MUNICIPAL SECONDARY MARKET DISCLOSURE
INFORMATION COVER SHEET

Conduit Issuer:

Geisinger Authority (Montour County, Pennsylvania)

Obligor:

Geisinger Health

THIS FILING RELATES TO ALL SECURITIES ISSUED BY THE ISSUER: CUSIP # 368497
Type of Filing:

Electronic

Voluntary Filing of Secondary Market Information:

Quarterly Financial Disclosure for the
ninth months ended March 31, 2018

I hereby represent that I am authorized by the issuer or its agent to distribute this information
publicly:
Dissemination Agent:
Noreen Wichert
Trust Associate
The Bank of New York Mellon Trust Company, N.A.
Global Corporate Trust
1735 Market Street, 6th Floor
AIM #193-0650
Philadelphia, PA 19103
Phone: (215) 553-6940
noreen.wichert@bnymellon.com
Please contact Kevin F. Brennan, CPA, FHFMA, Executive Vice President, Finance/Chief
Financial Officer, should you have any questions concerning this information.
Obligor:
Kevin F. Brennan, CPA, FHFMA
Executive Vice President, Finance/
Chief Financial Officer
Geisinger
100 N. Academy Avenue
Mail Code 22-01
Danville, PA 17822
Phone: (570) 271-6626
kbrennan@geisinger.edu
Municipal Authority (conduit issuer):
Geisinger Authority (Montour County, Pennsylvania)
Robert L. Marks, Esquire, Solicitor
Marks, McLaughlin & Dennehy
12 W. Market Street
Danville, PA 17821
Phone: (570) 275-3541
rlmarkssr@mmdlawoffice.com

 Geisinger 1
Financial Update
For the Nine Months Ended March 31, 2018
Introduction 2
Geisinger is a physician-led, integrated health services organization that has as its main components:
1.

an array of health services providers, including eight acute care hospitals with multiple campuses:

Geisinger Medical Center (“GMC”) – a tertiary/quaternary care teaching hospital with a main
campus in Danville and an acute care campus in Shamokin;

Geisinger Wyoming Valley Medical Center (“GWV”) – a tertiary/quaternary hospital with an
acute care campus near Wilkes-Barre and an outpatient campus in Wilkes-Barre;

Geisinger Community Medical Center (“GCMC”) – an acute care hospital in Scranton;

Geisinger Bloomsburg Hospital (“GBH”) – a community hospital in Bloomsburg;

Geisinger Lewistown Hospital (“GLH”) – a community hospital in Lewistown;

Holy Spirit Hospital of the Sisters of Christian Charity, Inc. doing business as Geisinger Holy
Spirit (“GHS”) – an acute care hospital in Camp Hill near Harrisburg;

AtlantiCare Regional Medical Center (“ARMC”) – a tertiary/quaternary care hospital with Atlantic
City and Mainland campuses in southern New Jersey; and

Geisinger Jersey Shore Hospital (“GJSH”) a critical access hospital in Jersey Shore,
Pennsylvania;

2.

a multispecialty physician group practice of approximately 1,835 physicians practicing at 246 primary
and specialty clinics

3.

Geisinger Health Plans (“GHPs”), comprised of Geisinger Health Plan (“GHP”), Geisinger Indemnity
Insurance Company (“GIIC”) and Geisinger Quality Options, Inc. (“GQO”), one of the nation’s largest
rural health insurance organizations with commercial, Medicare Advantage, Medical Assistance and
self-insured insurance products; and

4.

Geisinger Commonwealth School of Medicine (“GCSOM”) headquartered in Scranton, currently
serves 414 medical students and 98 graduate students.

Geisinger operates in 45 of Pennsylvania’s 67 counties, with a significant presence in central, south-central
and northeastern Pennsylvania, outside the major metropolitan areas, and in 7 counties in southern New
Jersey. As of March 31, 2018, Geisinger cared for approximately 1,169,000 patients active in the trailing
twelve months and managed approximately 580,000 health plan members, approximately 336,000 of whom
were both members and patients, resulting in a unique population managed of approximately 1,413,000
people.
On January 1, 2017, The Commonwealth Medical College became an affiliate of Geisinger Health and
changed its name to GCSOM. On July 1, 2017, Jersey Shore Hospital and Jersey Shore Hospital
Foundation became affiliates of Geisinger Health and changed their name to GJSH and Geisinger Jersey
Shore Hospital Foundation (“GJSHF”), respectively. Accordingly, GCSOM, GJSH and GJSHF activities
and accounts are included in the attached consolidated financial statements only since the transaction
dates.
This report contains financial statement excerpts based on the interim, consolidated financial statements
of Geisinger for the nine months ended March 31, 2018 and 2017. 3 Geisinger management believes that
the financial and operating information contained herein is complete and accurate as of the date of this
report. 4 This report and the attachments hereto have been provided to EMMA. 5

 Please contact Kevin F. Brennan, CPA, FHFMA, Executive Vice President, Finance/Chief Financial Officer
at (570) 271-6626 for questions or additional information.
Financial Highlights
I.
Balance Sheet
The balance sheet remained strong with total assets of $7.7 billion and $6.9 billion as of March 31,
2018 and 2017, respectively. Assets were comprised primarily of cash and investments totaling $4.4
billion on March 31, 2018. The unrestricted portion of cash and investments was $4.3 billion at March
31, 2018, representing 244.1 days’ cash on hand. The ratio of unrestricted cash and investments to
debt was 237.0% at March 31, 2018. Liquidity has benefited from retention of profits and prompt
collection of patient services receivables, with days in patient receivables of 33.9 days 6 as of March
31, 2018.
Geisinger had $1.8 billion of outstanding debt, including bonds, notes and capital leases, as of March
31, 2018. Leverage remains moderate with debt to total capitalization of 31.0%, as of March 31,
2018.
II.

Cash Flows
Earnings before interest, depreciation and amortization excluding unrealized gains and losses and
contribution (expense) from acquisitions (“EBITDA”) was $400.0 million, representing an EBITDA
margin of 7.7%, both for the nine months ended March 31, 2018. Cash flow from operations,
consisting of operating income before interest expense and depreciation and amortization totaled
$334.1 million, representing an operating cash flow margin of 6.5%, both for the nine months ended
March 31, 2018. Moderate debt service requirements and significant cash inflows produced a debt
service coverage ratio of 6.7 times for the nine months ended March 31, 2018. During the nine
months ended March 31, 2018, Geisinger maintained significant liquidity and moderate leverage,
while reinvesting approximately $152.4 million into capital expenditures.

III.

Statement of Revenue and Expenses
A.
Operating Performance
For the nine months ended March 31, 2018, Geisinger recorded a $145.9 million operating
profit, or a 2.8% return from core operations, both of which are calculated before interest
expense. Operating profitability benefited from gains related to Geisinger’s performance
improvement process, Achieving Excellence. During the nine months ended March 31, 2018,
Geisinger experienced a 3.5% growth in discharges and a 2.8% growth in discharges and
observations/23-hour stays, when compared to the year-earlier period. This growth was
attributable to success in expanding clinical programs.
For the nine months ended March 31, 2018, Geisinger net revenue approximated $5.1 billion.
This represents an increase of 8.8% over prior year ended March 31, 2017. This growth is
attributable to an increase in net patient service revenue after the provision for bad debts of
4.6% and an increase in premium revenue of 13.0%, both when compared with the year-earlier
period. Net patient service revenue benefitted from the realization of growth plans centered on
market share growth and the opportunistic capture of high-acuity, clinical service volumes.
Effective January 1, 2018, average premium rates for individual, insurance exchange members
increased approximately 32% and individual exchange membership increased by more than
20,000 members. GHPs’ medical expense ratio was 86.8% and 87.0% for the nine months
ended March 31, 2018 and 2017, respectively, including expenses paid to Geisinger clinicians
and clinical facilities. Operating profit includes gains of $17.7 million from the sale of two skilled
nursing facilities during January 2018.
B.

Investing and financing activities
Net investment earnings were $260.1 million during the nine months ended March 31, 2018.
Net investment earnings were comprised of $65.9 million of realized investment earnings and a
$194.2 million unrealized gain for the nine months ended March 31, 2018. Geisinger’s
significant investment assets performed similarly to broad market indices representing the asset

-2-

 classes to which the investments were allocated. The investment portfolio was prudently
managed with an allocation to cash and fixed income securities of 35.6% at March 31, 2018.
Unrestricted funds are predominantly invested in liquid vehicles with 98.0% of all unrestricted
cash and investments capable of being liquidated within one month. External, professional
investment management firms manage all Geisinger’s investment assets. The Finance
Committee of the Boards of Directors and Geisinger staff are assisted with investment decisions
by a professional investment-consulting firm.
C.

Excess of Revenue over Expenses
Geisinger achieved an excess of revenue over expenses of $356.9 million and an excess
margin of 6.6% for the nine months ended March 31, 2018. After excluding unrealized gains
and expense from acquisitions, the excess margin was 3.3%.

IV.

Variable Rate Demand Bonds (“VRDBs”) and Hedging Contracts
Geisinger had $242.3 million of VRDBs outstanding as of March 31, 2018. Risk from the VRDBs’ put
feature was offset by standby bond purchase agreements and unrestricted cash and investments
available for liquidation within one month of $4.3 billion or 17.4 times demand debt as of March 31,
2018. Geisinger maintained derivative instruments with notional values of $214.4 million to partially
offset the risk of cash flow changes from variable rates. The total market value of the hedging
contracts was recorded on the balance sheet as a $33.1 million liability as of March 31, 2018. No
collateral was pledged to secure derivative liabilities at March 31, 2018. Management intends to hold
the derivative contracts to maturity, while recording non-cash entries to account for fluctuations in
their market values on the financial statements.

V.

Management’s Summary of Financial Performance
Cash flow from operations exceeded capital expenditures by $181.7 million during the nine months
ended March 31, 2018 and leverage remains prudently controlled with debt to capitalization of 31.0%
as of March 31, 2018. The balance sheet remains highly liquid with unrestricted cash and investments
representing 55.9% of all assets. Geisinger’s strategic plans seek to manage the total cost of care
through population health management initiatives deployed by Geisinger Health Plans and the Clinical
Enterprise. Additionally, Geisinger seeks to grow high-acuity, fee-for-service business by increasing
penetration for these services in Geisinger’s expanded service area. Geisinger continues to consider
opportunities to expand primary care and partner with other healthcare organizations. Geisinger
Health Plans are expected to show per-member per-month premium growth and profitability, resulting
from effective management of variables affecting medical expense ratios, including prudent
underwriting and innovative care management.

Operational Highlights
I.
Kevin V. Roberts Joins Geisinger as Incoming CFO
Geisinger named Kevin V. Roberts, MBA, CPA, its new executive vice president, finance and chief
financial officer. Roberts will oversee all financial activities of the integrated health care delivery
system and will serve on Geisinger’s executive leadership team. He joins Geisinger from BJC
HealthCare, St. Louis, Missouri, a 15-hospital health system that includes Barnes-Jewish Hospital
and St. Louis Children’s Hospital and its academic partner, Washington University School of
Medicine, where he served as senior vice president and chief financial officer. During his more than
30 years of professional experience, Roberts has also held executive-level finance positions at
University Hospitals Health System and the Cleveland Clinic, both in Cleveland, Ohio, and Proctor
Hospital in Peoria, Illinois. Roberts succeeds Kevin Brennan, CPA, FHFMA, who announced his
retirement after more than 20 years with the health system. Brennan will remain at Geisinger through
June 2018 when he will become chair of the Healthcare Financial Management Association.
II.

Geisinger and St. Luke’s University Health Network to Build New Hospital in Schuylkill County
Geisinger and St. Luke’s are partnering to build a new acute care hospital in Schuylkill County. The
80-bed hospital will include an emergency department and a full range of specialties and services.
Groundbreaking will occur this spring and the hospital will open late next year. The three-story,
120,000-square-foot hospital will be located near Orwigsburg. This is the first time in Pennsylvania

-3-

 that two health care systems have agreed to build and equally co-own a new hospital. The two
systems enjoy a history of collaboration, including an insurance partnership. Also beginning July 1,
2018, Geisinger's Life Flight service will provide emergency medical air transportation for the entire
St. Luke’s system. Both organizations have provided services to Schuylkill, Berks, and Carbon county
residents for years.
III.

Harvard Business Review Article Describes Geisinger’s MyCode Community Health Initiative
In a recent Harvard Business Review article, Geisinger leaders say MyCode Community Health
Initiative with deoxyribonucleic acid (“DNA”) sequencing of patient samples begins a new era of care
for patients with inherited risks for conditions such as cancer and heart disease. The article was
written by Geisinger executives Huntington F. Willard, Director, Geisinger National Precision Health;
David T. Feinberg, MD, President and Chief Executive Officer and David H. Ledbetter, Executive Vice
President and Chief Scientific Officer. The authors explain that standard screening tests such as
colonoscopy, mammography, and cholesterol measurement are inadequate for people whose genetic
profiles put them at higher risk. Thanks to the MyCode program, genetic sequencing is becoming a
clinical reality for all patients in the community, not just as a diagnostic test for patients already sick.
Geisinger’s DNA sequencing project has the potential to identify patients who are at increased risk
for diseases such as early onset, inherited cancer and cardiac events. While currently Geisinger
anticipates about three percent of MyCode participants will be found to have genetic variants
associated with a high risk of disease, that number is expected to rise to as high as 10 percent to 15
percent in the future as the roles of additional genes and variants in disease are understood.

Management’s Summary
Geisinger’s leadership continues to focus the Clinical Enterprise on prudent growth initiatives and innovative
care redesign intended to ensure Geisinger’s long term success. GHPs deliver diversified product offerings
and care management initiatives to improve members’ health and reduce cost trends. It is anticipated that
ongoing initiatives will result in maintenance of a strong balance sheet and operating success. These plans
resulted in sustained profitability from core operations. We continue to plan for a level of financial
performance that will, for decades to come, support our purpose: “Everything we do is about caring – for
our patients, our members, our Geisinger family of physicians and employees, and our communities”.
Attachments:

Geisinger financial statement excerpts and utilization statistics for the nine months ended
March 31, 2018 and 2017

Notes:
1
Definition of Geisinger
Throughout this document and the attachments hereto, Geisinger refers to the entire health system,
comprised of Geisinger Health as parent and all subsidiary corporate entities comprising the System.
2

Disclaimer
This narrative contains certain forward-looking statements. These forward-looking statements are subject
to numerous assumptions, risks and uncertainties that change over time. This report is issued as of May
16, 2018. Geisinger assumes no duty to update any information contained in this document, even if
delivered after the original date of issuance. Actual results could differ materially from those anticipated
and future results could differ materially from historical performance.
3

Omission of Certain Financial Statements
Generally accepted accounting principles require financial statements to include a balance sheet, a
statement of operations and changes in net assets, a statement of cash flows and notes to the financial
statements. The statement of changes in net assets and statement of cash flows have been included only
in an abbreviated form. Complete notes have not been included in the attached financial statement
excerpts.

-4-

 4

Estimates in Financial Statements
The preparation of financial statements in accordance with generally accepted accounting principles
requires Geisinger management to make assumptions, estimates and judgments that affect the amounts
reported in financial statements, including the notes thereto and related disclosures, if any. Geisinger
considers critical accounting policies to be those that require the more significant judgments and estimates
in the preparation of financial statements, including the following: recognition of patient service revenue that
includes contractual allowances and provisions for bad debt, reserves for losses and expenses related to
insurance claims and healthcare professional risks. At the time judgments are made, management relies
on historical experience, available information and assumptions believed to be reasonable under the
circumstances in making its judgments and estimates. Actual results could differ materially from those
estimates.

5

Distribution through EMMA
This report is being distributed on a quarterly basis, and may be discontinued at any time. It is anticipated
that such quarterly information will be made available through the Electronic Municipal Market Access
system (“EMMA”), a service of the Municipal Securities Rulemaking Board.
6

Days in Patient Receivables
Days in patient receivables are calculated in accordance with the terms of the Healthcare Financial
Management Association’s Key Performance Indicators. Days in patient receivables include only the
accounts of Geisinger Clinic; GMC; GWV; GCMC; GBH; GLH; Family Health Associates of Geisinger
Lewistown Hospital; GHS; Spirit Physicians Services, Inc. doing business as Geisinger Holy Spirit Medical
Group, ARMC, AtlantiCare Physician Group P.A., GJSH, and Geisinger Jersey Shore Hospital Foundation
(collectively referred to as the “Clinical Enterprise”), including activity between the Clinical Enterprise and
Geisinger Health Plans. Calculations are based on average daily revenue for the three months prior to
statement date.

-5-

 GEISINGER
CONSOLIDATED BALANCE SHEETS
March 31,
(Dollars In Thousands, Unaudited)
2018
ASSETS
Current assets:
Cash and cash equivalents (a)
Investments (a)
Assets limited as to use - externally designated
Accounts receivable, net
Inventories and other
Total current assets

$

Long-term investments (a)
Assets limited as to use:
By Board (a)
Externally restricted by donors
Other - externally designated
Total assets limited as to use, noncurrent
Property and equipment
Less: accumulated depreciation and amortization
Net property and equipment
Other assets
Assets held in trust
Total assets
LIABILITIES AND NET ASSETS
Current liabilities:
Current installments of long-term debt
Estimated third-party payor settlements
Accounts payable
Medical claims payable
Accrued expenses and other
Total current liabilities

447,541
863,938
8,945
616,242
184,188
2,120,854

2017

$

291,589
780,810
14,425
537,055
161,346
1,785,225

2,725,426

2,397,653

277,557
112,206
12,406
402,169

286,757
104,990
7,982
399,729

3,562,391
1,507,549
2,054,842

3,326,564
1,301,556
2,025,008

372,867
35,865

291,324
33,088

$

7,712,023

$

6,932,027

$

23,033
107,611
79,669
181,365
693,260
1,084,938

$

22,772
125,505
75,558
173,371
675,384
1,072,590

Long-term debt, net of current installments
Other liabilities and contingencies
Total liabilities

1,797,614
590,404
3,472,956

1,513,359
648,711
3,234,660

Net assets:
Unrestricted
Unrestricted - noncontrolling interest
Temporarily and permanently restricted
Total net assets

4,061,348
11,535
166,184
4,239,067

3,527,284
13,631
156,452
3,697,367

Total liabilities and net assets

$

7,712,023

$

6,932,027

(a) Unrestricted cash, investments and designated by Board total $4,314,462 and $3,756,809,
respectively at March 31, 2018 and 2017.

 GEISINGER
CONSOLIDATED STATEMENTS OF OPERATIONS AND
CHANGES IN NET ASSETS
For the Nine Months Ended March 31,
(Dollars In Thousands, Unaudited)
2018
Unrestricted net assets
Revenue
Patient service revenue, net of contractual allowances and
discounts
$ 2,753,703
Provision for bad debts
(96,902)
Net patient service revenue less provision for bad debts
2,656,801
Premium revenue
2,260,683
Other revenue
212,484
5,129,968
Expenses
Salaries and benefits
Medical Claims
Supplies and other
Depreciation and amortization

Operating income

2017

$ 2,577,025
(37,433)
2,539,592
2,000,554
172,873
4,713,019

2,163,787
1,261,261
1,370,859
188,200
4,984,107
$

145,861

2,001,587
1,124,816
1,315,317
165,554
4,607,274
$

105,745

 GEISINGER
CONSOLIDATED STATEMENTS OF OPERATIONS AND
CHANGES IN NET ASSETS
For the Nine Months Ended March 31,
(Dollars In Thousands, Unaudited)

Operating income (brought forward)

2018
$ 145,861

2017
$ 105,745

Investing and financing activities:
Net realized investment earnings
Net unrealized investment earnings
Net investment earnings
Interest expense
Unrealized gain on derivatives
Contribution (expense) from acquisitions
Loss on extinguishment of debt

65,945
194,155
260,100
(42,899)
5,737
(11,854)
-

(4,833)
229,562
224,729
(31,516)
9,048
47,617
(2,829)

Gain from investing and financing activities
Nonoperating losses, net

211,084
(35)

247,049
(35)

Excess of revenue and gains over expenses and losses
Other changes in unrestricted net assets:
Unrealized gain on derivatives
Net assets released from restriction, capital purchases
Net asset transfers for underwater endowments
Net (distributions) contributions from noncontrolling interest
Changes in equity-based compensation
Other
Increase in unrestricted net assets

356,910

352,759

4,014
2,361
4
(3,055)
343
(2,841)
357,736

10,315
3,244
(39)
(3,106)
295
363,468

5,765
17
8,468
(4)
(2,391)
(2,361)
9,494

9,328
12,218
6,979
39
(10,286)
(3,244)
15,034

Changes in restricted net assets:
Contributions, net of uncollectibles
Contribution from acquisitions
Net investment gains
Net asset transfers for underwater endowments
Net assets released from restriction, fund operations
Net assets released from restriction, capital purchases
Increase (decrease) in restricted net assets
Increase in net assets
Net assets at beginning of year
Net assets at end of year

367,230
3,871,837
$ 4,239,067

378,502
3,318,865
$ 3,697,367

 GEISINGER
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Nine Months Ended March 31,
(Dollars In Thousands, Unaudited)

Operating activities
Increase in net assets
Change in net assets attributable to noncontrolling interest
Change in net assets attibutable to Geisinger
Adjustments to reconcile change in net assets to net cash
provided by operating activities:
Depreciation and amortization
Provision for bad debts
Change in value of derivatives
Net realized loss (gain) on investments
Net unrealized gain on investments
(Contribution) expense from acquisition, net of cash received
Restricted contributions
Noncontrolling interest
Net change in working capital
Other
Net cash provided by operating activities
Investing activities
Additions to property and equipment, net
Sales (purchases) of investments and assets limited as to use
Cash paid for acquisitions
Net cash provided by (used in) investing activities
Financing activities
Proceeds from issuance of debt
Repayment of debt
Net distribution to noncontrolling interest
Proceeds from restricted contributions
Net cash used in financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

2018

2017

$ 367,230
890
368,120

$ 378,502
1,105
379,607

188,200
97,194
(9,751)
(67,655)
(200,952)
12,423
(5,765)
2,166
(167,282)
(66,138)
150,560

165,554
37,467
(19,363)
35,612
(237,091)
(49,485)
(16,307)
2,001
(84,401)
(2,496)
211,098

(152,390)
187,647
35,257

(214,325)
114,787
(29,000)
(128,538)

13,622
(37,538)
(3,056)
5,765
(21,207)
164,610
282,931
$ 447,541

34,750
(54,544)
(3,106)
16,307
(6,593)
75,967
215,622
$ 291,589

 GEISINGER
UTILIZATION & PAYOR MIX STATISTICS
For the Nine Months Ended March 31,
2018

2017

2,050
77,428
16,236
344,811
4.5
61.4%
274,195
2,711,134
1,168,902
580,378
1,413,464

2,011
74,795
16,360
339,142
4.5
61.5%
259,315
2,601,944
1,069,851
586,693
1,371,261

32.8%
9.5%

33.0%
9.6%

9.2%
2.6%
2.8%
1.3%
7.1%
23.0%

9.7%
2.8%
3.0%
0.9%
7.1%
23.5%

Self-pay
Other
Total non Geisinger Insurance Operations

1.8%
3.5%
70.6%

1.7%
4.4%
72.2%

Geisinger Health Plans:
Commercial/TPA
Medicaid
Medicare Advantage
Subtotal Geisinger Health Plans

9.6%
8.7%
11.1%
29.4%

9.2%
8.2%
10.4%
27.8%

100.0%

100.0%

Consolidated Utilization Statistics
Physically Available Beds (a) (d)
Discharges (a) (d)
Observations (d)
Patient Service Days (a) (d)
Average Length of Stay (days) (a) (d)
Percent of Occupancy Based on Physically Available Beds (a) (
Outpatient Emergency Room Visits (d)
Clinic Outpatient Visits (b) (d)
Patients Active in the Trailing Twelve Months (d)
Managed Care Membership at Period End
Population Managed (c) (d)
Consolidated Payor Source (gross) (e)
Medicare
Medicaid
Commercial:
Highmark Blue Cross/Blue Shield
Capital Blue Cross
Blue Cross Horizon
Aetna
Other Commercial
Subtotal Commercial

Total

(a) Acute care statistics exclude psychiatry, nursery and skilled nursing and include neonatal intensive
care unit activity
(b) Includes outpatient consultations
(c) Population managed equals active patients plus members less overlap between patients and members
(d) Prior year restated
(e) Only includes Patient Service Revenue of the Clinical Enterprise