MEMORIAL SLOAN KETTERING CANCER CENTER
QUARTERLY DISCLOSURE REPORT
UNAUDITED COMBINED FINANCIAL STATEMENTS FOR
THE PERIOD ENDED SEPTEMBER 30, 2018

 Table of Contents

Disclosures ......................................................................... 2
Management’s Discussion & Analysis .............................. 3
Combined Financial Statements ........................................ 4
Notes to Interim Combined Financial Statements ............. 8
Debt Compliance Analysis .............................................. 11
Key Patient Statistics and Other Data .............................. 12
Certificate of Compliance ................................................ 14

1

 SPECIAL NOTE CONCERNING FORWARD-LOOKING FINANCIAL
STATEMENTS:
Certain statements in this Quarterly Disclosure Report are forward-looking statements that are
based on the beliefs of, and assumptions made by, the management of Memorial Sloan Kettering
Cancer Center ("MSK" or the “Institution”). Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual results or
performance of the Institution to be materially different from expected future results or
performance.
The audited financial statements, which contain a full set of footnotes, are available on the
DacBond website, www.dacbond.com

THIS DOCUMENT IS DATED AS OF NOVEMBER 13, 2018
MSK has prepared and released this Quarterly Disclosure Report in order to provide certain
information regarding its financial and operating performance for September 30, 2018 and to
meet its continuing disclosure obligations under certain of its financing documents. Except as
required by law or by its contractual obligations, MSK undertakes no obligation to update this
Quarterly Disclosure Report after its date.

2

 Memorial Sloan Kettering Cancer Center
Management’s Discussion and Analysis of Financial Performance
For the Nine Months Ended September 30, 2018 and 2017
For the nine months ended September 30, 2018, MSK generated a Net Change in Unrestricted
Net Assets of $484.5 million compared with $322.5 million for the same period in 2017.
Additionally, for the nine-month period in 2018, MSK generated $211.6 million of Board
Designated Unrestricted Income vs. $17.1 million in the prior period. In prior years this type of
non-recurring revenue was generally included in Operating Revenues.
Income from Operations for the nine months ended September 30, 2018 was $125.7 million
compared with $205.6 million for the same period in 2017. Operating Revenues increased by
$273.7 million or 8.4%. Patient Care Revenues increased by $280.2 million or 10.7%. The
growth in Patient Care Revenues reflects the growth of our regional ambulatory care network
and normal rate and volume increases. Operating Expenses increased by $353.6 million or
11.5%. Operating expense growth has been driven by our expanded regional ambulatory care
network, increased staffing in advance of further expansion planned for 2019 and increasing cost
of pharmaceuticals.
The Institution’s long-term investable portfolio of $3.8 billion has a year-to-date return of 5.0%,
which is exclusive of cash and short-term investment returns. The rate of return is reflective of a
portfolio that includes 15.0% domestic and 11.9% global equity, 16.4% fixed income and cash,
30.7% hedge funds, 5.8% inflation hedging, and 20.2% private equity and venture capital.
As of September 30, 2018, MSK had total assets of $10.7 billion compared with $10.6 billion at
year end 2017. Total net assets have increased from $6.1 to $6.6 billion during the same time
frame. In July 2018, MSKCC optionally prepaid $333.7 million of outstanding long-term debt.
In June 2018, MSKCC entered into a contract and sold approximately $181.0 million of its
accumulated benefit obligation to an insurance company via an annuity buy-out. As a result of
the two annuity buy-outs (including a 2017 transaction) the June 30, 2018 accumulated benefit
obligation relates exclusively to non-retirees.

3

 Memorial Sloan Kettering Cancer Center
and Affiliated Corporations
Combined Balance Sheets

Assets
Current assets:
Cash and cash equivalents
Short-term investments – at fair value
Accounts receivable, less allowance for doubtful accounts
Pledges, trusts and estates receivable
Other current assets
Total current assets
Noncurrent assets:
Assets whose use is limited:
Investments in marketable securities – at fair value:
Construction, debt service and repair reserve funds
Captive insurance funds
Employee benefit funds
Total investments in marketable securities whose use is limited
Investments – at fair value
Investments internally designated for major capital projects
Investments in nonmarketable securities at cost
Property and equipment – net
Mortgages and other loans receivable
Pledges, trusts and estates receivable
Other noncurrent assets
Total noncurrent assets
Total assets
Liabilities and net assets
Current liabilities:
Accounts payable
Accrued expenses
Current portion of long-term debt and capital lease obligations
Total current liabilities
Noncurrent liabilities:
Long-term debt and capital lease obligations, less current portion
Other noncurrent liabilities
Total liabilities
Net assets:
Unrestricted:
Undesignated
Board-designated
Total unrestricted
Temporarily restricted
Permanently restricted
Total net assets
Total liabilities and net assets

4

September 30, December 31,
2018
2017
(unaudited)
(audited)
(In Thousands)
$

874,447 $
91,821
584,984
139,621
143,275
1,834,148

111,407
61,544
86,733
259,684

$

$

212,581
54,770
83,846
351,197

3,380,311
699,577
4,085,052
37,748
390,240
66,577
8,919,189
10,753,337 $

3,149,107
867,658
11,900
3,855,532
36,387
361,550
64,898
8,698,229
10,636,012

510,424 $
403,466
50,035
963,925

489,603
387,955
73,344
950,902

2,362,354
784,575
4,110,854

$

900,411
239,472
497,547
170,567
129,786
1,937,783

4,755,179
360,295
5,115,474
827,788
699,221
6,642,483
10,753,337 $

2,715,704
864,303
4,530,909
4,437,167
193,807
4,630,974
798,880
675,249
6,105,103
10,636,012

 Memorial Sloan Kettering Cancer Center
and Affiliated Corporations
Combined Statements of Unrestricted Activities
Period Ended Period Ended
September 30, September 30,
2018
2017
(unaudited)
(In Thousands)
Operating revenues
Hospital care and services
Grants and contracts
Contributions
Net assets released from restrictions – pledge payments
Royalty and other income
Investment returns allocated to operations
Total operating revenues

$

Operating expenses
Salaries and wages
Employee fringe benefits
Purchased supplies and services
Pharmaceuticals
Depreciation and amortization
Interest
Total operating expenses
Income from operations

2,892,836
236,328
109,576
75,141
114,597
112,951
3,541,429

$

2,612,576
219,984
137,589
67,290
127,771
102,473
3,267,683

1,475,083
403,808
622,683
655,392
221,527
37,185
3,415,678
125,751

1,347,894
367,175
599,265
510,976
202,629
34,103
3,062,042
205,641

10,000

-

Nonoperating income and expenses, net
Net assets released from restrictions for capital purposes
Investment returns, net of allocation to operations and transfers to temporarily
restricted net assets
Pension settlement cost
Change in postretirement benefit obligation to be recognized in future periods
Other nonoperating income and expenses, net
Total nonoperating income and expenses, net
Increase in unrestricted net assets before Board-designated activities

52,924
(39,182)
143,259
(19,880)
147,121
272,872

142,431
(42,780)
99,651
305,292

Board-designated
Board-designated other activity
Board-designated philanthropy

127,827
83,801

17,176
-

Increase in Board-designated

211,628

17,176

Increase in total unrestricted net assets

$

5

484,500

$

322,468

 Memorial Sloan Kettering Cancer Center
and Affiliated Corporations
Combined Statements of Changes in Net Assets
Period Ended September 30, 2018 and Year Ended December 31, 2017

Unrestricted
Net assets at January 1, 2017
4,346,307
Increase in unrestricted net assets
284,667
Contributions, pledges and
bequests
–
Impairment of investments
–
Investment return on endowments
–
Net assets released from
restrictions
–
Net assets at December 31, 2017
4,630,974
Increase in unrestricted net assets
484,500
Contributions, pledges and
bequests
–
Impairment of investments
–
Investment return on endowments
–
Net assets released from
restrictions
–
Net assets at September 30, 2018
$ 5,115,474

6

Temporarily Permanently
Restricted
Restricted
(In Thousands)

$

Total

757,725
–

626,945
–

88,741
(23,673)
77,887

37,800
–
10,504

126,541
(23,673)
88,391

(101,800)
798,880
–

–
675,249
–

(101,800)
6,105,103
484,500

88,028
–
26,021

22,601
–
1,371

110,629
–
27,392

(85,141)
827,788 $

–
699,221

5,730,977
284,667

(85,141)
$ 6,642,483

 Memorial Sloan Kettering Cancer Center
and Affiliated Corporations
Combined Statements of Cash Flows
Period Ended Period Ended
September 30, September 30,
2018
2017
(unaudited)
(In Thousands)
Operating activities
Change in net assets
Adjustments to reconcile change in net assets
to net cash provided by operating activities:
Depreciation and amortization
Unrealized net gains
Realized net gains
Temporarily and permanently restricted contributions,
pledges and bequests transferred to investing activities
Changes in assets:
Accounts receivable, net
Pledges, trusts and estates receivable, net
Other current assets
Other noncurrent assets
Changes in liabilities:
Accounts payable and accrued expenses
Other noncurrent liabilities
Net cash provided by operating activities

$

Investing activities
Net acquisitions of property and equipment
Decrease in investments, net
Increase in mortgages and other loans receivable
Temporarily and permanently restricted contributions,
pledges and bequests transferred from operating activities
Net cash provided by investing activities
Financing activities
Repayment of debt, net
Net cash used in financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

$

7

537,380 $

379,314

221,527
(109,888)
(97,391)

202,629
(160,459)
(127,117)

(110,629)

(126,541)

(87,437)
2,256
(13,489)
(1,679)

11,909
5,985
(344)
(1,443)

48,822
(79,976)
309,496

25,872
(28,847)
180,958

(463,289)
395,220
(1,361)

(521,080)
527,569
(3,060)

110,629
41,199

126,541
129,970

(376,659)
(376,659)

(61,367)
(61,367)

(25,964)
900,411
874,447 $

249,561
698,872
948,433

 Memorial Sloan Kettering Cancer Center
and Affiliated Corporations
Notes to Interim Combined Financial Statements
For the Period Ended September 30, 2018

Note A - Basis of Presentation
The accompanying financial statements are presented on a combined basis and include the
accounts of the following tax exempt, Section 501(c)(3), incorporated affiliates: Memorial Sloan
Kettering Cancer Center, Memorial Hospital for Cancer and Allied Diseases, Sloan Kettering
Institute for Cancer Research, S.K.I. Realty, Inc., MSK Insurance US, Inc., MSK Proton, Inc.
and the Louis V. Gerstner Jr. Graduate School of Biomedical Sciences. All of these entities are
collectively referred to as the “Institution”.
The accompanying unaudited combined financial statements have been prepared in accordance
with U.S. generally accepted accounting principles applied on a basis consistent with that of the
2017 audited financial statements of the Institution. The Institution presumes that users of this
interim financial information have read or have access to the Institution’s audited combined
financial statements and that the adequacy of additional disclosures needed for a fair presentation
may be determined in that context. Information contained in the Institution’s audited combined
financial statements for the years ended December 31, 2017 and 2016 is incorporated herein.
Footnotes and other disclosures that would substantially duplicate the disclosures contained in
the Institution’s most recent audited combined financial statements have been omitted.
Accordingly, these financial statements do not include all the information and footnotes required
by U.S. generally accepted accounting principles for complete financial statements. In the
opinion of management, all transactions considered necessary for a fair presentation have been
included.
Patient volumes and net operating revenue and results are subject to seasonal variations caused
by a number of factors. Monthly and periodic operating results are not necessarily representative
of operations for a full year for various reasons, including the level of occupancy and other
patient volumes, interest rates, unusual or infrequent items and other seasonal fluctuations. These
same considerations apply to year-to-year comparisons.

8

 Memorial Sloan Kettering Cancer Center
and Affiliated Corporations
Notes to Interim Combined Financial Statements (continued)

Note B – Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make prudent and conservative estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Estimates also affect the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Note C – Retiree Pension and Health Plans
In June 2018, the Institution entered into a contract and sold approximately $181 million of its
accumulated benefit obligation to an insurance company via an annuity buy-out. The funding of
approximately $217 million was paid from the pension plan assets and only impacted a select
group of retirees. These affected participants had no impact to their retirement benefits. This
resulted in a reduction of pension liability for $143.7 million and a $39.2 million settlement loss
for 2018. The pension and postretirement health liabilities will be remeasured again at December
31, 2018.

9

 Memorial Sloan Kettering Cancer Center
and Affiliated Corporations
Notes to Interim Combined Financial Statements (continued)

Note D - Long-Term Debt
On July 1, 2018, the Institution redeemed the remaining balance of the outstanding Dormitory
Authority of the State of New York (DASNY) Series 2008 tax-exempt bonds for approximately
$333.7 million.
Long-term debt consists of the following:
September 30, December 31,
2018
2017
(unaudited)
(audited)
(In Thousands)
DASNY Series 1998, tax-exempt bonds maturing through 2023 at
various fixed interest rates ranging from 5.25% to 5.75%
DASNY Series 2008, tax-exempt bonds maturing through 2036 at
various fixed interest rates ranging from 4.00% to 5.00%
DASNY Series 2010, tax-exempt bonds maturing through 2023 at a
fixed interest rate of 2.18%
Series 2011A taxable bonds maturing in 2042 at a fixed interest rate
of 5.00%
DASNY Series 2012, tax-exempt bonds maturing through 2041 at
various fixed interest rates ranging from 3.00% to 5.00%
DASNY 2012 Series 1, tax-exempt bonds maturing through 2034 at
various fixed interest rates ranging from 4.00% to 5.00%
Series 2012A taxable bonds maturing in 2052 at a fixed interest rate
of 4.125%
Series 2015A taxable bonds maturing in 2055 at a fixed interest rate
of 4.20%
DASNY Series 2016-1, tax-exempt bonds repaid through 2028 at a
fixed interest rate of 1.97%
NJEDA Series 2016-2, tax-exempt bonds maturing through 2026 at a
fixed rate interest rate of 1.43%
DASNY Series 2017-1, tax-exempt bonds maturing between 2018
and 2047 at various fixed interest rates ranging from 4.00% to
5.00%
Unamortized bond premiums, discounts and issuance costs

$

Less current portion
$

10

122,900

$

135,400

–

333,730

40,000

46,000

400,000

400,000

80,380

82,350

262,265

262,265

400,000

400,000

550,000

550,000

103,279

105,944

119,626

130,500

290,420
43,519
2,412,389
50,035
2,362,354

294,420
48,439
2,789,048
73,344
2,715,704

$

 MEMORIAL SLOAN KETTERING CANCER CENTER
DEBT COMPLIANCE ANALYSIS
September 30, 2018
$000
9/30/2018

12/31/2017

DEBT RATIO ANALYSIS
Debt Ratio
Cash & Equivalents
Short Term Investments
Assets Whose Use is Limited
Investments
Total Cash & Investments
Permanently Restricted Net Assets
Less: Current Restricted Pledges
Less: Non-Current Restricted Pledges
PRNA Net of Restricted Pledges
Unrestricted Cash & Investments
Long Term Debt
Minimum Debt Ratio Required

Loss Allowed
Income (Loss) From Operations
Less: Investment Income Supporting Operations
Add: Net Assets Released from Restrictions -Capital
Add: 8% of Unrestricted Investments (3 yr avg)
Adjusted Operating Income (Loss)
Maximum Loss Allowed

874,447
91,821
259,684
4,079,888
5,305,840

900,411
239,472
351,197
4,016,765
5,507,845

699,221
6,040
15,721
677,460

675,249
8,941
24,668
641,640

4,628,380

4,866,205

2,412,389
1.92
0.60
Pass

2,789,048
1.74
0.60
Pass

125,751
(112,951)
10,000
355,390

239,765
(137,750)
15,000
355,514

378,190

472,529

(50,000)
Pass

(50,000)
Pass

Calculation of 8% of Unrestricted Investments
Total Cash and Investments
Less: Permanent Net Assets
Less: Assets Whose Use is Limited
Unrestricted Investments

5,305,840
677,460
259,684
4,368,696

5,507,845
641,640
351,197
4,515,008

3 yr average
X 8%

4,442,377
355,390

4,443,923
355,514

355,390

355,514

5,115,474
2,412,389
0.47

4,630,974
2,789,048
0.60

LT Debt to Unrestricted Net Asset Ratio
Unrestricted Net Assets
Long-term debt

LT Debt to Unrestricted Net Assets Ratio not to exceed

2.00
Pass

LT Debt to Unrestricted Cash & Investment Ratio
Unrestricted Cash & Investments
Long-term debt

4,628,380
2,412,389
0.52

LT Debt to Unrestricted Cash Ratio not to exceed

2.00
Pass

4,866,205
2,789,048
0.57

2.00
Pass

2.00
Pass

 Memorial Sloan Kettering Cancer Center
Key Patient Statistics and Other Data

Period Ended
September 30,
2018

Period Ended
September 30,
2017

Year Ended
December 31,
2017

Licensed Beds

514

514

514

Beds in Service

498

473

473

Admissions

18,214

17,713

23,506

Discharges

18,041

17,610

23,561

7.4

6.9

6.9

95.4%

94.5%

94.3%

Patient Days

128,845

121,266

161,661

Surgical Cases

20,712

18,919

25,330

Inpatient
Outpatient

7,520
13,192

7,457
11,462

9,786
15,544

Total Outpatient Visits:

576,742

536,210

722,329

405,932
170,810

393,551
142,659

526,006
196,323

196,592

181,977

247,496

105,228
91,364

102,527
79,450

137,515
109,981

269,276

251,445

468,125

185,214
84,062

183,613
67,832

322,472
145,653

108,211

102,038

137,579

44,568
63,643

45,144
56,894

60,187
77,392

17,594

16,301

16,434

Average Length of Stay
Occupancy Rate (1)

Manhattan
Regional Network
Chemotherapy treatments
Manhattan
Regional Network
Radiology
Manhattan
Regional Network
Radiation Oncology
Manhattan
Regional Network
Full Time Equivalents

(1) Based on adjusted bed count

12

 Memorial Sloan Kettering Cancer Center
Case Mix Index and Patient Revenue Distribution

Period Ended
September 30,
2018

Period Ended
September 30,
2017

Year Ended
December 31,
2017

Case Mix Index (1)

2.05

2.01

2.02

Medicare Only CMI

1.99

1.96

1.97

25.6%
2.6%
6.6%

25.1%
3.2%
6.3%

25.6%
3.1%
7.8%

65.2%
100%

65.1%
100%

63.5%
100%

Revenue Distribution (2)
Medicare
Medicaid
Commercial, Self Pay & Managed Care
non-contracted
Managed Care Contracted

(1) The grouper and weights applicable at the time of discharge were used in the CMI
calculation. This CMI is for the total Hospital.
(2) Includes net inpatient, outpatient, and medical practice revenue

13

 

CERTIFICATE OF COMPLIANCE
For The Period Ended September 30, 2018

Memorial Sloan Kettering Cancer Center
Bond Series 1998, 2010 Series 1, 2012 and 2012 Series-1., 2015 Series 1, 2016 Series 1,
2016 Series 2, and 20.17 Series 1

The undersigned hereby certifies as follows:

I am the Senior Vice President Finance of Memorial Sloan Kettering Cancer Center, herein
after referred to as the Institution, and I am authorized to sign this certi?cate.

I have read the Loan Agreements, and Tax Certificates executed on behalf of the Institution
in connection with the referenced Bond issues.

By Virtue of my position at the Institution I would expect to become aware in the ordinary
course of business of any breach of the terms, conditions and covenants contained. in the
Loan Agreements or Tax Certi?cates.

To the best of knowledge, there has not been and is not now existing any breach of any of
the terms, conditions or covenants contained in the Loan Agreements or Tax Certi?cates.

The Institution has not received an insurance payment, eminent domain award or property
damage award for any part ofthe Project or Mortgaged Property.

Except as permitted by the Loan Agreements or Tax Certificates executed in connection
with the issuances of the Bonds or as subsequently consented to by the Authority and any
other parties required to consent thereto, (1) the Institution owns, occupies and uses for its
tax exempt purposes all of the Project(s) financed with the proceeds of the referenced Bond
issue(s); (2) no other party has the right to use or occupy any portion of such Proj ect(s); (3)
the Institution receives no payment from any party or parties for occupying all or any part of
such Project(s); (4) the Institution has not entered into any contract for the management of
any part of the Project(s) by another party or person. (Payment does not include fees from
students for occupying dormitory rooms and fees from staff members for occupying staff
housing).

14

7. The Institution has not received any correspondence from the Internal Revenue Service
questioning its tax-exempt status and hereby reaf?rms its status as a not?for?pro?t
corporation that is exempt from federal income tax pursuant to Section 501 of the
Internal Revenue Code or as a tax exempt governmental entity.

8. The Institution has implemented adequate policies and procedures to enable the Institution
to comply with any reporting requirements of the Internal Revenue Service applicable to the
Bonds, including but not limited to Schedule (Form 990).

9. To the best of my knowledge, the Institution has not granted or permitted any liens against
the Mortgaged Property or leases of any part thereof except those which were ?led prior to,
or in connection, with the issuance of the Bonds or those which were subsequently
consented to by the Authority and any other parties required to consent thereto.

 

Signature Date

Mark Svenningson
Print Name

 

Senior Vice President Finance
Title

15