This spreadsheet supports STUDENT analysis of the case “University of Virginia Health System: The Long-Term Acute

Care Hospital Project” (Case 28)

This spreadsheet was prepared by Kenneth Eades, the Paul Tudor Jones Research Professor of Business Administration. Copyright © 2012 by the University of Virginia Darden
School Foundation, Charlottesville, VA. All rights reserved. For customer service inquiries, send an e-mail tosales@dardenbusinesspublishing.com. No part of this publication may
be reproduced, stored in a retrieval system, posted to the Internet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—
without the permission of the Darden School Foundation.

Aug. 27, 2012

UNIVERSITY OF VIRGINIA MEDICAL CENTER: Long Term Acute Care Hospital: Financial Projections

Assumptions
Number of Beds 50
Year 1 Utilization 26%
Year 2 Utilization 60%
Utilization Increase after Year 2 4%
Commercial Payer Mix 24%
Commercial Payer Billing per Day $2,800
Operating Variable Expense 7.0%
Year 1 Year 2
VOLUME
Patient Day Capacity 18,250 18,250
Utilization 26% 60%
Patient Days Used 4,745 10,950
Average Patient Census per Day 13 30
Average Length of Stay 30 27
Number of Patients per Year 158 406
Full-Time Employees/Census 4.8 3.5
Full-Time Employees 62 105
INSURANCE PAYERS MIX Billing Rate Annual Increase
Medicare 36% $27,795 per case 0.0%
Medicaid 29% $35,000 per case 1.3%
Commercial Payers 24% $2,800 per day 5.0%
Other 9% $38,500 per case 1.3%
Indigent 2% $35,000 per case 1.3%
Total Revenue
Net Revenues
EXPENSES Annual Increase
Salary, Wage, Benefits $60,250 per FTE 3%
Supplies, Drugs, Food 16.3% of net rev N.Ap.
Management Fees 8.0% of net rev N.Ap.

Operating Expenses (fixed) $1,200,000 N.Ap.

Operating Expenses (variable) 7% of net rev N.Ap.
Land Lease (annual rate) $200,000 3%
Construction $15,000,000 N.Ap.
Total Operating Expenses
- Interest Expense
Net Profit
Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

18,250 18,250 18,250 18,250 18,250 18,250 18,250 18,250

64% 68% 72% 76% 80% 84% 88% 90%
11,680 12,410 13,140 13,870 14,600 15,330 16,060 16,425
32 34 36 38 40 42 44 45
27 27 27 27 27 27 27 27
433 460 487 514 541 568 595 608
3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5
112 119 126 133 140 147 154 158
For-Profit Comparables
Health
Community Management
HCA Inc Health Associates Manor Care
Revenues (millions) $24,475 $3,720 $3,580 $3,375
Assets (millions) $5,222 $961 $997 $693
Total debt (millions) $9,278 $1,810 $1,014 $857
Stock price ($/share) $52.12 $39.73 $23.25 $39.49
Shares outstanding (millions) 452.7 88.5 247.2 78.7
Market cap (millions) $23,593 $3,517 $5,747 $3,108
Bond rating A B BB BB
Beta 0.60 0.60 0.70 0.80

· HCA Inc.—hospital management company; manages hospitals mainly in the Southeast and Texas.
· Community Health—operates general acute care hospitals in nonurban communities.
· Health Management Associates, Inc.—provides a range of general an acute care health services in nonurban
communities.
· Manor Care—provider of health services with broad capabilities; operates skilled nursing facilities, subacute medic
and rehabilitation units, outpatient rehab clinics, assisted living facilities, and acute care hospitals.
· Triad Hospitals—owns and manages health care facilities including hospitals and ambulatory surgery centers.
· Universal Health Services—owns and operates acute care and surgical hospitals, behavioral health centers, and sur
and radiation oncology centers.

Source: Value Line, December 2005.

 Universal
Health
Triad Hospitals Services
$4,805 $4,030
$1,458 $775
$1,703 $532
$41.46 $49.03
84.8 54.6
$3,517 $2,676
B BB
0.60 0.60

Southeast and Texas.

munities.
are health services in nonurban

illed nursing facilities, subacute medical

care hospitals.
and ambulatory surgery centers.
als, behavioral health centers, and surgery
 U.S. Treasury Yields

1-year 4.77%
5-year 4.72%
10-year 4.72%
30-year 4.73%

Data source: http://federalreserve.gov/releases/h15/data.htm (accessed March 2006).

Corporate Bond Yields

AAA 5.31%
AA 5.38%
A 5.45%
BBB 5.88%
BB 6.79%
B 7.57%

Data source: Bloomberg, “Fair Market Curve Analysis,” 10-Year Corporate Bonds, March 2, 2006.