Our objective is to provide high-quality, cost-effective healthcare services through an integrated delivery platform serving the needs of the communities in which we operate. We focus our business development efforts and capital resource investments on geographic markets and individual hospitals where we see an opportunity to expand services, improve operating performance and achieve a competitive position in the market. We were incorporated in July 1997 and acquired our first hospital, Maryvale Hospital, on June 1, 1998.
We believe that our success will be determined by the quality of care we provide and our ability to provide a safe environment for our patients to receive care. We believe our commitment to quality of care and safety must start at the top. We have employed chief medical officers at the regional level to review and improve clinical protocols and have maintained an active role on hospital governing boards to promote quality initiatives and staff education programs. We have implemented or are in the process of implementing the following initiatives: 1) investing in clinical information systems that will allow us to standardize compliance reporting of more than 40 quality and safety indicators across our hospitals including quality dashboard metrics; 2) dedicating resources such as rapid response teams to make the delivery of care more efficient; 3) revising clinical protocols where needed to minimize patient falls and worker injuries, 4) developing expanded peer groups against which to measure our progress and success; and 5) utilizing CAHPS patient satisfaction surveys at our hospitals. Our goal is to achieve a top 10% compliance rate with quality and safety standards.
We are committed to respecting the privacy of our patients and delivering care in all of our facilities that is founded on a common set of ethical beliefs and behaviors. We expect all of our employees and physicians to share in this commitment. During the past twelve months we allocated significant resources to strengthen our comprehensive corporate compliance program. We employed regional compliance officers to monitor employee compliance training, physician relations and compliance with state and federal regulations. The regional compliance officers report directly to our Chief Compliance Officer who reports jointly to our Chairman and Chief Executive Officer and to our board of directors. We also plan to make our employee orientation process more comprehensive to reinforce our commitment to ethics and compliance and to promote ownership in these values to our employees.
primary payer. If primary payment has not been received for an account, the patient co-insurance and deductible amounts remain
contractual allowances for unbilled patient accounts, certain billed patient accounts and for cash payments received but not posted to
patient accounts, whereas those deductions are not reflected on the aging reports. The table below provides a reconciliation of these
The increase in self-pay accounts receivable has led to increased write-offs and older accounts receivable outstanding, resulting in the need for an increased allowance for doubtful accounts. The increase in self-pay accounts receivable results from a combination of factors including increased patient volumes, price increases, higher levels of patient deductibles and co-insurance under managed care programs and the increased difficulties of uninsured patients who do not qualify for charity care programs to pay for escalating healthcare costs. We have implemented policies and procedures designed to expedite upfront cash collections and promote repayment plans from our patients. Our upfront cash collections increased by 3.6% on a same hospital basis during fiscal 2006 compared to fiscal 2005. However, we believe bad debts will remain sensitive to changes in payer mix, pricing and general economic conditions for the hospital industry during the foreseeable future.
We recognize patient service revenues during the period the healthcare services are provided based upon estimated amounts due from payers. We estimate contractual adjustments and allowances based upon payment terms set forth in managed care health plan contracts and by federal and state regulations. For the majority of our patient service revenues, contractual adjustments are applied to patient accounts at the time of billing using specific payer contract terms entered into the accounts receivable systems, but in some cases we record an estimated allowance until we receive payment. We derive most of our patient service revenues from healthcare services provided to patients with Medicare or managed care insurance (including commercial insurance) coverage. During fiscal 2005 and 2006, combined Medicare and managed care revenues accounted for 77% and 79% of net patient revenues, respectively. For those same periods, Medicaid revenues accounted for 7% of net patient revenues. Services provided to Medicare patients are generally reimbursed at prospectively determined rates per diagnosis (“PPS”), while services provided to managed care patients are generally reimbursed based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. Medicaid reimbursements vary by state. Other than
Same hospital patient days represent patient days for hospitals owned for the full 12 months of both years presented.
Supplies. Supplies as a percentage of total revenues increased to 16.5% in total and 16.3% on a same hospital basis during fiscal 2005 compared to 15.9% during fiscal 2004 primarily due to increased acuity of services provided to our patients and increased costs of supplies and pharmaceuticals. Our same hospital orthopedic and cardiac surgical volumes, which typically utilize more costly supplies, increased year over year.