The following table contains selected historical financial data for each of the years in the five year period ended December 31, 2000. We derived the selected historical financial data as of December 31, 1996 from unaudited financial statements. You should read this table in conjunction with the consolidated financial statements and related notes included elsewhere in this report and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
- the highly competitive nature of the healthcare business including the competition to recruit general and specialized physicians;
- changes in federal, state or local regulation affecting the healthcare industry;
- successful development or license, performance and use of management information systems, including software for efficient claims processing;
Effective November 17, 2000, we sold Springhill Medical Center located in Springhill, Louisiana for approximately $5.7 million. We deposited the proceeds into a trust for tax planning reasons and we intend to use them for future capital reinvestment.
Effective September 1, 2000, we sold Barrow Medical Center in Winder, Georgia for approximately $2.2 million.
The following table presents summaries of results from continuing operations for the years ended December 31, 1998, 1999 and 2000:
(a) EBITDA is defined as income from continuing operations before depreciation and amortization, interest expense, management fees, impairment of long-lived assets, ESOP expense, minority interests in earnings of consolidated entities and income taxes. EBITDA is commonly used as an analytical indicator within the healthcare industry and also serves as a measure of leverage capacity and debt service ability. EBITDA should not be considered as a measure of financial performance under generally accepted accounting principles and the items excluded from EBITDA are significant components in understanding and assessing financial performance. EBITDA should not be considered in isolation or as an alternative to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity. Because EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is susceptible to varying calculations, EBITDA as presented may not be comparable to other similarly titled measures of other companies. (b) Represents the total number of patients admitted (in the facility for a period in excess of 23 hours) to our hospitals and used by management and investors as a general measure of inpatient volume. (c) Management and investors use equivalent admissions as a general measure of combined inpatient and outpatient volume. We compute equivalent admissions by multiplying admissions (inpatient volume) by the sum of gross inpatient revenue and gross outpatient revenue and then dividing the resulting amount by gross inpatient revenue. The equivalent admissions computation "equates" outpatient revenue to the volume measure (admissions) used to measure inpatient volume resulting in a general measure of combined inpatient and outpatient volume. (d) "Same hospital" information excludes the operations of hospitals which we either acquired or divested during the years presented.
Revenues increased 8.1% to $557.1 million for the year ended December 31, 2000 compared to $515.2 million for the year ended December 31, 1999, primarily as a result of an 8.8% increase in same hospital revenues and our acquisition of two hospitals during fiscal 2000. Our sale of five hospitals during fiscal 2000 partially offset the increase in revenues. The 8.8% increase in same hospital revenues resulted primarily from a 2.6% increase in same hospital inpatient admissions and a 6.5% increase in same hospital equivalent admissions, adjusted to reflect combined inpatient and outpatient volume.
Our costs did not increase at the same rate as our revenue. The increase in volumes and revenues per equivalent admission contributed to the reduction of our operating expenses as a percent of revenue because we were able to spread our operating costs over an increased base of revenues.
Salaries and benefits decreased as a percentage of revenues to 40.2% for the year ended December 31, 2000 from 42.2% for the year ended December 31, 1999 primarily as a result of improvements in labor productivity and an increase in revenues per equivalent admission, as discussed above. In addition, man-hours per equivalent admission decreased 5.4% over the same period last year.
Supply costs decreased as a percentage of revenues to 12.0% for the year ended December 31, 2000 from 12.5% for the year ended December 31, 1999. The decrease related primarily to the increase in revenues per equivalent admission and a lower number of high intensity services provided during the year ended December 31, 2000 compared to the same period last year.
ESOP expense increased to $7.1 million for the year ended December 31, 2000 from $2.9 million for the year ended December 31, 1999. We established the ESOP in June 1999; therefore, only seven months of expense for the ESOP is reflected in the year ended December 31, 1999. The increase in ESOP expense is also due to a higher average fair market value of our common stock for the year ended December 31, 2000 compared to the same period last year. We recognize ESOP expense based on the average fair market value of the shares committed to be released during the period.
- decreases in Medicare reimbursement rates mandated by the Balanced Budget Act which became effective October 1, 1997. These rates lowered revenues by approximately $10.1 million for the year ended December 31, 1999 compared to periods before the effective date of the Balanced Budget Act;
Other operating expenses decreased as a percentage of revenues to 22.7% for the year ended December 31, 1999 from 23.5% for the year ended December 31, 1998 primarily because of a decrease in professional fees and contract services.
Depreciation and amortization expense increased to $31.4 million for the year ended December 31, 1999 from $28.3 million for the year ended December 31, 1998 primarily as a result of capital expenditures related to computer information systems. The majority of our facilities began depreciating the systems in the fourth quarter of 1998.
intercompany balance with HCA. On the date HCA distributed our common stock to its stockholders, we eliminated the intercompany amounts payable by us to HCA.
ESOP expense of $2.9 million during 1999 relates to the newly established ESOP.
Loss from continuing operations before income taxes was $10.1 million for the year ended December 31, 1999 compared to a loss of $27.5 million for the year ended December 31, 1998 primarily because of increases in revenue and decreases in certain expenses as described above.
At the time of the distribution, $25 million of the $60 million term loan facility was drawn. In June 2000, we borrowed the remaining $35 million of the $60 million term loan facility. The final payment under this term loan facility is due November 11, 2004.
The $65 million revolving credit facility is available for working capital and other general corporate purposes and any outstanding amounts under the revolving credit facility will be due and payable on November 11, 2004. As of December 31, 2000 and as of February 28, 2001, we did not owe any amounts under this facility.
The healthcare industry is labor intensive. Wages and other expenses increase during periods of inflation and when shortages in marketplaces occur. In addition, suppliers pass along rising costs to us in the form of higher prices. Our ability to pass on these increased costs is limited because of increasing regulatory and competitive pressures, as discussed above. In the event we experience inflationary pressures, results of operations may be materially effected.
Our revenue is particularly sensitive to regulatory and economic changes in the states of Kentucky and Tennessee. As of December 31, 2000, we operated 20 hospitals with six located in the Commonwealth
HCA agreed to indemnify us for any losses, other than consequential damages, arising from the pending governmental investigations of HCA's business practices prior to the date of the distribution and losses arising from legal proceedings, present or future, related to the investigation or actions engaged in before the distribution that relate to the investigation. However, we could be held responsible for any claims that are not covered by the agreements reached with the federal government or for which HCA is not required to, or fails to, indemnify us. We may also be affected by the initiation of additional investigations or claims against HCA in the future, if any, and the related media coverage.
If our access to HCA's information systems is restricted or we are not able to integrate changes to our existing information systems, our operations could suffer.
If the distribution were to fail to qualify for tax-free treatment, then, in general, additional corporate tax, which would be substantial, would be payable by the consolidated group of which HCA is the common parent. Each member of HCA's consolidated group at the time of the distribution, including LifePoint, would be jointly and severally liable for this tax liability. In addition, LifePoint entered into a tax sharing and indemnification agreement with HCA and Triad, which prohibits LifePoint from taking actions that could jeopardize the tax treatment of either the distribution or the restructuring transactions that preceded the distribution, and requires LifePoint to indemnify HCA and Triad for any taxes or other losses that result from LifePoint's actions, which amounts could be substantial. If LifePoint were required to make any indemnity payments or otherwise were liable for additional taxes relating to the distribution, LifePoint's results of operations could be materially adversely affected.