The Johns Hopkins Hospital .us

The Johns Hopkins Hospital

Financial Statements June 30, 2012 and 2011

The Johns Hopkins Hospital

Index June 30, 2012 and 2011

Page(s) Report of Independent Auditors ................................................................................................................. 1 Balance Sheets ....................................................................................................................................... 2-3 Statements of Operations and Changes in Net Assets ............................................................................. 4 Statements of Cash Flows ......................................................................................................................... 5 Notes to Financial Statements ..............................................................................................................6-36

REPORT OF INDEPENDENT AUDITORS ________

To the Board of Trustees of The Johns Hopkins Hospital: In our opinion, the accompanying balance sheets and the related statements of operations and changes in net assets and cash flows present fairly, in all material respects, the financial position of The Johns Hopkins Hospital ("JHH") at June 30, 2012 and 2011, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of JHH's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

September 28, 2012

PricewaterhouseCoopers LLP, 100 East Pratt Street, Suite 1900, Baltimore, MD 21202-1096 T: (410) 783 7600, F: (410) 783 7680, us

The Johns Hopkins Hospital

Balance Sheets June 30, 2012 and 2011 (in thousands)

ASSETS Current assets:

Cash and cash equivalents Short-term investments Assets whose use is limited for current liabilities Patient accounts receivable, net of estimated uncollectibles of $29,636 and $47,114 at June 30, 2012 and 2011, respectively Due from others Due from affiliates - current portion Inventories of supplies Prepaid expenses and other current assets

Total current assets

Assets whose use is limited, net of current By donors or grantors for: Future campus development Pledges receivable By Board of Trustees Other

Total assets whose use is limited, net of current

Investments Property, plant and equipment Less: accumulated depreciation and amortization

Total property, plant and equipment, net

Due from affiliates, net of current portion Net pension asset Other assets

Total assets

2012

2011

$

41,074 $ 153,388

8,950

89,230

12,152

9,370

210,413 29,362 31,015 45,272 28,815

407,053

167,573 21,302 2,876 36,281 5,484

485,504

644 15,079 63,382

7,705

86,810

7,516 25,614 61,758

6,549

101,437

459,589 2,072,864

(552,048)

1,520,816

587,003 1,850,549

(514,360)

1,336,189

264,213 -

31,367

54,641 1,878 4,648

$ 2,769,848 $ 2,571,300

The accompanying notes are an integral part of these financial statements. 2

The Johns Hopkins Hospital

Balance Sheets, continued June 30, 2012 and 2011 (in thousands)

LIABILITIES AND NET ASSETS Current liabilities:

Current portion of long-term debt Accounts payable and accrued liabilities Accrued vacation Due to affiliates Advances from third-party payors Current portion of estimated malpractice costs

Total current liabilities

Long-term debt, net of current portion Estimated malpractice costs, net of current portion Net pension liability Other long-term liabilities

Total liabilities

Net assets: Unrestricted Temporarily restricted Total net assets Total liabilities and net assets

2012

2011

$ 162,625 197,090 18,240 19,725 80,257 21,846

499,783

708,198 64,121

290,783 235,495

1,798,380

$ 124,995 199,077 16,755 8,782 66,903 1,235

417,747

643,252 39,943

133,270 127,166

1,361,378

952,208 19,260

971,468

$ 2,769,848

748,394 461,528 1,209,922

$ 2,571,300

The accompanying notes are an integral part of these financial statements. 3

The Johns Hopkins Hospital

Statements of Operations and Changes in Net Assets For the years ended June 30, 2012 and 2011 (in thousands)

2012

2011

Operating revenues: Net patient service revenue Other revenue Investment income Net assets released from restrictions used for operations

Total operating revenues

$ 1,634,266 143,362 14,042 229

1,791,899

$ 1,585,310 130,577 14,145 245

1,730,277

Operating expenses: Salaries, wages and benefits Purchased services Supplies and other Interest Provision for bad debts Depreciation and amortization

Total operating expenses

Income from operations

698,118 505,647 374,736

8,349 34,930 84,892

1,706,672

85,227

667,347 497,833 346,880

9,861 38,243 69,357

1,629,521

100,756

Non-operating revenues and expenses: Interest expense on swap agreements Change in market value of swap agreements Realized and unrealized (losses) gains on investments Loss on advance refunding of debt Non-operating services

(Deficiency) excess of revenues over expenses

(19,115) (107,608)

(5,469) (363)

(8,073)

(55,401)

(19,078) 24,207 27,049

-

132,934

Contributions from affiliates Unrealized (losses) gains on investments Change in funded status of defined benefit plans Net assets released from restrictions used for purchases of property and equipment

Increase in unrestricted net assets

(188,442)

447,657 203,814

31,200 (1,145) 49,240

3,397 215,626

Changes in temporarily restricted net assets: Gifts, grants and bequests Net assets released from restrictions used for purchase of property, plant and equipment Net assets released from restrictions used for operations Other

(Decrease) increase in temporarily restricted net assets

(Decrease) increase in net assets Net assets at beginning of year

16,235

(447,657) (229)

(10,617) (442,268) (238,454) 1,209,922

66,666

(3,397) (245) -

63,024 278,650 931,272

Net assets at end of year

$ 971,468 $ 1,209,922

The accompanying notes are an integral part of these financial statements. 4

The Johns Hopkins Hospital

Statements of Cash Flows For the years ended June 30, 2012 and 2011 (in thousands)

Operating activities: Change in net assets Adjustments to reconcile change in net assets to net cash and cash equivalents (used in) provided by operating activities: Depreciation, amortization, and accretion Provisions for bad debts Net realized and unrealized losses (gains) on investments Change in market value on swap agreements Change in funded status of defined benefit plans Restricted contributions and investment income received Contributions from affiliates Refunding of debt Changes in assets and liabilities: Patient receivable and due from others Inventories of supplies, prepaid expenses and other current assets Due (to) from affiliates Pledges receivable Other assets Accounts payable, accrued liabilities and accrued vacation Advances from third-party payors Accrued pension benefit costs Other long-term liabilities Estimated malpractice costs

Net cash and cash equivalents (used in) provided by operating activities

Investing activities: Purchases of property, plant, and equipment Purchases of investment securities Sales of investment securities

Net cash and cash equivalents used in investing activities

Financing activities: Proceeds from restricted contributions and investment income received Proceeds from long-term borrowing Repayment of long-term debt Contributions from affiliates Advances to affiliates note payable

Net cash and cash equivalents (used in) provided by financing activities

Decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental disclosure of noncash transactions Construction costs incurred but not paid

2012

2011

$ (238,454) $ 278,650

87,215 34,930

5,469 107,608 188,442 (26,770)

21,170

(85,830)

(11,652) (75,853) 10,535

(5,058) 15,128 13,354 (29,051)

721 (1,976)

9,928

(284,697) (338,006) 544,319

(78,384)

73,635 38,243 (25,905) (24,207) (49,240) (64,882) (31,200)

-

(83,759)

(1,612) 13,592 (1,783)

5,836 15,294 (6,161)

8,421 1,795 2,556

149,273

(216,404) (1,379,696) 1,265,159

(330,941)

26,770 284,587 (204,300)

(150,915)

64,882 -

(13,415) 31,200

-

(43,858)

(112,314)

153,388

$

41,074 $

82,667 (99,001) 252,389 153,388

$

33,996 $

49,626

The accompanying notes are an integral part of these financial statements. 5

The Johns Hopkins Hospital

Notes to the Financial Statements For the years ended June 30, 2012 and 2011 (in thousands)

1.

Organization and Summary of Significant Accounting Policies

Organization. The Johns Hopkins Health System ("JHHS") is the sole member of The Johns Hopkins Hospital ("JHH"). JHHS is a not-for-profit organization incorporated in the State of Maryland to formulate policy among and provide centralized management for JHHS and its Affiliates. In addition, JHHS provides certain shared services including purchasing, legal, coordination of marketing, and other functions for which JHH is charged separately (see Note 13).

JHHS appoints JHH's Board of Trustees. JHH's Articles of Incorporation provide that JHHS' Board of Trustees will approve JHH's annual operating and capital budgets, significant programmatic changes at JHH, and other significant changes to JHH including amendments of its articles of incorporation or bylaws, mergers, or dissolutions.

JHH's mission is to provide patient care in the treatment and prevention of human illness which compares favorably with that rendered by any other institution in the United States or abroad.

Use of Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Basis of Presentation. The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Cash and Cash Equivalents. Cash and cash equivalents include amounts invested in accounts with depository institutions which are readily convertible to cash, with original maturities of three months or less. Total deposits maintained at these institutions at times exceed the amount insured by federal agencies and therefore, bear a risk of loss. JHH has not experienced such losses on these funds.

Inventories of Supplies. Inventories of supplies are composed of medical supplies, drugs, linen, and parts inventory for repairs. Inventories of supplies are recorded at lower of cost or market using a first in, first out method.

Assets Whose Use is Limited. Assets whose use is limited or restricted by donor are recorded at fair value at the date of donation, which is then considered cost. Investment income or losses on investments of temporarily restricted assets is recorded as an increase or decrease in temporarily restricted net assets to the extent restricted by the donor or law. The cost of securities sold is based on the specific identification method.

Assets whose use is limited include assets set aside for future capital improvements, assets held by trustees under debt agreements, assets restricted by the board of trustees, and assets held for malpractice funding. These assets consist of cash and short term investments, accrued interest and pledges receivable. The carrying amounts reported in the balance sheets approximate fair value.

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