2019 Operating & Capital Budget January 8, 2019

1. 2019 Operating & Capital BudgetJanuary 8, 2019 Kathy Martinez CFO

2. NCHS 2019 OPERATIONAL BUDGET

3. Budget & Narrative are included on pages 15-19 of the BOD packet

4. 2019 Operating Budget-the Bottom Line • 2019 Proposed Operational Budget reflects an Operational Net Income of $68,027 • The capital budget is $634,876 • 2019 is the year “to get our house in order” • No plans for bricks & mortars • Cash Impact

5. FTE’s & Personnel Expenses • Personnel Costs are 74.66% of our total expenses • Salaries & Wages-61% (consistent with 2018) • Fringe Benefits-13.8% (up .8% from 2018) • Fringe Benefits are 21.65% of salaries • The budget represents 779.96 FTE’s with a salary cost of $52,766,812. • Based on historical trends we know we will have vacancies throughout the year therefore a salary savings of $2,004,480 was recorded for an average of 40 FTE’s. • The net salary expense is $50,762,332 and represents 739.96 FTE’s. • The salary expense is a $2.7M or 5.60% increase over the 2018 forecast. • December 2018 actual payroll reflects 716.36 FTE’s. We finished 2018 17.27 FTE’s below budget and reported an increase of 19.68 FTE’s over 2017.

6. Visits • 2019 Visits are projected at 343,258 • The prelim total December 2018 visits reported are 337,384 therefore the projected increase is a 1.74% increase. • 1.74% represents 5,874 additional visits • We modified our visit projection & distribution methodology for 2019.

7. Visit Methodology While historical individual productivity is used to forecast the visits the budgeted visits are by clinic and not individual provider. Historical vs. Current: • 2018 Visits = Productive FTE x Provider type visit goal with allocations based on prior 2 years of seasonal trend. Vs. • 2019 Visits = Monthly hours x historical productive FTE x historical visits/hour with allocations based on monthly productive hours.

8. Patient Revenue • Payer mix based on 2018 historical trend, by site. • The budgeted visit payer mix is 69.4% Medi-cal. • Medi-cal Revenue accounts for 88% of our Patient Revenue • Revenue per visit is site specific by insurance and is based on historical trends with the following exceptions: • FQHC Rate for Perris Health Center was budgeted at $275 per visit. The proposed Perris rate is $316.66 and while we expect to receive this rate we were conservative knowing we will be dealing with the San Diego department of A & I in 2021. • P4P or Managed Care Incentives were budgeted at $1,412,984 as we expect to receive CHG incentives for the quality measures achieved in 2018.

9. Other Revenue • Net Gain from Contracted Pharmacy Revenue is $3,635,614 representing a $1M increase over 2017 budget • Meaningful Use Revenue $178k • Investment Income $360k • Donation Revenue $200k • Special Events include $95k from the annual golf tournament for a net profit of $55k and $80k from the 2019 Gala for a break even bottom line.

10. 2019 Capital Budget • 2019 Capital Budget is $634,876 • Includes $250k placeholder for investment in SYHC PACE program later in the year. • We have no new capital projects planned for 2019 but we will be carrying over the Ramona project and the completion of the SM Flip into 2019. • Annual Improvements: • Furniture, Fixtures,& Equipment $71,900 • Computer & Security Equipment $123,500 • Building & Leasehold Improvements $189,476

11. Business Model Changes • AB2204 passed Qtr4 2018 and is projected to be effective 1/1/19. This bill allows us to increase the hours our satellite clinic operate from 30 to 40 hours, therefore increasing access. • Allows for increased hours at Crouch Specialty, Crouch Dental, Thunder Dr. and potentially our contracted partners. • We are currently working with the State to surrender the licenses for our La Mision and MM Dental sites. Once the licenses have been surrendered, we will be able to open these clinics as satellites, increasing our revenue without reducing access. • Budgeted patient revenue reflects these changes effective 2/1

13. 2019 Capital Budget

14. Questions