2013-05-07T11:12:12-05:00 2012-06-30 450250958 EIDE BAILLY LLP 4310 17TH AVE S PO BOX 2545 FARGO ND 581082545 990 2011-07-01 450230400 HILLSBORO MEDICAL CENTER HILL 7016363201 PO BOX 609 HILLSBORO ND 58045 Jac McTaggart 7016363201 2013-05-06 1 LISA CHAFFEE CPA P00193453 7012398500 2013-05-06 2011 2016-03-07 17:11:31Z Jac McTaggart PO BOX 609 HILLSBORO ND 58045 8138945 0 X www.hillsboromedicalcenter.com X 1946 ND To provide quality health care and living services with dignity and individualized care. 10 10 192 30 0 0 396438 632997 7095839 7404562 57162 24138 76019 77248 7625458 8138945 0 0 0 0 4008975 4163425 0 0 0 3859550 3991832 7868525 8155257 -243067 -16312 15718023 16039565 13412557 13792723 2305466 2246842 X The mission of the Hillsboro Medical Center is to provide quality health care and living services with dignity and individualized care. 0 0 7914002 7404562 The Hospital/Home provides medical care to the community and long-term care to the elderly regardless of the individual's ability to pay for the services received.Medical services offered include critical access hospital services, skilled nursing services, emergency services and ambulance services. To fulfill its mission of community service, the Medical Center provides care to patients and residents who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Because the Medical Center does not pursue collection of amounts determined to qualify for charity care, they are not reported as patient and resident service revenue.The Medical Center maintains records to identify and monitor the level of charity care it provides. These records include the amount of charges foregone for services and supplies furnished under its charity care policy and equivalent service statistics. The amounts of charges foregone, based on established rates, were $9,563 and $14,804 for the years ended June 30, 2012 and 2011.Hillsboro Medical Services also operates a skilled nursing facility. The Home provides nursing services, meals, housekeeping, laundry and activities for residents. 7914002 1 1 0 0 0 0 0 0 1 0 1 0 0 0 1 1 0 1 0 0 0 0 0 0 0 0 1 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 0 0 1 12 0 1 192 1 0 0 0 0 0 0 0 0 0 0 X 10 10 0 1 0 0 0 0 0 1 1 0 0 1 1 1 1 1 1 1 1 0 X Darlene Swanson 7016363211 PO Box 609 Hillsboro ND 58045 X Kathy Evenson 3.00 X X 0 0 0 Jeff McInnes 1.00 X X 0 0 0 Brenda Muller 1.00 X X 0 0 0 Ed Laxdal 1.00 X X 0 0 0 Wes Ecker 1.00 X 0 0 0 Wayne Koering 1.00 X 0 0 0 Cel Baumgartner 1.00 X 0 0 0 Doug Melby 1.00 X 0 0 0 Lisa Rotvold 1.00 X 0 0 0 Joy Hollinshead 1.00 X 0 0 0 Scott Awalt 12.00 X 0 0 0 Jac McTaggart Starting 12012 40.00 X 0 0 0 John Rieke Thru 92011 40.00 X 87218 0 5776 87218 0 5776 0 0 0 0 Sanford Health PO Box 2010 Fargo ND 58122 Various Medical Service Contracts and Ma 517829 DMS Health SDS 12-2208 PO Box 86 Minneapolis MN 55486 X-Ray Fees 106836 Dakota Travel Nurse Inc 502 W Main St Mandan ND 58554 Contracted Nursing Services 105736 3 443386 169266 20345 632997 Net Patient & Resident 621300 7368839 7368839 Supporting Revenue 900099 35723 35723 7404562 24138 24138 77248 0 77248 77248 77248 8138945 7404562 0 101386 126373 126373 3453000 3453000 65805 65805 214104 214104 304143 304143 22460 22460 32359 32359 861338 861338 24260 24260 108467 72664 35803 194909 194909 32635 32635 19410 19410 691173 691173 1196047 1196047 72576 72576 Medical Supplies 459808 459808 Food 133990 133990 Bad debts 121077 121077 Recognition 2198 2198 19125 19125 8155257 7914002 241255 0 1204470 1088915 1315958 2374912 29715 35466 45787 47452 17631455 6559484 11562769 11071971 1145364 1106796 413960 314053 15718023 16039565 514992 717282 79914 94558 12790000 12595000 14288 15672 357492 13363 12719 13412557 13792723 X 2305466 2246842 2305466 2246842 15718023 16039565 X -16312 -42312 X 0 1 1 X 0 X RESTRICTED RESTRICTED RESTRICTED RESTRICTED RESTRICTED RESTRICTED RESTRICTED RESTRICTED 0 1 13783374 4329776 9453598 3539464 2199155 1340309 308617 30553 278064 11071971 Unamortized Bond Premium 12719 12719 Part IV, Line 2b: The Medical Center holds tenant security deposits from assisted living residents. These funds are included in cash and accounts payable in the consolidated financial statements. Tenant security deposits totaled $15,672 and $14,288 at June 30, 2012 and 2011. Description of Uncertain Tax Positions Under FIN 48: Part X: The Medical Center and the Foundation are organized as North Dakota nonprofit corporations and have been recognized by the Internal Revenue Service (IRS) as exempt from federal income taxes under Internal Revenue Code Section 501(c)(3). The Medical Center and the Foundation are required to file a Return of Organization Exempt from Income Tax (Form 990) with the IRS annually. In addition, the Medical Center and the Foundation are subject to income tax on any net income that is derived from business activities that are unrelated to its exempt purpose. The Medical Center and the Foundation believe they have appropriate support for any tax positions taken affecting the annual filing requirements for the Medical Center and the Foundation, and as such, do not have any uncertain tax positions that are material to the consolidated financial statements. The Medical Center and the Foundation would recognize future accrued interest and penalties related to unrecognized tax liabilities in income tax expense if such interest and penalties are incurred. 1 1 X 0 0 0 1 1 0 0 11000 11000 0.00140 2052708 2044119 8589 0.00110 2063708 2044119 19589 0.00250 500 500 0.00010 420869 274537 146332 0.01820 421369 274537 146832 0.01830 2485077 2318656 166421 0.02080 0 121077 90808 1628321 1612199 16122 X 1 0 1 1 Hillsboro Medical Center

12 3rd St SE Hillsboro ND 58045

X X X X Ambulance Hillsboro Medical Center 1 0 1 0 0 1 X X X X 1 1 X X 1 0 1 X 0 0 2 Hillsboro Medical Center Nursing Home

12 3rd St SE Hillsboro ND 58045

Skilled Nursing Comstock Corner

12 3rd St SE Hillsboro ND 58045

Assisted Living Part I, Line 3c: Throughout the payment and collection process, the business office staff attempt to identify to the extent possible, patients who may be eligible for charity care considerations. Individuals with accounts to be considered for charity reductions are asked to complete a financial statement form, which provides pertinent financial information necessary to determine financial need. The charity care application asks for items such as employment information, current income, current expenses, assets owned as well as other miscellaneous items. Credit reports are also used to verify and assist in the decision process. This information is also compared against the federal poverty guidelines. Review of potential charity requests are performed monthly by the Business Manager and certain recommendations are forwarded to the Administrator. The Administrator reviews all information in the charity care application and bases a decision for charity care on all factors included in the application. Part I, Line 7: An average ratio of cost to gross charges, which addresses all patient segments, was used to determine the amount of Financial Assistance at cost on Part I, line 7a. Unreimbursed Medicaid on line 7b was calculated using the costing methods to prepare the cost reports. Subsidized health services on line 7g was calculated using the cost report. Community health improvement services, line 7e, were calculated based on estimated costs. Part I, L7 Col(f): The amount of bad debt expense removed from total expenses to determine the percentage was $121,077. Part II: n/a Part III, Line 4: Financial Statement Bad Debt Expense Footnote:The carrying amount of patient and resident receivables is reduced by a valuation allowance that reflects management's estimate of amounts that will not be collected from patients, residents, and third-party payors. Management reviews patient and resident receivables by payor class and applies percentages to determine estimated amounts that will not be collected from third parties under contractual agreements and amounts that will not be collected from patients and residents due to bad debts. Management considers historical write-off and recovery information in determining the estimated bad debt provision.All discounts and payments on a patient's account are accounted for prior to determining bad debt expense. Hillsboro Medical Center reports amounts as bad debt once they are 120 days overdue and have been turned over to a collection agency. Historically, almost all of these amounts remain unpaid as the patient does not have sufficient resources and likely would qualify for the Charity Care Program. Based on this assumption, 75% of the bad debt amount is considered charity care. Part III, Line 8: Medicare allowable costs of care are based on the Medicare Cost report. The Medicare cost report is completed based on the rules and regulations set forth by Centers for Medicare and Medicaid Services. Part III, Line 9b: As of 6/30/12, the collection policy did not contain specific written provisions on collection practices to be followed for patients who are known to qualify for financial assistance. However in practice, when it is appropriate, a review is done to determine if a patient qualifies for charity care (all patients are evaluated on an individual basis). This can be discussed with the patient during the phone call prior to sending to collections. All collection efforts are reversed if a patient is determined to be eligible for financial assistance. Schedule H, Part V, Section B The Organization began re-writing some of their policies during the year in order to be in compliance with IRC 501(r). This process was halted because the Organization was in the process of becoming affiliated with Sanford Health and knew that when the affiliation was official they would adopt the policies and procedures of Sanford Health. The Organization will become part of Sanford Health as of January 1st, 2013. Hillsboro Medical Center Part V, Section B, Line 9: We have a charity care application available requesting financial and employment information. Items requested include but are not limited to, household income, household expense, insurance benefits, and assets. Administration reviews the application and bases a decision for charity care on all factors and compares data to federal poverty guidelines. Notes are made on the statements informing patients that charity care applications are available if they are unable to pay. Hillsboro Medical Center Part V, Section B, Line 10: No discounted care was provided during the fiscal year. Hillsboro Medical Center Part V, Section B, Line 13g: The Organization informs patients about the Charity Care Policy during the collection process and indicates which pertinent information is needed in order to determine financial need. As of the fiscal year end, the Organization is working on making the Charity Care Policy more widely available to the public in order to be in compliance with IRC 501(r). Hillsboro Medical Center Part V, Section B, Line 19d: During the fiscal year, individuals who were eligible for charity care received a 100% write off applied to the gross charges on their bill. There were no other lesser discounts offered.Effective January 2013, the Organization will be affiliated with Sanford Health. They will adopt the amounts generally billed calculations currently in use by Sanford Health. The minimum discount for those that qualify will be calculated by using the weighted average of the contractual adjustments provided to the three largest commercial insurance companies during the prior calendar year. Part VI, Line 2: The Assistant Director of Nursing and the Medical Providers at Hillsboro Medical Center assess the needs of outpatient services utilized by the community. We re-evaluate the services we provide and have added multiple needed outpatient treatments. These services enhanced patient care and provided services within our community instead of needing to travel outside the Hillsboro area for these services. The Organization began planning a Community Health Needs Assessment during the year as well to help assess the needs of the community. We will continue to review the needs of the community and the services that we offer. Part VI, Line 3: During the collection process for outstanding bills, Hillsboro Medical Center (HMC) informs the patients that they do have a Charity Care Policy and they will send out a financial statement form, which will provide pertinent patient financial information necessary to determine financial need. Also, HMC discusses with the patients that they could apply with the county for Medicaid assistance. The final determination for Charity Care is approved by the Administrator after reviewing all pertinent factors. Part VI, Line 4: Hillsboro Medical Center is a 16-bed acute care hospital, a 36-bed nursing facility, and a 16-unit assisted living facility located in Hillsboro, North Dakota. Hillsboro has a population of approximately 1,603 per the 2010 Census data. Per the 2007-2011 American Community Survey's 5 year estimates, the median income for a household in the city was $43,629 and the median income for a family was $56,719. Males (working year-round and full-time) had a median income of $43,182 versus $30,655 for females. The per capita income for the city was $20,791. About 4.2% of families and 8.4% of the population were below the poverty line, including 7.6% of those under age 18 and 11.2% of those age 65 or over. Sanford-Mayville Hospital is another hospital that serves the community in an 18 mile radius. Part VI, Line 5: The mission of the Hillsboro Medical Center is to provide quality health care and living services with dignity and individualized care. Hillsboro Medical Center provides community meetings about CPR, Advance Directives, Child Passenger Safety, Alzheimer's, etc. to promote information and well-being to people in our community. Hillsboro Medical Center also provides a room for Hospice and UND Journal Club free of charge so they can conduct their meetings for the care of people in the community and surrounding areas. The majority of the organization's governing body is comprised of individuals who reside in the primary service area. These individuals are not employees, nor contractors or family members of the organization. The organization extends medical staff privileges to qualified physicians in the community. Surplus funds, if available, are re-invested in the facility to improve patient care. Part VI, Line 6: n/a Traill County 456002246 892846AQ9 2007-05-22 13341133 Exp of facility; new Asst Lvg and LT Care bldgs, 80% rmdl of Hospital 0 0 0 730000 13341133 893789 658284 239850 11549210 2009 0 0 0 1 0 0 0 0 0.00000 0.00000 0.00000 0 0 0 0 0 0 0 Form 990, Part VI, Section A, line 1 The Organization has an Executive Committee which has the power to transact all regular business of the Organization during the interim between meetings of the Board of Directors, provided that any action taken does not conflict with the policies and expressed wishes of the Board and that the Executive Committee refers all matters of major importance to the full Board. The Executive Committee consists of the Chairperson, Vice Chairperson, Corporation CEO/Administrator, Treasurer and Secretary. The Executive Committee is chaired by the Chairperson and meets on call of the Chairperson of the Board or Corporation CEO/Administrator. Form 990, Part VI, Section A, line 3 The CEO/Administrator is employed through a management agreement with Sanford Health, an unrelated party. Form 990, Part VI, Section B, line 11 The Chief Executive Officer/Administrator will review a draft of the Form 990. During a board meeting, the Board of Directors also received, reviewed, and approved a copy of the Form 990 prior to it being filed. Form 990, Part VI, Section B, line 12c The conflict of interest policy covers the Board of Directors. In December, board members are asked to disclose any possible conflicts. The Chief Executive Officer/Administrator reviews the disclosures and determines if there are any conflicts. Any board member with a conflict is asked to abstain from voting on that issue. The conflict of interest for the CEO is covered by the management contract with Sanford Health. The CFO is not covered by the conflict of interest policy. Form 990, Part VI, Section B, line 15 Salary range for the CEO is determined by Sanford Health and presented to Hillsboro Medical Center board of trustees for approval. Market comparability data is used to help determine the salary range. The Hospital documents the compensation deliberation and decision for the CEO in the board minutes. The CEO is considered a common law employee of Hillsboro Medical Center and the CFO is considered a common law employee of Sanford Health. Other officer's salaries are reviewed on an annual basis with comparative data. Market adjustments as well as annual increases are approved by the board. This was last completed in December of 2011. Form 990, Part VI, Section C, line 19 The governing documents, conflict of interest policy and financial statements are available upon request. Form 990, Part VII Ed Laxdal devotes 1 hour per week to the related organization, Hillsboro Medical Center Foundation. Changes in Net Assets or Fund Balances: Form 990, Part XI, line 5: Net unrealized losses on investments: -42,312. Hillsboro Medical Center Foundation PO Box 609 Hillsboro ND 58045 363542187 Fundraising ND 501(c)(3) 7 Hillsboro Medical Center 1 0 0 1 0 0 0 0 0 0 0 0 1 1 1 0 1 0 0 Hillsboro Medical Center Foundation C 443386 General Ledger