allcare cco, inc. - · pdf fileallcare cco, inc. december 31, 2015 ... total...

Report of Independent Auditors and Financial Statements with

Supplementary Information

AllCare CCO, Inc. December 31, 2015

CONTENTS

PAGE

REPORTOFINDEPENDENTAUDITORS.......................................................................................................................................................................................1

FINANCIALSTATEMENTS

Balancesheet.....................................................................................................................................................................................................................................3

Statementofoperations................................................................................................................................................................................................................4

Statementofstockholders’equity.............................................................................................................................................................................................5

Statementofcashflows.................................................................................................................................................................................................................6

Notestofinancialstatements......................................................................................................................................................................................................7

SUPPLEMENTARYINFORMATION

ReportL7.Yearlybalancesheetofcorporateactivity...................................................................................................................................................14

ReportL8.Yearlystatementofrevenue,expenses,andchangesinnetassets...................................................................................................16

ReportL9.Cashflowsanalysiscorporateactivity/indirectmethod.....................................................................................................................18

REPORTOFINDEPENDENTAUDITORS

TotheBoardofDirectorsAllCareCCO,Inc.

ReportontheFinancialStatements

We have audited the accompanying financial statements of AllCare CCO, Inc. (formerly AllCare HealthPlan)(“AllCare”),whichcomprisethebalancesheetasofDecember31,2015,andtherelatedstatementsofoperations,stockholders’equity,andcashflowsfortheyearthenended,andtherelatednotestothefinancialstatements.

Management’sResponsibilityfortheFinancialStatements

Management is responsible for the preparation and fair presentation of these financial statements inaccordancewithaccountingprinciplesgenerallyaccepted intheUnitedStatesofAmerica;this includesthe design, implementation, and maintenance of internal control relevant to the preparation and fairpresentationof financialstatements thatare free frommaterialmisstatement,whetherdue to fraudorerror.

Auditor’sResponsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordancewith auditing standards generally accepted in the United States ofAmerica. Those standards require thatwe plan and perform the audit to obtain reasonable assuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthe financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks ofmaterialmisstatement of the financial statements,whether due to fraud orerror. Inmaking those risk assessments, the auditor considers internal control relevant to the entity’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’s internalcontrol.Accordingly,weexpressnosuchopinion.Anauditalsoincludesevaluatingthe appropriateness of accounting policies used and the reasonableness of significant accountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancialpositionofAllCareasofDecember31,2015,andtheresultsofitsoperationsanditscashflowsfortheyearthenendedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.

SupplementaryInformation

Our audit was conducted for the purpose of forming an opinion on the financial statements thatcollectively compriseAllCare’sbasic financial statements.Theaccompanying supplementary schedules,ReportL7,YearlyBalanceSheetofCorporateActivity;ReportL8,YearlyStatementofRevenue,Expenses,andChangesinNetAssets;andReportL9,CashFlowAnalysisCorporateActivity/IndirectMethodasofandfortheyearendedDecember31,2015,arepresentedforthepurposeofadditionalanalysisandarenotarequiredpartofthebasicfinancialstatements.

Theaccompanyingsupplementary information–ReportL7,YearlyBalanceSheetofCorporateActivity;ReportL8,YearlyStatementofRevenue,Expenses;andChangesinNetAssets,andReportL9,CashFlowAnalysisCorporateActivity/IndirectMethodasofandfortheyearendedDecember31,2015,havenotbeen subjected to the auditing procedures applied in the audit of the basic financial statements, andaccordingly,wedonotexpressanopinionorprovideanyassuranceonit. SanFrancisco,CaliforniaMay12,2016

FINANCIALSTATEMENTS

__________

ALLCARECCO,INC.

Seeaccompanyingnotes.Page3

BALANCESHEETDecember31,2015

CURRENTASSETSCashandcashequivalents 24,864,047$OregonHealthAuthoritypremiumreceivables 1,928,687Reinsurancereceivable 303,870Deferredincometaxes 4,002,615Duefromaffiliates 11,371,833Otherreceivables 46,338

Totalcurrentassets 42,517,390

ASSETSLIMITEDASTOUSE 8,680,155

INTANGIBLEASSET 250,000

Totalassets 51,447,545$

CURRENTLIABILITIESClaimspayable 15,263,789$Minimummedicallossratiopayable 1,000,000Accountspayable 1,687,787Retroratesettlement 4,793,293SpecialNeedsRateGroup("SNRG")payable 1,250,804Alternativepaymentmethodology("APM")sharedsavings 3,650,000Riskpoolpayable 810,000Contractwithholdpayable 731,865

Totalcurrentliabilities 29,187,538

STOCKHOLDERS’EQUITYContributedcapital 350,000Retainedearnings 21,910,007

Totalstockholders'equity 22,260,007

Totalliabilitiesandstockholders'equity 51,447,545$

ASSETS

LIABILITIESANDSTOCKHOLDERS’EQUITY

ALLCARECCO,INC.


STATEMENTOFOPERATIONSYearEndedDecember31,2015

REVENUESOregonHealthAuthoritypremiumsearned,

netofhospitalreimbursementadjustments 217,470,766$Qualitybonuspool 6,170,421Grantincomeandotherrevenue 398,313

Totalrevenue 224,039,500

EXPENSESHealthcareexpenses 192,057,988Operatingexpenses 26,114,549

Totalexpenses 218,172,537

INCOMEFROMOPERATIONS 5,866,963

OTHERINCOME Netinvestmentincome 69,530

INCOMEBEFOREINCOMETAXES 5,936,493

INCOMETAXEXPENSE (2,585,755)

NETINCOME 3,350,738$

ALLCARECCO,INC.


STATEMENTOFSTOCKHOLDERS’EQUITYYearEndedDecember31,2015

Contributed RetainedCapital Earnings Total

Balance,December31,2014 350,000$ 24,559,269$ 24,909,269$

Dividendsdeclaredandpaid ‐ (6,000,000) (6,000,000)

Netincome ‐ 3,350,738 3,350,738

Balance,December31,2015 350,000$ 21,910,007$ 22,260,007$

ALLCARECCO,INC.


STATEMENTOFCASHFLOWSYearEndedDecember31,2015

CASHFLOWSFROMOPERATINGACTIVITIESNetincome 3,350,738$Adjustmentstoreconcilenetincometonetcashprovidedbyoperatingactivities:

Deferredincometax (860,918)Changesin:

OregonHealthAuthoritypremiumsreceivables (960,729)Reinsurancereceivable (296,055)Duefromaffiliates (9,627,248)Otherreceivables (15,573)Claimspayable 2,640,037Minimummedicallossratiopayable 1,000,000Accountspayable 67,194Retroratesettlement 4,793,293SNRGpayable 1,250,804APMsharedsavings 2,650,000Riskpoolpayable (3,670,000)Contractwithholdpayable (8,361)

Netcashprovidedbyoperatingactivities 313,182

CASHFLOWSUSEDFORINVESTINGACTIVITIESProceedsfromsalesofinvestments 7,910,372Purchasesofinvestments (10,481,658)Proceedsfromloanreceivable 82,909

Netcashusedforinvestingactivities (2,488,377)

CASHFLOWSFROMFINANCINGACTIVITIESPaymentsofdividends (6,000,000)

Netcashusedforfinancingactivities (6,000,000)

NETCHANGEINCASHANDCASHEQUIVALENTS (8,175,195)

CASHANDCASHEQUIVALENTS,beginningofyear 33,039,242

CASHANDCASHEQUIVALENTS,endofyear 24,864,047$

SUPPLEMENTALCASHFLOWINFORMATIONCashpaidduringtheyearforincometaxes 12,840,000$

ALLCARECCO,INC.NOTESTOFINANCIALSTATEMENTS

Page7

NOTE1–DESCRIPTIONOFOPERATIONSANDSUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES

Descriptionoforganization–AllCareCCO,Inc.(formerlyAllCareHealthPlan)(“AllCare”)wasincorporatedinSeptember2004.OnJuly1,2012,AllCarewasawardedoneof the firstCoordinatedCareOrganization(“CCO”)contracts in theStateofOregontoservetheMedicaidpopulationinSouthernOregon.TheadoptionofthisnewcontracthasfacilitatedtheintegrationofMentalandDental Health Services inwith its current Physical Health Services at AllCare. AllCare chose to re‐name the CCO, fromOregonHealthPlan, tobetter reflect thenewservice integrationmodelbutdidnotmakeachange to theownershipstructure.ADoingBusinessAsname (“DBA”)ofAllCareHealthPlanwas chosenbyMidRougeAllCareHealthAssurance, Inc. (formerlyMidRogueIndependentPhysicianHoldingCompany)and thenewstakeholders toestablishan identityrelated to thenewbusinessmodel.The first CCO contract was issued on a seventeen‐month time frame. The contract was renewed for calendar year 2015 onDecember24, 2014. The next renewal will be on a calendar year basis. In October 2014, AllCare filed amended articles ofincorporationwiththeStateofOregonchangingitsnametoAllCareCCO,Inc.

AllCarecontractswithtenindependentRiskAcceptingEntities(“RAE”)toprovide,orarrangetoprovide,coveredhealthservicesto enrollees assigned to the RAE on a fully capitated basis. The ten RAE’s are as follows: Jackson County Health and HumanServices,OptionsforSouthernOregon,Inc.,CurryCommunityHealth,OnTrack,CapitolDentalCare,Inc.,WilliametteDentalGroup,ModaHealth–ODS,AdvantageDental,LaClinicaandReadyRide.

Cashandcashequivalents–Cashandcashequivalentsincludeallhighlyliquidinvestmentswithoriginalmaturitiesof90daysorlessandarecarriedatcost,whichapproximatesfairvalue.Cashbalancesaremaintainedatbanksandfinancialinstitutions,whichat timesmay exceed the federally insured limits. During 2015, balances exceeded the federally insured limits. AllCare has notexperiencedanylossesontheseaccounts.

OregonHealthAuthority(“OHA”)premiumreceivables–OHApremiumreceivables includeamountsdue formaternitycaseratepremiums.Pastduestatusisbaseduponthedateofservicesprovided.Uncollectiblereceivablesarechargedoffwhendeemeduncollectible. Recoveries from previously charged‐off accounts are recorded when received and no interest is charged onoutstandingamounts.AllCaredoesnotrequirecollateralorothersecuritytosupporttherecordedreceivablesamounts.

Reinsurance–Inthenormalcourseofbusiness,AllCareseekstolimititsexposuretolossesonanysingleinsuredandtorecoveraportionof benefits paidby ceding reinsurance to its single reinsurer under excess coverage agreements. In addition,AllCare isrequiredtoobtaincertainreinsuranceasacontractorofOHA.TheseagreementscallforAllCaretocedereinsurancepremiumstoits reinsureronapermemberpermonthbasis. In return, the reinsurerassumes100%of the risk inexcessof specified limits.ReinsuranceagreementsdonotrelieveAllCare fromitsobligationtoserviceproviders.Amountsrecoverableareestimated inamanner consistent with the claim liability associated with the reinsurance policy. Reinsurance premiums and reinsurancerecoveriesareincludedinhealthcareexpenses.Reinsurancepremiumswere$1,437,682fortheyearendedDecember31,2015.AllCarehad$1,263,882ofreinsurancerecoveriesonpaidlossesfortheyearendedDecember31,2015.ReinsurancereceivablefortheyearendedDecember31,2015was$303,870andhasbeenincludedinthebalancesheet.

Assetslimitedastouse–AssetslimitedastouseconsistofcertificatesofdepositbeingheldintrustforcontractualinsolvencyrequirementsinaccordancewithOHA.Thereservesarerequiredtoensurefuturepaymentofmedicalclaimsorcontractwithholdsandsettlements.

Claimspayable –Claims incurred represent capitationandnoncapitationpayments for services renderedduring theyear.Theclaims payable liability is based on experience statistics related to the nature and volume of work performed. Managementperiodicallyevaluatesthisestimatedliabilityinordertomaintainitatalevelthatissufficienttoabsorbprobableincurredbutnotreportedclaims.Management’sevaluationoftheadequacyoftheestimateisbasedonananalysisofclaimspaidafterthebalancesheetdateandanactuarialreviewofhistoricalclaimexperience.

Retroratesettlement–During2015,OHArevised their rateprocessand in turndevelopednewrateswhichwereretroactivebacktoJanuary1,2015.AllCarereceivednotificationofthenewratesduringthethirdquarter2015.Therevised2015rateswereapproximately3.9%lowerthantheoriginalratesprovidedduringthecontractrenewalperiodin2014.Asaresultofthedecreaseinrates,OHApreparedatakebackscheduleforthereturnoftheoverpaidratesfromJanuary1,2015throughOctober1,2015.Theretroratesettlementwas$4,793,293asofDecember31,2015.

SpecialNeedsRateGroup(“SNRG”)payable–AllCarereceivesaspecificcaserate forpatientswhohavebeenidentifiedwithspecific high‐risk medical conditions. The SNRG case rates are paid to the CCOs and thenmonitored against actual claims, toprovidea revenue risk corridorprotection for theCCOsandStateas thisnewerrategroupriskwas transferred to theCCOs in2013. The SNRG risk corridor is structured to reimburse CCOswith actual claims costs that exceed revenues, and inversely torecouprevenuesexceedingactualclaimcosts.TheriskcorridorpayablerelatedtoSNRGwas$1,250,804asofDecember31,2015.


Page8

Alternativepaymentmethodology(“APM”)sharedsavings–During2014,AllCareimplementednewpaymentmethodologiesforshareholderprimarycarephysicianseffectiveJanuary1,2014andforshareholderpediatricphysicianseffectiveJuly1,2014.DuringtheyearendedDecember31,2015,AllCareimplemented3additionalmethodologiesforspecialists,behavioralhealth,anddental health providers. In addition, the paymentmethodologiesweremade available to all network providers. As part of themethodology,providerswillreceivebonusesbaseduponmemberaccessandquality incentivemetrics if theprovidersmeettherequirementsestablishedwithinthecontracts.AsofDecember31,2015,$3,650,000hasbeenaccrued inthebalancesheet.ThepaymentswillbemadeinJuly2016.

Riskpoolpayable‐AllCareprovidesforriskpoolsforallshareholderprovidersandstakeholdersthatshareriskwithAllCare.TheriskpoolamountsaredeterminedannuallybytheBoardofDirectors.Fortheyearended2015,20%wasallocatedtotheriskpoolofwhich15%willbedistributedtoshareholderprovidersand5%tostakeholders.AsofDecember31,2015,$810,000hasbeenaccruedinthebalancesheet.ThepaymentswillbemadeinJuly2016.

Professionalliabilityinsurance–AllCareinsuresforprofessionalliabilityclaimsunderaclaims‐madepolicy.Underthepolicy,insurance premiums cover only those claims actually reported during the policy term. Should the claims‐made policy not berenewed,orreplacedwithequivalentinsurance,claimsrelatedtooccurrencesduringtheirtermsbutreportedsubsequenttotheirterminationmaybeuninsured.AccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica(“U.S.”GAAP”)requirethatahealth careorganizationdisclose theestimatedcostsofmalpracticeclaims in theperiodof the incidentofmalpractice, if it isreasonably possible that liabilitiesmay be incurred and losses can be reasonably estimated. Management is not aware of anypending claims thatexceed thecoverage limitationsprovidedby theirpolicy.Management isunable to reasonablyestimate therange of future costs, if any, of unasserted medical malpractice claims arising from incidents in current and prior periods.Management believes that any unreported professional liability will not have a material adverse effect on AllCare’s financialpositionorresultsofoperations.

Revenuerecognition–AllCare’srevenuesconsistofpremiumsearnedfromcapitationpaymentsreceivedfromtheOregonHealthAuthorityandarerecognizedasrevenueduringtheperiodinwhichAllCareisobligatedtoprovideservicestomembers.Maternitycaseratepremiumsarerecognizedintheperiodthatabirthoccurs.

Hospital Reimbursement Adjustment (“HRA”) andManaged CareOrganization (“MCO”) tax revenue are received as part of thepremiumpaymentandarerecordedinpremiumrevenuewhenreceived.HRAandMCOamountsreceivedaretobepaidinfulltodesignatedentitiesandarealsorecordedasanexpenseuponreceipt.

Qualitybonuspool–AspartoftheCCOcontractwithOHA,thereisbonusfundingavailabletoAllCare.OHAhasestablished17quality incentivemetricswithbenchmarksthattheCCOmustmeettobeabletoshareinthebonusfunding.FortheyearendedDecember31,2014,AllCaremet11.6ofthemetricswhichqualifiedAllCarefor80%ofthepotentialbonus.AllCarereceivedandrecorded$6,170,421duringtheyearendedDecember31,2015relatedtothe2014bonusfunding.

Grant income–During2013and2015,AllCareenteredintograntawardcontractswithOHAforthepurposeof fundinghealthcare transformation projects designed to support the Triple Aim of better health, better care, and lower costs. The grants areaccountedforasrevenueintheperiodtheconditionsaresatisfied.Therelatedprogramexpensesareaccruedasincurred.FortheyearendedDecember31,2015,AllCarerecognized$382,231inrevenueandexpenserelatedtothisgrant.

Healthcareservicecostrecognition–AllCarecontractswithvarioushealthcareprovidersfortheprovisionofcertainmedicalcare services to itsplanmembers.Under the termsof the contractswithparticipatingproviders, apercentageof their feesareretainedbyAllCaretocoverpotentialdeficits.AllCareevaluatesthecontractwithholdannuallyandmayreturnaportiontotheproviders basedon its ability tomeet claimobligations.Operating expenses includeall amounts incurredbyAllCareunder theaforementionedcontracts.

Thecostofotherhealthcareservicesprovidedorcontractedforisaccruedintheperiodinwhichitisprovidedtoamemberbasedinpartonestimates,includingaccrualformedicalservicesprovidedbutnotreportedtoAllCare.

Net investment income – Investment income consists of interest earnings from certificates of deposits. Interest representsamounts earned on investment holdings and is accruedwhen earned. Investment transaction, custodial and advisory fees areexpensedwhenincurred.


Page9

Income taxes – AllCare accounts for income taxes in accordance with the Financial Accounting Standards Board (“FASB”)statementforaccountingfor incometaxeswhichrequiresAllCaretousetheassetandliabilitymethodofaccountingforincometaxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporarydifferences” by applying enacted statutory tax rates, applicable to future years, to differences between the financial statementcarryingamountsandthetaxbasesofexistingassetsandliabilities.Underthisstatement,theeffectondeferredincometaxesofachangeintaxratesisrecognizedinincomeintheperiodthatincludestheenactmentdate.Avaluationallowanceisrecognizedifitismorelikelythannotthatsomeportion,orallof,adeferredtaxassetwillnotberealized.ThefactorsusedtoassessthelikelihoodofrealizationincludeAllCare’sforecastofthereversaloftemporarydifferences,futuretaxableincomeandavailabletaxplanningstrategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income inapplicabletaxjurisdictionscouldaffecttheultimaterealizationofdeferredtaxassetsandcouldresultinanincreaseinAllCare’seffectivetaxrateonfutureearnings.

AllCarerecognizesthetaxbenefitfromuncertaintaxpositionsifitismorelikelythannotthatthetaxpositionswillbesustainedonexaminationbythetaxauthorities,basedonthetechnicalmeritsoftheposition.Thetaxbenefitismeasuredbasedonthelargestbenefitthathasagreaterthan50%likelihoodofbeingrealizeduponultimatesettlement.AllCarerecognizesinterestandpenaltiesrelatedtounrecognizedtaxbenefitsinincometaxexpense.Accruedinterestandpenaltiesareincludedwithintherelatedliabilitylineinthebalancesheet.SeeNote5foradditionaldetails.

Useofestimates–ThepreparationoffinancialstatementsinconformitywithU.S.GAAPrequiresAllCaretomakeestimatesandassumptionsaffecting thereportedamountsofassets, liabilities, revenuesandexpenses,andthedisclosureofcontingentassetsandliabilities.Theamountsestimatedcoulddifferfromactualresults.Significantestimatesinthesefinancialstatementsincludetheliabilityforclaimsincurredbutnotpaid,minimummedicallossratiopayable,retroratesettlement,SNRGpayable,APMsharedsavings,riskpoolpayable,andreinsurancereceivable.

Fair value of financial instruments – Unless otherwise indicated, the fair values of all reported assets and liabilities, whichrepresentfinancialinstruments,approximatetheircarryingvalues.AllCare’spolicyistorecognizetransfersinandtransfersoutofLevels1and2asoftheendofthereportingperiod.PleaseseeNote3forfairvaluehierarchydisclosuresofinvestments.

Concentrationsofrisk–FinancialinstrumentspotentiallysubjectingAllCaretoconcentrationsofriskconsistprimarilyofbankdemanddepositsinexcessofFDICinsurancethresholds.DuringtheyearendedDecember31,2015,themajorityofrevenuesweregeneratedfromthecontractwiththeOHAtoprovidemedicalservicestoresidentswithinJosephine,Jackson,DouglasandCurrycounties, Oregon. Loss of contract due to nonrenewal or legislative decisions that impact program funding or result indiscontinuationcouldmateriallyaffectthefinancialpositionofAllCare.

New accounting pronouncements – In January 2016, the Financial Accounting Standards Board (“FASB”) issued AccountingStandards Update (“ASU”) No. 2016‐01, Recognition and Measurement of Financial Assets and Financial Liabilities, FinancialInstruments–Overall(Subtopic825‐10)(“ASU2016‐01”),whichenhancesthereportingmodelforfinancialinstrumentstoprovideusers of financial statements with more decision‐useful information. The update addresses certain aspects of recognition,measurement,presentation,anddisclosureof financial instruments.Forpublicbusinessentities, theamendments inthisupdateareeffectiveforfiscalyearsbeginningafterDecember15,2017,includinginterimperiodswithinthosefiscalyears.Forallotherentities includingnot‐for‐profit entities and employeebenefit plans, the amendment is effective for fiscal years beginning afterDecember 15, 2018 and interimperiodswithin fiscal years beginning afterDecember 15, 2019. All entities that are not publicbusinessentitiesmayadopttheamendmentsinthisupdateearlierasoffiscalyearsbeginningafterDecember15,2017,includinginterim periodswithin those fiscal years. The adoption is effective for AllCare beginning January 1, 2019. The adoption is notexpectedtohaveamaterialimpactonthefinancialstatements.

InFebruary2016,theFASBissuedASUNo.2016‐02,Leases(Topic842),whichwillrequireanentitytoreportaright‐of‐useassetandaliabilityfortheobligationtomakepaymentsforallleaseswiththeexceptionofthoseleaseswithatermof12monthsorless.The ASU applies to all entities and is effective for annual periods beginning after December 15, 2019, and interim periodsthereafter,with early adoption permitted. The adoption is effective forAllCare beginning January 1, 2020. The adoption is notexpectedtohaveamaterialimpactonthefinancialstatements.


Page10

NOTE2–ASSETSLIMITEDASTOUSEANDNETWORTHREQUIREMENT

AsofDecember31,2015,assetslimitedastouseconsistofsevencertificatesofdepositheldatUmpquaBankandninecertificatesofdepositsheldatUmpquaInvestments.ThesefundsarerestrictedastotheiruseandareheldtosatisfyarequiredreservebyOHAforAllCaretomaintainitsstatusasacontractor.Thecertificatesofdeposithavevaryingmaturitydatesfrom2016through2018.AsofDecember31,2015,AllCarewasincompliancewithrequiredreserverequirementsforOHA.

AsstatedintheCCOcontract,AllCareshallmaintainalevelofnetworththatwillprovideforminimumadequateoperatingcapital.Aminimumadequatelevelofnetworthisdefinedasthediscountedpremiumrevenuetonetworthratiolessthanorequalto20:1(premium to surplus ratio).AtDecember31, 2015,AllCare’snetworthwas$22,260,007,which is inexcessof the requirementamountof$9,422,635.

NOTE3–FAIRVALUEOFASSETSANDLIABILITIES

Fairvalue isdefinedas theprice thatwouldbe received to sell anassetorpaid to transfera liability inanorderly transactionbetweenmarketparticipantsatthemeasurementdate.Afairvaluehierarchyisestablishedwhichrequiresanentitytomaximizetheuseofobservableinputsandminimizetheuseofunobservableinputswhenmeasuringfairvalue.Thestandarddescribesthreelevelsofinputsthatmaybeusedtomeasurefairvalue:

Level1 Quotedpricesinactivemarketsforidenticalassetsorliabilities.

Level2 Observable inputsotherthanLevel1prices,suchasquotedpricesforsimilarassetsor liabilities;quotedprices inactivemarketsthatarenotactive;orotherinputsthatareobservableorcanbecorroboratedbyobservablemarketdataforsubstantiallythefulltermoftheassetsorliabilities.

Level3 Unobservableinputsthataresupportedbylittleornomarketactivityandthataresignificanttothefairvalueoftheassetsorliabilities.

Following is adescriptionof thevaluationmethodologiesused for instrumentsmeasuredat fairvalueona recurringbasisandrecognized in the accompanying financial statements, aswell as the general classification of such instruments pursuant to thevaluationhierarchy:

Assets limited as touse – These assets consist of certificates of deposit. The carrying amount reported in the balance sheetapproximateitsfairvalue.Fairvalueisbasedonthepurchasepriceofinvestmentswithsimilarterms.

ThefollowingtablepresentsthefairvaluemeasurementsofassetsrecognizedintheaccompanyingbalancesheetmeasuredatfairvalueonarecurringbasisandthelevelwithinthefairvaluehierarchyinwhichthefairvaluemeasurementsfallatDecember31,2015:

FairValue Level1 Level2 Level3

AssetslimitedastouseCertificatesofdeposit 8,680,155$ ‐$ 8,680,155$ ‐$

Totalassetslimitedastouse 8,680,155$ ‐$ 8,680,155$ ‐$

NOTE4–CLAIMSPAYABLE

Thecostofhealthcareservicesisrecognizedintheperiodinwhichitisprovidedandincludesanestimateofthecostofservicesthathavebeen incurredbutnotyetreported.Theestimate forreserves forclaims isbasedonprojectionsofhospitalandothercostsusinghistoricalstudiesofclaimspaid.Estimatesaremonitoredandreviewedand,assettlementsaremadeorestimatesareadjusted, differences are reflected in current operations. Such estimates are subject to the impact of changes in the regulatoryenvironmentandeconomicconditions.


Page11

ActivityforclaimspayablefortheyearendedDecember31,2015issummarizedasfollows:

Balance,beginningoftheyear 12,623,752$

Add:claimsexpensesincurred 109,259,908

Less:claimsexpensespaid (106,619,871)

Balance,endoftheyear 15,263,789$

NOTE5–INCOMETAXES

AllCarefilesitsfederaltaxreturnonaconsolidatedbasiswithMidRogueAllCareHealthAssurance(“MRAHA”).AllCareseparatelytracks an intercompany payable to and/or receivable from MRAHA. As of December31, 2015, AllCare had an intercompanyreceivablefromitsparentof$10,494,045includedinDuefromaffiliates.

TheprovisionforincometaxesfortheyearendedDecember31,2015isasfollows:

Current:Federal 2,835,273$State 611,400

3,446,673Deferred:

Federal (750,236)State (110,682)

(860,918)

Totalprovisionforincometaxes 2,585,755$

AllCare’seffectiveincometaxratediffersfromthatcomputedatfederalstatutoryratesprimarilyduetotheeffectofstateincometaxandpermanentitems.

Deferredincometaxesreflectthenettaxeffectsoftemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandtheamountsusedforincometaxpurposes.SignificantcomponentsoftheAllCare’sdeferredtaxassetsandliabilitiesareasfollows:

Federal State Total

Deferredtaxassets:Claimsreserve 561,217$ 82,796$ 644,013$Riskpoolpayable 1,516,400 223,714 1,740,114Accruedwithhold 248,834 36,710 285,544Minimummedicallossratiopayable 340,000 50,160 390,160Charitablecontributions 821,577 121,207 942,784

Netdeferredtaxassets 3,488,028$ 514,587$ 4,002,615$

AllCarefilesincometaxreturnsintheU.S.federaljurisdictionandinthestateofOregon.AllCareisnolongersubjecttoincometaxexaminationsbytaxingauthoritiesforyearsbefore2012forfederalandOregonfilings.


Page12

NOTE6–RELATEDPARTYTRANSACTIONS

During 2009, AllCare entered into a Management Services Agreement (the “Agreement”) with AllCare Management Services(“AMS”),previouslyMidRogueManagementServices.UndertheAgreement,AMSperformsthemanagementandadministrationservices for AllCare in exchange for fees at $35 PMPM for CCO members. Management fee expenses paid by AllCare totaled$21,158,865fortheyearendedDecember31,2015.

During2015,AllCarehadreceivablefromAllCareDevelopment,LLC(“DEV”)intheamountof$1,000,000,receivablefromMRAHAof$10,494,045,payabletoAllCareHealthPlan(“AHP”)intheamountof$9,850andapayabletoAMSintheamountof$112,362,relatedCCOtransformationcosts.

NOTE7–CCOMINIMUMMEDICALLOSSRATIOREQUIREMENTFORTHEACAEXPANSIONPOPLULATION

Effective July1,2014 theState is requiringaminimummedical lossratio (“MMLR”)of80%ontheAffordableCareAct (“ACA”)expansionpopulation rate groups. The initial reportingperiodunder theCCO contract for this new requirement is 18months:July1,2014–December31,2015,withclaimsrun‐outthroughMarch31,2016andfinalreportingsubmissionsduebyJune30,2016.Subsequentyearsaretobecalculatedbaseduponthecalendaryear.ThetermsoftheACAMMLRrequirementispendingCenterforMedicare&MedicaidServices(“CMS”)approval,sothetermsandconditionsoftherequirementaresubjecttochange.AtDecember31,2015,AllCarehasaccrued$1,000,000relatedtotheMMRLfortheeighteenmonthsendedDecember31,2015.

NOTE8–COMMITMENTSANDCONTINGENCIES

Intheordinarycourseofbusiness,AllCareisapartytoclaimsandlegalactionsbyenrollees,providers,andothers.Afterconsultingwithlegalcounsel,AllCare’smanagementisoftheopinionthatanyliabilitythatmayultimatelybeincurredasaresultofclaimsorlegalactionswillnothaveamaterialeffectonthefinancialpositionorresultsofoperationsofAllCare.

The health care industry is subject to numerous laws and regulations of federal, state, and local governments. These laws andregulationscanbesubjecttofuturegovernmentreviewandinterpretation,aswellasregulatoryactionsunknownorunassertedatthis time.These lawsand regulations include,butarenot limited to, accreditation, licensure,health careprogramparticipationrequirements, and reimbursement for patient services. Government activity has continued with respect to investigations andallegationsconcerningpossibleviolationsoffraudandabusestatutesandregulationsbyhealthcareproviders.Violationsoftheselaws and regulations could result in expulsion fromhealth careprograms, togetherwith the impositionof significant fines andpenalties, as well as significant repayment for previously billed patient services.While AllCare is subject to similar regulatoryreviews,managementbelievesthattheoutcomeofanypotentialregulatoryreviewwillnothaveamaterialadverseeffectontheAllCare’sfinancialposition.

NOTE9–HEALTHCAREREFORM

OnMarch23,2010,thePatientProtectionandAffordableCareAct(“PPACA”)wassignedintolaw.OnMarch30,2010,theHealthCare and Education Reconciliation Act of 2010 was signed, amending the PPACA (collectively the “Affordable Care Act”). TheAffordable Care Act addresses a broad range of topics affecting the healthcare industry, including a significant expansion ofhealthcare coverage. The expansion is accomplished primarily through incentives to individuals to obtain and employers toprovidehealthcarecoverageandanexpansioninMedicaideligibility.TheAffordableCareActalsoincludesincentivesformedicalresearchandtheuseofelectronichealthrecords,changesdesignedtocurbfraud,wasteandabuse,andcreatesnewagenciesanddemonstration projects to promote the innovation and efficiency in the healthcare delivery system. Some provisions of thehealthcarereform legislationwereeffective immediately;otherswillbephased in through2016.Further legislativepoliciesarerequired for severalprovisions thatwillbeeffective in futureyears.The impactof this legislationwill likelyaffectAllCare.Theeffectsofthechangesthatwillberequiredinfutureyearsarenotdeterminableatthistime.


Page13

NOTE10–SUBSEQUENTEVENTS

Subsequent events are events or transactions that occur after the balance sheet date but before the financial statements areavailable tobe issued.AllCarerecognizes in the financialstatements theeffectsofall subsequentevents thatprovideadditionalevidenceaboutconditionsthatexistedatthedateofthebalancesheet,includingtheestimatesinherentintheprocessofpreparingthefinancialstatements.AllCare’sfinancialstatementsdonotrecognizesubsequenteventsthatprovideevidenceaboutconditionsthat did not exist at the date of the balance sheet but arose after the balance sheet date and before financial statements areavailabletobeissued.

AllCare has evaluated subsequent events throughMay 12, 2016,which is the date the financial statements are available to beissued.

SUPPLEMENTARYINFORMATION

__________

ALLCARECCO,INC.

Page14

REPORTL7.YEARLYBALANCESHEETOFCORPORATEACTIVITYDecember31,2015

CorporateActivity

1.CashandCashEquivalents 24,864,047$2.Short‐TermInvestments ‐3.PremiumsReceivable 1,928,6874.InvestmentIncomeReceivables 8,1895.HealthCareReceivables ‐6.AmountsDuefromAffiliates ‐7.ReinsuranceRecoverableonPaidLosses 303,8708.OtherCurrentAssets 11,409,982

9.TOTALCURRENTASSETS 38,514,77510.Bonds ‐11.1PreferredStocks ‐11.2CommonStocks ‐12.OtherLong‐TermInvestedAssets ‐13.ReceivableforSecurities ‐14.AmountsDuefromAffiliates ‐15.RestrictedCashandRestrictedSecurities 8,680,15516.OtherAssets 4,252,615

17.TOTALOTHERASSETS 12,932,77018.Land,Building,andImprovements ‐19.FurnitureandEquipment ‐20.LeaseholdImprovements ‐21.EDPEquipment ‐22.OtherPropertyandEquipment ‐

23.TOTALPROPERTYANDEQUIPMENT(NETOFDEPR) ‐24.TOTALASSETS 51,447,545$

CURRENTASSETS

OTHERASSETS

PP&E

ALLCARECCO,INC.

Page15

REPORTL7.YEARLYBALANCESHEETOFCORPORATEACTIVITY(CONTINUED)December31,2015

CorporateActivity

25.AccountsPayable 7,731,884$26.ClaimsPayable 15,263,78927.AccruedMedicalIncentivePool 731,86528.UnearnedPremiums ‐29.LoansandNotesPayable ‐30.AmountsDuetoAffiliates ‐31.OtherCurrentLiabilities 5,460,000

32.TOTALCURRENTLIABILITIES 29,187,53833.LoansandNotesPayable ‐34.AmountsDuetoAffiliates ‐35.PayableforSecurities ‐36.OtherLiabilities ‐

37.TOTALOTHERLIABILITIES ‐38.TOTALLIABILITIES 29,187,538

39.CommonStock ‐40.PreferredStock ‐41.PaidinSurplus ‐42.ContributedCapital 350,00043.SurplusNotes ‐44.ContingencyReserves ‐45.RetainedEarnings/FundBalance 21,910,00746.OtherNetAssets ‐

47.TOTALNETASSETS 22,260,00748.TOTALLIABILITIESANDNETASSETS 51,447,545$

CURRENTLIABILITIES

OTHERLIABILITIES

NETASSETS

ALLCARECCO,INC.

Page16

REPORTL8.YEARLYSTATEMENTOFREVENUE,EXPENSES,ANDCHANGESINNETASSETSYearEndedDecember31,2015

CorporateActivity

1.GrossPremiums(Capitation&CaseRateRevenue) 247,844,500$a.Reinsurance/StopLossPremiumsPaid 1,437,712b.HRAPayments 30,373,734c.MinimumMRLRebate 1,000,000d.MCOTaxes ‐2.NetPremiums 215,033,0543.QualityIncentivePool 6,170,4214.OtherMedicaidRevenue ‐5.OtherHealthCareRelatedRevenues ‐

6.TOTALOPERATINGREVENUES 221,203,4757.Physician/ProfessionalServices 55,913,8818.HospitalServicesa.Inpatient 33,320,324b.Outpatient 17,078,651c.EmergencyRoom 7,618,9879.Pharmacy 23,163,90410.LabandX‐Ray ‐11.Vision ‐12.SubstanceUseDisorder 2,870,89613.DME&Supplies ‐14.MentalHealth 23,488,41815.Dental 14,345,42616.HealthRelatedNon‐benefit(Flex)Services 1,022,48817.OtherMemberServiceExpenses 13,101,807

18.MEMBERSERVICEEXPENSESSUBTOTAL 191,924,782$

REVENUES

MEMBERSERVICEEXPENSES

ALLCARECCO,INC.

Page17

REPORTL8.YEARLYSTATEMENTOFREVENUE,EXPENSES,ANDCHANGESINNETASSETS(CONTINUED)YearEndedDecember31,2015

CorporateActivity

19.ReinsuranceRecoveriesIncurred 1,263,882$20.Co‐payments ‐21.TPRAmountsReceived,COB,andSubrogation 1,040,644

22.DEDUCTIONSSUBTOTAL 2,304,52623.TOTALMEMBERSERVICEEXPENSESLESSDEDUCTIONS 189,620,256

24.Compensation ‐25.OtherAdministrativeExpense 25,325,232

26.TOTALADMINISTRATIVEEXPENSES 25,325,23227.TOTALOPERATINGEXPENSES 214,945,48828.NETOPERATINGINCOME(LOSS) 6,257,987NON‐OPERATING 29.NetInvestmentIncome 60,916REVENUESAND 30.Non‐Healthcare‐RelatedExpenses ‐EXPENSES 31.OtherNon‐operatingRevenuesandExpenses (382,410)32.TOTALNON‐OPERATINGREVENUESANDEXPENSES (321,494)33.NETINCOME(LOSS)BEFORETAXES 5,936,49334.ProvisionforIncomeTaxes 2,585,75535.NETINCOME(LOSS) 3,350,738

36.NetAssetsBeginningofQuarter 24,909,26937.Increase(Decrease)inCommonStock ‐38.Increase(Decrease)inPreferredStock ‐39.Increase(Decrease)inPaidinSurplus ‐40.Increase(Decrease)inContributedCapital ‐41.Increase(Decrease)inSurplusNotes ‐42.Increase(Decrease)inContingencyReserves ‐43.Increase(Decrease)inRetainedEarnings/NetWorth ‐

a.NetIncome 3,350,738b.DividendstoStockholders (6,000,000)c.InterestonSurplusNotes ‐d.ChangeinNon‐AdmittedAssets ‐e.OtherChangesinNetAssets ‐

39.NetAssets 22,260,007$

DEDUCTIONS

ADMINISTRATIVE

NETASSETS

ALLCARECCO,INC.

Page18

REPORTL9.CASHFLOWSANALYSISCORPORATEACTIVITY/INDIRECTMETHODYearsEndedDecember31,2015

CASHFLOWSPROVIDEDBYOPERATINGACTIVITIESCorporateActivity

1.NetIncome(Loss) 3,350,738$2.DepreciationandAmortization ‐3.PremiumReceivable (960,731)4.DueFromAffiliates (233,921)5.HealthCareReceivable (667)6.Other(Increases)DecreasesinOperatingAssets (9,385,099)

Increases(Decreases)in 7.AccountsPayable 6,091,290OperatingLiabilities 8.ClaimsPayable 2,125,990

9.AccruedMedicalIncentivePool (8,360)10.UnearnedPremiums ‐11.DuetoAffiliates ‐12.OtherIncreases(Decreases)fromOperatingActivities (583,149)

13.NETCASHPROVIDEDBYOPERATINGACTIVITIES 396,091CASHFLOWSPROVIDEDBYINVESTINGACTIVITIESCASH 14.ReceiptsfromInvestments ‐FLOWS 15.ReceiptsforSalesofPropertyandEquipment ‐PROVIDED 16.PaymentforInvestments (2,571,286)BY 17.PaymentsforPropertyandEquipment ‐INVESTING 18.OtherIncrease(Decrease)inCashFlowsfor ‐ACTIVITIES InvestingActivities19.NETCASHUSEDININVESTINGACTIVITIES (2,571,286)CASH 20.Distributionofcapital ‐FLOWS 21.LoanProceedsfromNon‐Affiliates ‐PROVIDED 22.LoanProceedsfromAffiliates ‐BY 23.PrincipalPaymentsonLoansfromNon‐Affiliates ‐FINANCING 24.PrincipalPaymentsonLoansfromAffiliates ‐ACTIVITIES 25.DividendsPaid (6,000,000)

26.PrincipalPaymentsunderLeaseObligations ‐27.OtherCashFlowProvidedbyFinancingActivities ‐

28.NETCASHUSEDINFINANCINGACTIVITIES (6,000,000)29.NETINCREASE/(DECREASE)INCASHANDCASHEQUIVALENTS (8,175,195)30.CASHANDCASHEQUIVALENTSATBEGINNINGOFREPORTEDPERIOD 33,039,24231.CASHANDCASHEQUIVALENTSATENDOFREPORTEDPERIOD 24,864,047$

ADJUSTMENTTORECONCILENETINCOME

INCREASE(DECREASEINOPERATINGASSETS

allcare cco, inc. - · pdf fileallcare cco, inc. december 31, 2015 ... total...

Documents