$50,680,000 PALM BEACH COUNTY HEALTH FACILITIES AUTHORITY Hospital Revenue Bonds (Jupiter Medical Center, Inc. Project), 2013 Series A

Transcription

1 New Issue Book-Entry Only Ratings: See "Ratings" herein In the opinion of Bond Counsel, assuming compliance by the Issuer and the Obligated Group with certain covenants, under existing statutes, regulations, and judicial decisions, the interest on the Series 2013A Bonds will be excluded from gross income for federal income tax purposes of the holders thereof and will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. However, interest on the Series 2013A Bonds shall be taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax on corporations. See "TAX MATTERS" herein for a description of other tax consequences to holders of the Series 2013A Bonds. $50,680,000 PALM BEACH COUNTY HEALTH FACILITIES AUTHORITY Hospital Revenue Bonds (Jupiter Medical Center, Inc. Project), 2013 Series A Dated: Date of Delivery Due: November 1, as shown on the inside cover The Series 2013A Bonds are limited obligations of the Palm Beach County Health Facilities Authority (the "Issuer") payable solely from and secured by the Pledged Funds (defined herein) which includes, among other things, payments made by Jupiter Medical Center, Inc. (the "Medical Center") and two affiliated corporations, Jupiter Medical Center Foundation, Inc. (the "Foundation") and Jupiter Medical Center Pavilion, Inc. ("Pavilion" and together with the Medical Center, and the Foundation, the "Obligated Group") pursuant to Obligation No. 1 (2013 Series A Bonds) ("Obligation No. 1") issued under a Master Indenture (as further described herein) and certain funds and accounts established under a Trust Indenture, dated as of May 1, 2013 (the "2013A Bond Indenture"), between the Issuer and The Bank of New York Mellon Trust Company, N.A., Jacksonville, Florida as trustee (the "Bond Trustee"). THE SERIES 2013A BONDS ARE NOT A GENERAL DEBT, LIABILITY OR OBLIGATION OF THE ISSUER, BUT ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM (I) PAYMENTS TO BE MADE BY THE OBLIGATED GROUP UNDER THE MASTER INDENTURE OR FROM THE EXERCISE OF RIGHTS UNDER THE MASTER INDENTURE OR THE MORTGAGE REFERRED TO HEREIN, AND (II) ALL AMOUNTS IN CERTAIN FUNDS AND ACCOUNTS CREATED PURSUANT TO THE 2013A BOND INDENTURE (HEREIN COLLECTIVELY REFERRED TO AS, THE "PLEDGED FUNDS"), AS MORE FULLY DESCRIBED HEREIN. THE SERIES 2013A BONDS ARE NOT A DEBT, LIABILITY OR OBLIGATION OF THE STATE OF FLORIDA OR ANY POLITICAL SUBDIVISION THEREOF OTHER THAN THE ISSUER. NEITHER THE FULL FAITH AND CREDIT OF THE ISSUER, NOR THE FULL FAITH AND CREDIT OR THE TAXING POWER OF THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE SERIES 2013A BONDS OR ANY OTHER OBLIGATION, AND NONE OF THE STATE OF FLORIDA OR ANY POLITICAL SUBDIVISION THEREOF SHALL BE DIRECTLY, INDIRECTLY, OR CONTINGENTLY OBLIGATED TO LEVY OR TO PLEDGE ANY FORM OF TAXATION WHATSOEVER FOR THE PAYMENT OF THE OBLIGATIONS UNDER THE 2013A BOND INDENTURE, INCLUDING, THE SERIES 2013A BONDS OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT FROM ANY SOURCE EXCEPT THE PLEDGED FUNDS. THE ISSUER HAS NO TAXING POWER. The Series 2013A Bonds will be issued as fully registered bonds issued in denominations of $5,000 and any integral multiple thereof and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Series 2013A Bonds. Purchasers of the Series 2013A Bonds will not receive certificates representing their interests in the Series 2013A Bonds purchased. Ownership by the Beneficial Owners of the Series 2013A Bonds will be evidenced by book-entry only. As long as Cede & Co. is the registered owner as nominee of DTC, payments on the Series 2013A Bonds will be made to such registered owner, and disbursal of such payments to Beneficial Owners will be the responsibility of DTC and its participants. See "DESCRIPTION OF THE SERIES 2013A Bonds Book-Entry Only System" herein. Interest is payable on May 1 and November 1 of each year, commencing on November 1, The Series 2013A Bonds are subject to mandatory sinking fund redemption, optional redemption, extraordinary optional redemption or purchase in lieu of redemption at the election of the Obligated Group, all as described herein. The Series 2013A Bonds are being issued to provide funds, together with other available funds of the Obligated Group, to (i) finance, refinance or reimburse the Medical Center for a portion of the cost of acquisition, construction, installation and equipping of certain capital improvements to its healthcare facilities, as more particularly described herein, (ii) currently refund the outstanding principal amount of the Issuer's Hospital Revenue Bonds, Series 1993 (Jupiter Medical Center, Inc. Project), Hospital Revenue Refunding Bonds (Jupiter Medical Center, Inc. Project), Series 1999A, Health Facilities Revenue Bond, Series 2009A (Jupiter Medical Center Project) and Health Facilities Revenue Bond, Series 2009B (Jupiter Medical Center Project), (iii) fund a debt service reserve account for the Series 2013A Bonds and (iv) pay certain costs of issuance relating to the Series 2013A Bonds. See "THE PLAN OF FINANCE" herein. SEE INSIDE COVER PAGE FOR MATURITY SCHEDULE. THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT INTENDED TO BE A SUMMARY OF ALL FACTORS RELATING TO AN INVESTMENT IN THE SERIES 2013A BONDS. INVESTORS ARE ADVISED TO READ THIS OFFICIAL STATEMENT IN ITS ENTIRETY BEFORE MAKING AN INVESTMENT DECISION. The Series 2013A Bonds are offered when, as, and if issued by the Issuer and accepted by the Underwriter, subject to prior sale, withdrawal or modification of the offer without notice, and to approval of the legality of the Series 2013A Bonds by Bryant Miller Olive P.A., Orlando, Florida, Bond Counsel. Certain legal matters will be passed upon for the Issuer by its counsel Haile, Shaw & Pfaffenberger, P.A., North Palm Beach, Florida, for the Obligated Group by its counsel Mark E. Raymond, Esq., Palm Beach Gardens, Florida, and for the Underwriter by its counsel, Nabors, Giblin & Nickerson, P.A., Tampa, Florida. Kaufman, Hall & Associates Inc., Skokie, Illinois, is acting as financial advisor to the Obligated Group in connection with the issuance of the Series 2013A Bonds. It is expected that the Series 2013A Bonds will be available for delivery through the facilities of DTC on or about May 7, RBC CAPITAL MARKETS Dated: April 24, 2013

2 Maturity November 1 AMOUNTS, MATURITIES, INTEREST RATES, YIELDS, PRICES AND INITIAL CUSIP NUMBERS* Amount $25,955,000 Serial Series 2013A Bonds Interest Rate Yield Price Initial CUSIP No.* 2013 $1,965, % 0.740% SH ,500, SJ ,605, SK ,700, SL ,815, SM ,925, SN ,040, SP ,500, SQ ,875, SR ,965, SS ,065, ST0 $2,660, % Term Bonds Due November 1, 2028, Yield 4.250%, Price , Initial CUSIP No SU7* $5,020, % Term Bonds Due November 1, 2033, Yield 4.150%, Price , Initial CUSIP No SV5* $17,045, % Term Bonds Due November 1, 2043, Yield 4.370%, Price , Initial CUSIP No SW3* Yield calculated to first call date (November 1, 2022). * CUSIP numbers have been assigned by an independent company not affiliated with the Issuer, the Obligated Group or the Underwriter and are included solely for the convenience of the owners of the Series 2013A Bonds. None of the Issuer, the Obligated Group or the Underwriter is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the Series 2013A Bonds or as indicated above. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Series 2013A Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Series 2013A Bonds.

3 The Series 2013A Bonds are exempt from registration under both the Securities Act of 1933, as amended, and the securities laws of Florida. No dealer, broker, salesperson or other person has been authorized by the Issuer, the Obligated Group, or the Underwriter to give any information or to make any representations other than as contained herein, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the Series 2013A Bonds offered hereby, nor shall there be any sale of the Series 2013A Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information contained in this Official Statement has been furnished by the Issuer, the Obligated Group, DTC and other sources that are believed to be reliable. The information set forth herein is subject to change after the date of this Official Statement and no sale made hereunder shall, under any circumstances, create any implication that there has been no change in the information or opinions stated herein or in the affairs of the Issuer, the Obligated Group, or DTC since the date of this Official Statement. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, their responsibility to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2013A BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. All summaries herein of documents and agreements are qualified in their entirety by reference to such documents and agreements, and all summaries herein of the Series 2013A Bonds are qualified in their entirety by reference to the form thereof included in the aforesaid documents and agreements. NO REGISTRATION STATEMENT RELATING TO THE SERIES 2013A BONDS HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR WITH ANY STATE SECURITIES COMMISSION. IN MAKING ANY INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATIONS OF THE OBLIGATED GROUP AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE SERIES 2013A BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSION OR ANY STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. THE FOREGOING AUTHORITIES HAVE NOT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements." Such statements are generally identifiable by the terminology used such as "plan," "project," "expect," "anticipate," "intend," "believe," "estimate," "budget," or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Obligated Group does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based, occur or fail to occur. i

4 TABLE OF CONTENTS The Table of Contents for this Official Statement is for convenience of reference only and is not intended to define, limit or describe the scope or content of any provisions of this Official Statement. Page INTRODUCTION... 1 THE ISSUER... 3 THE OBLIGATED GROUP... 3 THE PLAN OF FINANCE... 4 Purpose of the Series 2013A Bonds... 4 The Project; 2013C Bank Loan... 4 The Refunding... 4 Other Parity Obligations... 5 Estimated Sources and Uses... 5 ANNUAL DEBT SERVICE REQUIREMENTS... 6 THE SERIES 2013A BONDS... 7 General... 7 Redemption Prior to Maturity... 7 Book-Entry Only System SECURITY AND SOURCES OF PAYMENT Limited Obligations; Pledged Funds Master Indenture Limitations on Indebtedness and Liens Rate Covenant Reserve Requirement Additional Covenants BONDHOLDERS' RISKS General Obligated Group Financings Certain Matters Relating to Enforceability of Security Interest in Revenues Mortgaged Property Certain Other Matters Relating to Security for Series 2013A Bonds Bankruptcy Enforceability of Remedies Impact of Market Turmoil The Stimulus Act; the HITECH Act and Electronic Health Records Nonprofit Health Care Environment Federal and State Legislation; National Health Care Reform Regulatory Environment Business Relationships and Other Business Matters Private Health Plans and Insurers Health Plan Financial Pressure and Insolvency. 50 Tax-Exempt Status and Other Tax Matters Malpractice and General Liability Insurance Property and Casualty Insurance Florida Certificate of Need Page Changes in Health Care Delivery due to Technology and Services Other Risk Factors TAX MATTERS General Information Reporting and Backup Withholding Other Tax Matters Relating to the Series 2013A Bonds Tax Treatment of Original Issue Discount Tax Treatment of Bond Premium LITIGATION The Obligated Group The Issuer LEGAL MATTERS FINANCIAL ADVISOR RATINGS UNDERWRITING FINANCIAL STATEMENTS VERIFICATION OF MATHEMATICAL COMPUTATIONS DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS CONTINUING DISCLOSURE The Issuer The Obligated Group Prior Undertakings MISCELLANEOUS CERTIFICATE CONCERNING OFFICIAL STATEMENT APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E APPENDIX F The Obligated Group Consolidated Financial Statements - Jupiter Medical Center, Inc. and Affiliated Companies Years Ended September 30, 2012 and 2011 Definitions Summary of Certain Provisions of the 2013A Bond Indenture and Master Indenture Form of Opinion of Bond Counsel Form of Continuing Disclosure Agreement ii

5 OFFICIAL STATEMENT Relating To $50,680,000 PALM BEACH COUNTY HEALTH FACILITIES AUTHORITY Hospital Revenue Bonds (Jupiter Medical Center, Inc. Project), 2013 Series A INTRODUCTION The purpose of this Official Statement, including the cover page, inside cover page and the Appendices hereto, is to furnish certain information with respect to the original issuance and sale of $50,680,000 Palm Beach County Health Facilities Authority Hospital Revenue Bonds (Jupiter Medical Center, Inc. Project), 2013 Series A (the "Series 2013A Bonds") to be issued by the Palm Beach County Health Facilities Authority (the "Issuer"). This introduction is only a brief description of the matters described in this Official Statement, and a full review of this Official Statement should be undertaken by potential investors in the Series 2013A Bonds. This Official Statement speaks only as of its date, and the information contained herein is subject to change. The Issuer is a public body corporate and politic of the State of Florida. The Series 2013A Bonds are being issued pursuant to the Constitution of the State of Florida, Chapter 154, Part III, Florida Statutes, Chapter 159, Part II, Florida Statutes, and other applicable provisions of law (collectively, the "Act"), an authorizing resolution adopted by the Issuer on April 3, 2013, and a Trust Indenture, dated as of May 1, 2013 (the "2013A Bond Indenture") between the Issuer and The Bank of New York Mellon Trust Company, N.A., Jacksonville, Florida, a national banking association, as trustee (the "Bond Trustee"). The Series 2013A Bonds are being issued for the principal purpose of providing a loan to Jupiter Medical Center, Inc. (the "Medical Center"), Jupiter Medical Center Foundation, Inc. (the "Foundation") and Jupiter Medical Center Pavilion, Inc. ("Pavilion," and together with Medical Center and the Foundation, the "Obligated Group") pursuant to a Financing Agreement, dated as of May 1, 2013 (the "Financing Agreement"), among the Issuer and the Obligated Group. The proceeds of such loan will be used, together with other funds available to the Obligated Group for such purpose, to (i) finance, refinance or reimburse the Medical Center for a portion of the cost of acquisition, construction, installation and equipping of certain capital improvements to its healthcare facilities, as more particularly described herein (the "Project"), (ii) currently refund the outstanding principal of Hospital Revenue Bonds, Series 1993 (Jupiter Medical Center, Inc. Project), Hospital Revenue Refunding Bonds (Jupiter Medical Center, Inc. Project), Series 1999A, Health Facilities Revenue Bond, Series 2009A (Jupiter Medical Center, Inc. Project) and Health Facilities Revenue Bond, Series 2009B (Jupiter Medical Center Project) (collectively, the "Refunded Bonds"), (iii) fund a debt service reserve account for the Series 2013A Bonds, and

6 (iv) pay costs and expenses related to the issuance of the Series 2013A Bonds. See "THE PLAN OF FINANCE" herein. To secure and provide for the payment of the Series 2013A Bonds, the Obligated Group will issue Obligation No. 1 (2013 Series A Bonds) ("Obligation No. 1") under and pursuant to a Master Trust Indenture dated as of May 1, 2013 (the "Master Trust Indenture"), as supplemented and amended from time to time, and particularly as supplemented by the First Supplemental Indenture for Obligation No. 1 (the "First Supplement"), dated as of May 1, 2013, (collectively with the Master Trust Indenture, the "Master Indenture"), each by and among the Obligated Group and The Bank of New York Mellon Trust Company, N.A. as master trustee thereunder (the "Master Trustee"). Obligation No. 1 is secured on a parity basis with all other Obligations issued and outstanding from time to time under the Master Indenture; provided that the Master Indenture permits the issuance of Obligations that are not secured by the Mortgage referenced to below. The initial Members of the Obligated Group (the Medical Center, the Foundation and Pavilion) established the Master Indenture so that indebtedness of the Obligated Group may be issued and secured from time to time on a parity basis. Each of the Obligations is secured by a pledge of the Gross Revenues of the Obligated Group, and unless otherwise provided in the Supplement pursuant to which an Obligation is issued, the Mortgaged Property (described below). See "SECURITY AND SOURCES OF PAYMENT Master Indenture Pledge of Gross Revenues" and" Mortgage" and" Outstanding Parity Obligations" herein. To further secure its obligations under the Master Indenture, (1) the Medical Center has executed a Mortgage, dated as of March 15, 2013, (the "Mortgage"), whereby the Medical Center has granted to the Master Trustee a mortgage on and security interest in certain real and tangible personal property comprising the main hospital campus owned and operated by the Medical Center (the "Mortgaged Property"). If so specified in the Supplement pursuant to which Obligations are issued, Obligations may be issued which are not secured by the Mortgage. Obligation No. 1 will be secured by the Mortgage. See "SECURITY AND SOURCES OF PAYMENT Master Indenture Mortgage" herein. The Series 2013A Bonds are not a general debt, liability, or obligation of the Issuer, but are limited obligations of the Issuer, payable solely from (i) payments to be made by the Obligated Group pursuant to the Master Indenture or from the exercise of rights under the Master Indenture or the Mortgage, and (ii) all amounts in certain funds and accounts created under the 2013A Bond Indenture (herein collectively referred to as, the "Pledged Funds"). The Series 2013A Bonds are not a debt, liability or obligation of Palm Beach County, Florida (the "County"), the State of Florida or any political subdivision or municipal corporation thereof other than the Issuer. Neither the full faith and credit nor the taxing power of the County, the State of Florida, or any political subdivision thereof is pledged to the payment of the principal of or interest on the Series 2013A Bonds, and none of the County, the State of Florida or any political subdivision thereof shall be directly, indirectly, or contingently obligated to levy or to pledge any form of taxation whatsoever for the payment of the Series 2013A Bonds or to make any appropriation for their payment from any source except the Pledged Funds. The Issuer has no taxing power. There follows in this Official Statement descriptions of the Series 2013A Bonds, the Issuer, the Obligated Group, the Master Indenture, the Financing Agreement, the 2013A Bond 2

7 Indenture, the Mortgage, the Project and certain other matters. The descriptions and information contained herein do not purport to be complete, comprehensive, or definitive, and all references herein to documents or reports are qualified in their entirety by reference to the complete text of such documents or reports. Copies of documents and reports referred to herein that are not included in their entirety herein may be obtained from the Underwriter prior to delivery of the Series 2013A Bonds and thereafter from the Bond Trustee upon payment of any required fee. Unless otherwise defined herein, terms used in capitalized form in this Official Statement shall have the same meanings as in the 2013A Bond Indenture and the Master Indenture. See APPENDIX C "Definitions" for definitions of certain terms used in this Official Statement. THE ISSUER The Issuer is a public body corporate and politic of the State of Florida. Pursuant to the Act, the Issuer is authorized to issue revenue bonds and to loan the proceeds thereof to the Obligated Group for the purposes described herein. The Issuer has not provided the information herein concerning the Obligated Group, or the Project and is not responsible for the information provided by the Obligated Group. Except as required by the Act, the Issuer has made no investigation and makes no representation concerning the fiscal condition of the Obligated Group, or the accuracy or sufficiency of any information herein concerning the Obligated Group. CERTAIN OF THE INFORMATION HEREIN OTHER THAN THE INFORMATION UNDER THE CAPTIONS "THE ISSUER" AND "LITIGATION - The Issuer" IS BEYOND THE KNOWLEDGE OF THE ISSUER. WHILE THE ISSUER HAS NO REASON TO BELIEVE THAT SUCH INFORMATION IS INCOMPLETE OR INACCURATE, THE ISSUER HAS NOT INDEPENDENTLY INVESTIGATED OR CONFIRMED THE ACCURACY OR COMPLETENESS THEREOF AND HAS INCLUDED SUCH INFORMATION IN THIS OFFICIAL STATEMENT IN RELIANCE UPON THE REPRESENTATIONS AND WARRANTIES OF THE OBLIGATED GROUP THAT SUCH INFORMATION DOES NOT CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT AND DOES NOT OMIT TO STATE ANY MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS MADE HEREIN, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY ARE MADE, NOT MISLEADING. THE OBLIGATED GROUP The Medical Center is a Florida not for profit corporation and is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). The Medical Center owns health care facilities located in Jupiter, Florida which include a 163 bed acute care hospital (the "Hospital"). The Medical Center is the sole corporate member of both the Foundation and Pavilion, each of which is a Florida not for profit corporation and an organization described in Section 501(c)(3) of the Code. The Medical Center also owns land and buildings adjacent to the Hospital that Pavilion currently operates as a 120 bed skilled nursing facility. The sole purpose of the Foundation is to fund development for the Medical Center and 3

8 the Pavilion. See APPENDIX A - "The Obligated Group" for a description of the current Members of the Obligated Group and their various facilities and operations. The Medical Center, the Foundation and Pavilion currently are the only Members of the Obligated Group. Upon compliance with certain conditions specified in the Master Indenture, additional Members may be added to the Obligated Group. Under certain circumstances specified in the Master Indenture, a Member may withdraw or be removed from the Obligated Group; provided, however, the Medical Center is not permitted to withdraw from the Obligated Group. All Members of the Obligated Group are jointly and severally liable with respect to the Obligations issued under the Master Indenture, including Obligation No. 1. See APPENDIX D "Summary of Certain Provisions of the 2013A Bond Indenture and the Master Indenture Summary of Certain Provisions of the Master Indenture Parties Becoming Members of the Obligated Group and Withdrawal from the Obligated Group" for further information. Purpose of the Series 2013A Bonds THE PLAN OF FINANCE The proceeds to be received by the Issuer from the sale of the Series 2013A Bonds will be loaned by the Issuer to the Obligated Group for the purpose of providing funds, together with other funds available to the Obligated Group for such purpose, to: (i) finance, refinance and reimburse one or more of the Members of the Obligated Group for a portion of the costs of the Project (described below), (ii) refund the Refunded Bonds, (iii) fund a debt service reserve account for the Series 2013A Bonds and (iv) pay costs and expenses related to the issuance of the Series 2013A Bonds. The Project; 2013C Bank Loan The Project consists of the financing, refinancing or reimbursing the Medical Center for a portion of the cost of acquisition, construction, installation and equipping of certain capital improvements to its healthcare facilities including, without limitation the new DeGeorge Pavilion Project that will add 44 new acute care beds to the Hospital in a new three story tower containing approximately 90,000 square feet of new construction and renovation on the main campus of the Medical Center and certain ongoing general capital equipment purchases. The remainder of the costs of the Project will be financed with private donations and the proceeds of a tax exempt bank loan to be entered into by the Obligated Group concurrently with the issuance of the Series 2013A Bonds in the amount of $15,170,866 (the "2013C Bank Loan"). See "APPENDIX A - THE OBLIGATED GROUP - DeGeorge Pavilion Project." The Refunding Concurrently with the delivery of the Series 2013A Bonds, the Trustee shall transfer a portion of the proceeds of the Series 2013A Bonds and other funds contributed by the Medical Center (the "Refunding Proceeds") to The Bank of New York Mellon Trust Company, N.A., as escrow agent (the "Escrow Agent") under separate Escrow Deposit Agreements with respect to each Series of the Refunded Bonds, each dated May 7, 2013, and among the Issuer, the Medical Center and the Escrow Agent. The Escrow Agent will deposit the Refunding Proceeds to 4

9 Escrow Deposit Trust Funds created pursuant to the Escrow Deposit Agreements. The Refunding Proceeds shall be used and applied pursuant to and in the manner provided in the respective Escrow Deposit Agreements to pay the principal of, redemption premium, if any, and interest on the respective Series of Refunded Bonds on the redemption date therefor, anticipated to be on or about June 6, 2013, as provided therein and in accordance with schedules verified by Causey Demgen & Moore P.C. See "VERIFICATION OF MATHEMATICAL COMPUTATIONS" herein. Other Parity Obligations Concurrently with the issuance of the Series 2013A Bonds and the delivery of Obligation No. 1, the Obligated Group will issue four additional Obligations secured on a parity with Obligation No. 1 with respect to the Mortgage and the lien on the Gross Revenues, but not with respect to the Reserve Account established under the 2013A Bond Indenture for the benefit of the Series 2013A Bonds. See "SECURITY AND SOURCES OF PAYMENT - Outstanding Parity Obligations" for a description of such additional Obligations. Such additional Obligations will be issued in connection with, and to secure, in addition to the 2013C Bank Loan described above, the "2013B Bank Loan," the "Term Loan" and the "TD Bank Line of Credit," each as defined and described under such caption. Estimated Sources and Uses The following table sets forth the estimated sources and uses of funds in connection with the Series 2013A Bonds: Total Sources of Funds: Par Amount $50,680, Plus Net Original Issue Premium 3,666, Other Available Funds 4,682, Total Sources of Funds $59,028, Uses of Funds: Refund Refunded Bonds $30,826, Deposit to Project Fund 23,561, Deposit to Series 2013 Debt Service Reserve Account 3,521, Costs of Issuance (1) 1,119, Total Uses of Funds $59,028, (1) Includes legal, financial advisory and accounting fees, Underwriter's discount, initial fees of the Bond Trustee, the Master Trustee, costs of printing, title insurance and other incidental expenses. 5

10 ANNUAL DEBT SERVICE REQUIREMENTS The following table sets forth, for each respective fiscal year ending September 30, the amount required to be made available in such year for the payment of principal (and mandatory redemption) and interest of the Series 2013A Bonds, the 2013B Bank Loan, the 2013C Bank Loan and the Term Loan: Series 2013A Bonds Year Ending September B Bank Loan (1) 2013C Bank Loan (2)(3) Term Loan (4)(5) Principal Interest Subtotal Total Debt Service 2013 $167, $171, $339, , , , ,965, ,258, ,223, ,040, , , , ,500, ,227, ,727, ,373, , , , ,605, ,124, ,729, ,398, , , , ,700, ,018, ,718, ,404, , , ,136, ,815, ,908, ,723, ,101, , , ,925, ,793, ,718, ,947, ,655, , ,040, ,659, ,699, ,801, , ,500, ,545, ,045, ,491, , ,875, ,461, ,336, ,782, , ,965, ,365, ,330, ,090, ,186, ,065, ,264, ,329, ,515, ,162, , ,207, ,467, ,630, ,140, , ,195, ,500, ,641, ,118, , ,178, ,708, ,826, ,096, , ,152, ,907, ,004, ,073, , ,119, ,929, ,003, ,051, , ,081, ,946, ,997, ,028, , ,036, ,966, ,995, ,007, ,000, , ,988, ,995, , ,075, , ,011, ,995, , ,150, , ,031, ,993, , ,230, , ,051, ,991, , ,315, , ,072, ,990, , ,400, , ,090, ,985, , ,495, , ,112, ,985, , ,590, , ,130, ,981, , ,690, , ,148, ,976, , ,800, , ,171, ,977, , ,910, , ,188, ,972, , ,030, , ,210, ,656, ,585, , ,649, ,649, Total $6,314, $24,073, $5,284, $50,680, $35,186, $85,866, $121,538, (1) Series 2013B Interest Rate Assumed at 2.82% (75% of 10-yr avg. of 1m-Libor + 132bp) (2) Series 2013C Interest Rate Assumed at 2.90% (75% of 10-yr avg. of 1m-Libor + 140bp) (3) While the 2013C Bank Loan is Balloon Long-Term Indebtedness under the Master Trust Indenture, the amounts (debt service numbers) presented in this table are based upon the nominal amortization schedule, assuming the obligation is not put; and are not calculated based on the Balloon Long-Term Indebtedness assumptions as described in the Master Trust Indenture. (4) Term Loan Interest Rate Assumed at 3.55% (10-yr avg. of 1m-Libor + 155bp) (5) While the Term Loan is Balloon Long-Term Indebtedness under the Master Trust Indenture, the amounts (debt service numbers) presented in this table are based upon the nominal amortization schedule, with a bullet maturity on May 1, 2018; and are not calculated based on the Balloon Long-Term Indebtedness assumptions as described in the Master Trust Indenture. 6

11 THE SERIES 2013A BONDS General The Series 2013A Bonds will be dated as of their date of delivery, will be issued in fully registered form, without coupons, in the denominations of $5,000 each or integral multiples thereof, and will bear interest, computed on the basis of a 360-day year, consisting of twelve 30- day months, at the rates and mature on the dates set forth on the inside cover page of this Official Statement. Interest on the Series 2013A Bonds will be payable semi-annually on May 1 and November 1 of each year, commencing November 1, The Series 2013A Bonds will be issued in book-entry only form, as described below under" Book-Entry Only System" and the method and place of payment will be as provided in and by the book-entry only system. In the event that the use of the book-entry only system for the Series 2013A Bonds is discontinued, the method and place of payment will be as described in the 2013A Bond Indenture. So long as the Series 2013A Bonds are in book-entry only form, Cede & Co., as nominee of DTC, will be the sole registered owner of the Series 2013A Bonds. Transfers of beneficial interests in the Series 2013A Bonds will be made as described below under" Book-Entry Only System." Redemption Prior to Maturity Optional Redemption. The Series 2013A Bonds maturing on or after November 1, 2023 shall be subject to redemption prior to stated maturity at the option of the Obligated Group, on or after November 1, 2022, in whole or in part at any time, in such manner as may be designated by the Obligated Group and by lot within a maturity, at the redemption price of 100% of the principal amount of the Series 2013A Bonds to be redeemed, plus accrued interest thereon to the date fixed for such redemption. Extraordinary Optional Redemption. The Series 2013A Bonds are subject to redemption prior to their stated dates of maturity, in whole or in part by lot on any date, from the prepayment of Loan Payments payable by the Obligated Group under the Financing Agreement, at par plus accrued interest to the date fixed for redemption, but without premium, (i) from proceeds received from the damage, destruction or condemnation of Operating Assets (as defined in the Master Indenture), to the extent such funds are not used to rebuild or restore the Operating Assets pursuant to the Financing Agreement, and (ii) if, as a result of constitutional changes or of legislative or administrative action or by judicial action (in the opinion of the Obligated Group), the Financing Agreement is impossible to perform without unreasonable delay, or unreasonable burdens or excessive liabilities are imposed on the Obligated Group, as described in the Financing Agreement. 7

12 Series 2013A Bonds Mandatory Sinking Fund Redemption. (a) The Series 2013A Bonds maturing on November 1, 2028 shall be redeemed in part on November 1 in each year listed below, commencing November 1, 2024, at a redemption price equal to 100% of the principal amount redeemed, plus accrued interest thereon to the redemption date, in the principal amount set forth below next to such year: November 1 of the Year Principal Amount 2024 $260, , , , * 810,000 *Maturity (b) The Series 2013A Bonds maturing on November 1, 2033 shall be redeemed in part on November 1 in each year listed below, commencing November 1, 2029, at a redemption price equal to 100% of the principal amount redeemed, plus accrued interest thereon to the redemption date, in the principal amount set forth below next to such year: November 1 of the Year Principal Amount , , ,000, ,075, * 1,150,000 *Maturity 8

13 (c) The Series 2013A Bonds maturing on November 1, 2043 shall be redeemed in part on November 1 in each year listed below, commencing November 1, 2034, at a redemption price equal to 100% of the principal amount redeemed, plus accrued interest thereon to the redemption date, in the principal amount set forth below next to such year: November 1 of the Year Principal Amount ,230, ,315, ,400, ,495, ,590, ,690, ,800, ,910, ,030, * 2,585,000 *Maturity The mandatory sinking fund requirements described above shall be reduced to the extent of any partial redemption of Series 2013A Bonds of a maturity or maturities as described under" Optional Redemption," and" Extraordinary Optional Redemption." In the event of a partial redemption of Series 2013A Bonds as described under" Optional Redemption," or" Extraordinary Optional Redemption" above, the Bond Trustee will allocate the principal amount of Series 2013A Bonds of a series redeemed against the mandatory sinking fund redemption requirements in such order as shall be directed by the Obligated Group. At its option, to be exercised on or before the 45th day next preceding any mandatory sinking fund redemption date for the Series 2013A Bonds under the 2013A Bond Indenture, the Obligated Group may deliver to the Bond Trustee for cancellation the Series 2013A Bonds of the appropriate maturity in any aggregate principal amount which have been purchased by the Obligated Group in the open market. Each Series 2013 Bond so delivered will be credited by the Bond Trustee at 100% of the principal amount thereof against the mandatory sinking fund redemption requirement for the Series 2013A Bonds of such maturity on such mandatory sinking fund redemption date; and any excess of such amount will be credited against future mandatory scheduled redemption requirements as directed by the Obligated Group. The Obligated Group, will, on or before the 45th day preceding each mandatory sinking fund redemption date, furnish the Bond Trustee with a certificate, signed by a Obligated Group Representative, stating the extent to which the provisions of the first sentence of this paragraph are to be availed of with respect to such mandatory redemption requirements for such mandatory redemption date. Purchase in Lieu of Redemption. In lieu of the optional redemption and cancellation of the Series 2013A Bonds, Series 2013A Bonds may be called for purchase by the Obligated Group in lieu of optional redemption on the same dates and at the same purchase price as Series 2013A Bonds may be called for and redeemed pursuant to an optional redemption described under the sub-caption" Optional Redemption" above. Series 2013A Bonds so purchased by the 9

14 Obligated Group in lieu of redemption may be either (i) delivered to the Bond Trustee and cancelled or (ii) held by the Obligated Group and, upon receipt of an opinion of Bond Counsel to the effect that such sale will not adversely affect the exclusion from gross income for federal income tax purposes of interest on such Series 2013A Bonds, subsequently sold by the Obligated Group. Notice of purchase and selection of Series 2013A Bonds for purchase pursuant to this paragraph shall be given or made and shall have the same effect as provided herein for notice and selection of Series 2013A Bonds for optional redemption; provided, that the notice shall be modified as necessary to reflect the purchase of Series 2013A Bonds in lieu of optional redemption. Selection of Series 2013A Bonds to be Redeemed. So long as the Series 2013A Bonds are held in book-entry only form, the Bond Trustee will give notice of redemption of the Series 2013A Bonds only to Cede & Co., as the registered owner of the Series 2013A Bonds, and the Bond Trustee will not mail a redemption notice directly to the Beneficial Owners of the Series 2013A Bonds. DTC is obligated to select the Series 2013A Bonds for redemption and disseminate the notice of redemption pursuant to its rules and procedures. In the case of any redemption in part, the Series 2013A Bonds to be redeemed under the 2013A Bond Indenture shall be selected by the Bond Trustee, subject to any requirements of this paragraph. A redemption of Series 2013A Bonds shall be redemption of the whole or of any part of the Series 2013A Bonds, provided, that there shall be no partial redemption of less than $5,000. If less than all of the Series 2013A Bonds shall be called for redemption under any provision of the 2013A Bond Indenture permitting such partial redemption, the particular Series 2013A Bonds to be redeemed shall be selected by the Bond Trustee, in such manner as the Bond Trustee in its discretion may deem fair and appropriate; provided, however (a) that the portion of any Series 2013 Bond to be redeemed shall be in the principal amount of $5,000 or any multiple thereof, and (b) that, in selecting Series 2013A Bonds for redemption, the Bond Trustee shall treat each Series 2013 Bond as representing that number of Series 2013A Bonds which is obtained by dividing the principal amount of such Series 2013 Bond by $5,000. If there shall be called for redemption less than all of a Series 2013A Bonds the Issuer shall execute and deliver and the Bond Trustee shall authenticate, upon surrender of such Series 2013A Bonds to be partially redeemed without charge to the owner thereof, a replacement Series 2013 Bond in the principal amount of the unredeemed balance of the Series 2013 Bond so surrendered. Procedure for Redemption; Effect of Redemption. (a) In the event any of the Series 2013A Bonds are called for redemption, the Bond Trustee shall give notice, in the name of the Obligated Group, of the redemption of such Series 2013A Bonds, which notice shall (i) specify the Series 2013A Bonds to be redeemed, the redemption date, the redemption price, and the place or places where amounts due upon such redemption will be payable (which shall be the designated corporate trust office of the Bond Trustee) and, if less than all of the Series 2013A Bonds are to be redeemed, the numbers of the Series 2013A Bonds, and the portions of the Series 2013A Bonds, to be redeemed, (ii) state any condition to such redemption or any reservation of the right to rescind such notice, and (iii) state that on the redemption date, and upon the satisfaction of any such condition, the Series 2013A Bonds to be redeemed shall cease to bear interest. CUSIP number identification shall accompany all redemption notices. Such notice may set forth any additional information relating to such redemption. Such notice shall be given by mail, postage prepaid, (or while the DTC book-entry only system is in effect, in such 10

15 manner as is acceptable to DTC and the Trustee) at least 30 days (or, in the case of acceleration of the Series 2013A Bonds, seven days) but not more than 60 days prior to the date fixed for redemption to each Holder of Series 2013A Bonds to be redeemed at its address shown on the registration books kept by the Bond Trustee; provided, however, that failure to give such notice to any Series 2013 Bondholder or any defect in such notice shall not affect the validity of the proceedings for the redemption of any of the other Series 2013A Bonds. The Bond Trustee shall send a second notice of redemption by certified mail return receipt requested to any registered Holder who has not submitted Series 2013A Bonds called for redemption 30 days after the redemption date, provided, however, that the failure to give any second notice by mailing, or any defect in such notice, shall not affect the validity of any proceedings for the redemption of any of the Series 2013A Bonds and the Bond Trustee shall not be liable for any failure by the Bond Trustee to send any second notice. (b) Any Series 2013A Bonds and portions of Series 2013A Bonds which have been duly selected for redemption and for which the Bond Trustee holds sufficient funds to pay the redemption price shall cease to bear interest on the specified redemption date in accordance with the 2013A Bond Indenture. Book-Entry Only System The information in this section concerning The Depository Trust Company, New York, New York ("DTC") and DTC's book-entry system has been obtained from sources that the Issuer and the Obligated Group believe to be reliable, but the Issuer and the Obligated Group take no responsibility for the accuracy thereof. DTC will act as securities depository for the Series 2013A Bonds. The Series 2013A Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2013 Bond certificate will be issued for each maturity of the Series 2013A Bonds, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants (the "Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by 11

16 the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (the "Indirect Participants"). DTC has Standard & Poor's highest rating: "AAA." The DTC rules applicable to its Direct and Indirect Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and Purchases of the Series 2013A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2013A Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2013 Bond (each a "Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2013A Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2013A Bonds, except in the event that use of the book-entry system for the Series 2013A Bonds is discontinued. To facilitate subsequent transfers, all Series 2013A Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Series 2013A Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2013A Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2013A Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2013A Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2013A Bonds, such as redemptions, tenders, defaults, and proposed amendments to the bond documents. For example, Beneficial Owners of Series 2013A Bonds may wish to ascertain that the nominee holding the Series 2013A Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Bond Registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Series 2013A Bonds within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. 12

17 Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2013A Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Series 2013A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Series 2013A Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Issuer or the Bond Trustee on a payment date in accordance with their respective holdings shown on DTC's records. Payments by DTC Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such DTC Participant and not of DTC nor its nominee, the Bond Trustee or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest on the Series 2013A Bonds, as applicable, to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Bond Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Series 2013A Bonds at any time by giving reasonable notice to the Issuer or the Bond Trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2013 Bond certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry transfers through DTC upon compliance with any applicable DTC rules and procedures. In that event, Series 2013 Bond certificates will be printed and delivered. The Issuer, the Obligated Group, the Bond Trustee and the Underwriter do not have any responsibility or obligation to the Direct Participants, Indirect Participants or the Beneficial Owners with respect to (a) the accuracy of any records maintained by DTC or any Direct Participant or Indirect Participant, (b) the payment by DTC or any Direct Participant or Indirect Participant of any amount due to any Beneficial Owner in respect of the principal of and interest on the Series 2013A Bonds, (c) the delivery or timeliness of delivery by DTC or any Direct Participant or Indirect Participant of any notice to any Beneficial Owner which is required or permitted under the terms of the 2013A Bond Indenture to be given to Bondholders, or (d) any consent given or other action taken by DTC, or its nominee, Cede & Co., as Bondholders. 13

18 Limited Obligations; Pledged Funds SECURITY AND SOURCES OF PAYMENT The Series 2013A Bonds will be issued by the Issuer pursuant to the 2013A Bond Indenture. To secure and provide for the payment of the Series 2013A Bonds and its obligations under the Financing Agreement, the Obligated Group will issue Obligation No. 1 under and pursuant to the Master Indenture. The Medical Center, the Foundation and Pavilion are currently the only Members of the Obligated Group and the Medical Center is currently the Obligated Group Representative under the Master Indenture. Obligation No. 1 and all other Obligations issued and outstanding under the Master Indenture are limited obligations secured equally and ratably without preference or priority as to lien or source of payment of any one Obligation over any other Obligation, by a lien on and security interest in the Gross Revenues of the Obligated Group, the funds and accounts created under the Master Indenture, the Mortgaged Property (unless otherwise specified with respect to particular Obligations) and all other property or collateral held by or pledged to the Master Trustee thereunder, and all proceeds and products of the foregoing. THE SERIES 2013A BONDS WILL NOT BE DEEMED TO CONSTITUTE A GENERAL DEBT, LIABILITY OR OBLIGATION OF THE ISSUER, OR A DEBT, LIABILITY OR OBLIGATION OF THE COUNTY, THE STATE OF FLORIDA OR ANY POLITICAL SUBDIVISION THEREOF, OR A PLEDGE OF THE FAITH AND CREDIT OR TAXING POWER OF THE COUNTY, THE STATE OF FLORIDA OR ANY POLITICAL SUBDIVISION THEREOF. THE ISSUER WILL NOT BE OBLIGATED TO PAY THE SERIES 2013A BONDS, ANY INTEREST THEREON, OR ANY OTHER OBLIGATIONS WITH RESPECT THERETO EXCEPT FROM THE PLEDGED FUNDS IN THE MANNER PROVIDED IN THE 2013A BOND INDENTURE AND MASTER INDENTURE. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE COUNTY, THE STATE OF FLORIDA, NOR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE SERIES 2013A BONDS, OR ANY OTHER OBLIGATIONS OF THE ISSUER WITH RESPECT THERETO. NEITHER THE COUNTY, THE STATE OF FLORIDA, NOR ANY POLITICAL SUBDIVISION THEREOF WILL BE DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATED TO LEVY ANY FORM OF TAXATION WHATEVER FOR THE PAYMENT OF THE ISSUER'S OBLIGATIONS UNDER THE 2013A BOND INDENTURE, INCLUDING, WITHOUT LIMITATION, THE SERIES 2013A BONDS. THE ISSUER HAS NO TAXING POWER. Master Indenture General. As to each Member of the Obligated Group, all Obligations issued pursuant to the Master Indenture are or will be limited obligations payable from and secured by a lien upon and pledge of the Gross Revenues in the manner set forth in the Master Indenture. The Obligations shall be additionally secured by the Mortgage; provided that if so specified in the Supplement pursuant to which such Obligations are issued, Obligations may be issued which are not secured by the Mortgage. Each Member of the Obligated Group, so long as it is a Member, 14

19 jointly and severally, covenants and agrees that it will promptly pay the principal of, redemption premium, if any, and interest on all Obligations issued and outstanding under the Master Indenture at the place, on the dates and in the manner provided therein and in said Obligations according to the true intent and meaning thereof. Any one or more series of Obligations issued under the Master Indenture may, so long as any Liens created in connection therewith constitute Permitted Liens, be secured by security interests in or liens on other Property of the Obligated Group or any Member. Such security need not extend to any other indebtedness including Obligations. Consequently, the Supplement pursuant to which any one or more series of Obligations is issued may provide for such supplements or amendments to the provisions of the Master Indenture as are necessary to provide for such security and to permit realization upon such security solely for the benefit of the Obligations entitled thereto. To the extent that any Indebtedness which is permitted or required to be issued pursuant to the Master Indenture is not in the form of a promissory note, an Obligation in the form of a promissory note may be issued under the Master Indenture and pledged as security for the payment of such Indebtedness in lieu of directly issuing such Indebtedness as an Obligation under the Master Indenture. Nevertheless, the parties to the Master Indenture agree that Obligations may be issued to evidence any type of Indebtedness (other than Non-Recourse Indebtedness and Subordinated Indebtedness), including without limitation any Indebtedness in a form other than a promissory note. Consequently, the Supplement pursuant to which any Obligation is issued may provide for such supplements or amendments to the provisions of the Master Indenture as are necessary to permit the issuance of such Obligation and as are not inconsistent with the intent of the Master Indenture, provided that, except as otherwise expressly provided in the Master Indenture, all obligations issued under the Master Indenture will be equally and ratably secured by any Lien created under the Master Indenture. Each Member of the Obligated Group covenants in the Master Indenture that it will not pledge or grant a security interest in any of its Property, except for Permitted Liens. Pledge of Gross Revenues. To secure the prompt payment of the principal of, redemption premium, if any, and the interest on the Obligations and the performance by each Member of the Obligated Group of its other obligations under the Master Indenture, each Member of the Obligated Group has pledged, assigned and granted to the Master Trustee, for the benefit of the Holders of the Obligations, equally and ratably without preference or priority as to lien or source of payment of any one Obligation over any other Obligation, a lien on and security interest in: (a) all Gross Revenues of the Obligated Group and all Accounts, accounts receivable, contract rights and general intangibles giving rise to Gross Revenues; (b) the funds and accounts created under the Master Indenture and all other property or collateral held by or assigned or pledged to the Master Trustee under the Master Indenture; and (c) all proceeds and products of any of the foregoing. 15

20 "Gross Revenues" means all receipts, revenues, income, rents, royalties, benefits and other moneys received by the Obligated Group or any Member thereof, including, without limitation, contributions and donations, in the form of cash, securities or other intangible personal property, and all rights to receive the same, whether in the form of Accounts, contract rights, chattel paper, instruments, rights under agreements with insurance companies, or other rights, and the proceeds thereof and of any insurance thereon, whether now owned or held or hereafter acquired by the Obligated Group and, except as otherwise provided in the Master Indenture with respect to Derivative Agreements, net payments due from a counterparty under a Derivative Agreement; provided, however, that Gross Revenues does not include (i) gifts, grants, bequests, donations and contributions heretofore or hereafter made, and the income derived therefrom ("Donation"), to the extent the use thereof was restricted at the time of making thereof by the donor or maker to purposes inconsistent with such Donation being included in Gross Revenues for purposes of the Master Indenture, (ii) tangible personal property unless acquired with Gross Revenues in violation of the provisions of the Master Indenture, (iii) property to the extent the inclusion thereof in Gross Revenues would result in a violation of federal or state law or regulation or provision of a contract made by any Member of the Obligated Group without the violation of the provisions of the Master Indenture, (iv) the proceeds of any borrowing, or (v) earnings constituting Escrowed Interest or Escrowed Principal. For additional definitions relating to the Master Indenture, see APPENDIX C attached hereto. Prior to any Event of Default, any Member of the Obligated Group may sell accounts receivable or incur Indebtedness secured by all or any part of its accounts receivable free of such pledge and lien to the extent permitted by the provisions of the Master Indenture. In the event of such sale or incurrence of Indebtedness, upon written request of a Member of the Obligated Group, the Master Trustee will execute a release of its lien with respect to the accounts receivable so sold or pledged as security for such Indebtedness. Each new Member of the Obligated Group will, upon becoming a Member pursuant to the Master Indenture, execute and deliver to the Master Trustee from time to time such amendments or supplements to the Master Indenture as may be necessary or appropriate to include as security thereunder its Gross Revenues and/or Accounts, as the case may be as described above. Mortgage. The Mortgage creates a mortgage lien on and a security interest in the Mortgaged Property, which includes the Medical Center's interest in the Project Site (as defined in the Mortgage), all rights-of-way, streets, alleys, passages, riparian and littoral rights, waters, water courses, sewer rights, mineral rights, air rights, lateral support rights, liberties, privileges, tenements, corporeal and incorporated hereditaments, easements, licenses and appurtenances thereunto belonging or in any way appertaining to the Project Site, whether now owned or hereafter acquired by the Medical Center, and including all rights of ingress and egress to and from said real property and all adjoining property (whether such rights now exist or subsequently arise and either in law or in equity), together with the reversion or reversions remainder and remainders, rents, rights under leases, issues and profits thereof, and all proceeds and products of the conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims, including, without limitation, proceeds of insurance and condemnation awards or payments in lieu of condemnation. 16

21 The Mortgage secures each of the Obligations (excluding Obligations that by their terms are not secured by the Mortgage in accordance with the Master Indenture) on a parity basis and, upon the occurrence of and continuance of an Event of Default under the Master Indenture, the Master Trustee may exercise its rights and remedies under the Mortgage, including, without limitation, foreclosure. However, the Master Trustee's rights with respect to the sale and use of the Mortgage Property is limited by the nature of the facilities. See "BONDHOLDERS' RISKS Mortgaged Property" herein. Liquidity Covenant. The Obligated Group has covenanted in the First Supplement for the benefit of the holders of the Series 2013A Bonds to maintain, as of September 30 of each year, at least 75 Days Cash on Hand. This covenant shall be tested based upon and at the time of delivery of the audited financial statements of the Obligated Group. The First Supplement defines "Days Cash on Hand" as of the date of calculation, as the amount determined by dividing (a) the aggregate amount of Unrestricted Cash and Investments of the Members of the Obligated Group multiplied by 365 by (b) the total operating expenses of the Obligated Group for the twelve month period ending on the date of determination and for purposes of calculating operating expenses for this definition, depreciation and amortization shall not be included in operating expenses. See "APPENDIX C - Definitions" for the definition of "Unrestricted Cash and Investments." Outstanding Parity Obligations. In order to fully terminate all the Obligated Group's outstanding indebtedness (in addition to the Refunded Bonds) and discharge the existing master indenture securing such indebtedness and the Refunded Bonds, concurrently with the issuance of the Series 2013A Bonds and the 2013C Bank Loan, the proceeds of a second tax exempt bank loan to be entered into by the Obligated Group in the approximate amount of $5,603,107 (the "2013B Bank Loan") will be used to currently refund the Issuer's outstanding Variable Rate Demand Revenue Bonds (Jupiter Medical Center, Inc.), Series 1999B (the "Series 1999B Bonds"). Additionally, the Obligated Group will secure a term loan from TD Bank, N.A. ("TD Bank") in the amount of $4,614,342 (the "Term Loan") in replacement of the existing term loan from TD Bank and a line of credit established by TD Bank in the maximum available amount of $10,000,000 (the "TD Bank Line of Credit"), each in favor of the Medical Center. After the issuance of the Series 2013A Bonds, the refunding of the Refunded Bonds and the execution and delivery of the 2013B Bank Loan, the 2013C Bank Loan, the Term Loan and the TD Bank Line of Credit, the following Obligations will be outstanding: (a) Obligation No. 1 in the principal amount of the Series 2013A Bonds; (b) Obligation No. 2 in the principal amount of $5,603,107 securing the 2013B Bank Loan; (c) Obligation No. 3 in the principal amount of $15,170,866 securing the 2013C Bank Loan; (d) Obligation No. 4 in the anticipated principal amount of $4,614,342 securing the Term Loan; and (e) Obligation No. 5 in the maximum principal amount of $10,000,000 securing obligations of the Obligated Group under the TD Bank Line of Credit. 17

22 Limitations on Indebtedness and Liens Pursuant to the Master Indenture, each Member of the Obligated Group covenants and agrees that it will not incur any Additional Indebtedness if, after giving effect to all other Indebtedness incurred by the Obligated Group, such Indebtedness could not be incurred pursuant to one of the provisions of the Master Indenture described below in paragraphs (a) through (k), inclusive. "Additional Indebtedness" means any Indebtedness incurred or assumed by any Member of the Obligated Group subsequent to the issuance of Obligation Nos. 1 through 5 under the Master Indenture or incurred or assumed by any other Member of the Obligated Group subsequent to or contemporaneously with its becoming a Member of the Obligated Group. Indebtedness may be incurred only in the manner and pursuant to the terms set forth in the Master Indenture. Each Member of the Obligated Group further covenants and agrees that it will not incur any Additional Indebtedness without the written consent of the Obligated Group Representative, as evidenced by an Officer's Certificate or a copy of the resolution of the Obligated Group Representative to be delivered to the Master Trustee prior to the incurrence of such Additional Indebtedness. (a) Long-Term Indebtedness may be incurred if prior to incurrence of the Long-Term Indebtedness there is delivered to the Master Trustee: (i) An Officer's Certificate of the Obligated Group Representative certifying that the Income Available for Debt Service for each of the two most recent Fiscal Years preceding the date of delivery of the certificate of the Obligated Group Representative for which there are Audited Financial Statements available was at least 115 percent of the Maximum Annual Debt Service on all Long-Term Indebtedness of the Obligated Group to be Outstanding following the issuance of such proposed Long-Term Indebtedness; or (ii) (A) an Officer's Certificate of the Obligated Group Representative demonstrating that the Long-Term Maximum Annual Debt Service Coverage Ratio for the periods mentioned in (a)(i) above, excluding the proposed Long- Term Indebtedness, was at least 1.25; and (B) a report of a Consultant (or if the Long-Term Maximum Annual Debt Service Coverage Ratio calculated in (ii)(a) above was greater than 1.50, a certificate of the Obligated Group Representative) demonstrating that the forecasted Long-Term Maximum Annual Debt Service Coverage Ratio, calculated taking into account the Long-Term Indebtedness to be Outstanding following the issuance of the proposed Long-Term Indebtedness is not less than 1.15 for (x) in the case of Long-Term Indebtedness (other than a Guaranty) to finance capital improvements, each of the two full Fiscal Years succeeding the date on which such capital improvements are forecasted to be in operation, or (y) in the case of Long-Term Indebtedness not financing capital improvements or in the case of a Guaranty, each of the two full Fiscal Years succeeding the date on which the Indebtedness is incurred, as shown by projected financial statements for the Obligated Group for each such period, accompanied by a statement of the relevant assumptions upon which such projected financial statements for the Obligated Group are based; provided, however, that if a report 18

23 of a Consultant states that Governmental Restrictions have been imposed which make it impossible for the coverage requirements of the Master Indenture to be met, then such coverage requirements will be reduced to the maximum coverage permitted by such Governmental Restrictions but in no event less than (b) In addition to, and not in lieu of, Long-Term Indebtedness permitted to be incurred under clause (a) above, Long-Term Indebtedness may be incurred provided that immediately after giving effect to any Long-Term Indebtedness incurred pursuant to this clause (b), the aggregate principal amount of Long-Term Indebtedness incurred under this clause (b) and the aggregate principal amount of Indebtedness incurred pursuant to clause (d)(i) below and then Outstanding will not exceed 25% of Operating Revenues calculated in accordance with the Accounting Principles for the most recent Fiscal Year for which Audited Financial Statements are available. (c) Long-Term Indebtedness may be incurred for the purpose of refunding any Outstanding Long-Term Indebtedness if, prior to the incurrence of such Long-Term Indebtedness, (i) if the Long-Term Indebtedness to be incurred does not constitute Crossover Refunding Indebtedness there is delivered to the Master Trustee (A) an Officer's Certificate of the Obligated Group Representative demonstrating that the Maximum Annual Debt Service will not increase by more than 10% after the incurrence of such proposed refunding Long-Term Indebtedness and after giving effect to the disposition of the proceeds thereof and (B) an Opinion of Counsel stating that upon the incurrence of such proposed Long-Term Indebtedness and application of the proceeds thereof, the Outstanding Long-Term Indebtedness to be refunded thereby will no longer be Outstanding; or (ii), if the Indebtedness proposed to be issued is Cross-over Refunding Indebtedness, there is delivered to the Master Trustee an Officer's Certificate of the Obligated Group Representative stating that the total Maximum Annual Debt Service immediately following the Cross-over Date does not exceed the Maximum Annual Debt Service immediately prior to the issuance of the Cross-over Refunding Indebtedness by more than 10% assuming for the purpose of the test only that no other Additional Indebtedness is incurred between the date of issuance of the Cross-over Refunding Indebtedness and the Cross-over Date. (d) (i) Short-Term Indebtedness may be incurred subject to the limitation that immediately after giving effect to any Short-Term Indebtedness incurred pursuant to this clause (d)(i), the aggregate principal amount of all Indebtedness Outstanding under this clause (d)(i) and clause (b) above will not exceed 25% of Operating Revenues, calculated in accordance with the Accounting Principles, for the most recent Fiscal Year for which Audited Financial Statements are available. (ii) Short-Term Indebtedness may also be incurred if the tests set forth in clauses (a)(i) or (a)(ii) above are met with respect to the incurrence of such Short-Term Indebtedness. For the purpose of calculating compliance with the Long-Term Indebtedness coverage tests set forth in clauses (a)(i) or (a)(ii) above, the Short-Term Indebtedness to be incurred as described in this clause (d)(ii) will be deemed to be Long- Term Indebtedness. 19

24 (e) Non-Recourse Indebtedness may be incurred for the purposes of acquiring Property and improving the Property acquired, either simultaneously or subsequent to the acquisition of such Property with Non-Recourse Indebtedness, without limit. (f) Completion Indebtedness may be incurred without limitation; provided, however, that prior to the incurrence of Completion Indebtedness in a principal amount in excess of ten percent (10%) of the principal amount of the Long-Term Indebtedness originally incurred to finance the costs of construction or acquisition of the facilities with respect to which such Completion Indebtedness is to be incurred, the Obligated Group Representative will furnish to the Master Trustee a certificate of an architect estimating the costs of completing the facilities for which Completion Indebtedness is to be incurred, and an Officer's Certificate of the Chief Financial Officer of the Member of the Obligated Group for which Completion Indebtedness is to be incurred certifying that the amount of Completion Indebtedness to be incurred will be sufficient, together with other available funds, to complete construction of the facilities in respect of which Completion Indebtedness is to be incurred. (g) Subordinated Debt may be incurred without limit. (h) Indebtedness under a Credit Facility (including a Guaranty of indebtedness under a Credit Facility) may be incurred without limit. (i) Indebtedness secured by Accounts may be incurred in any amount not to exceed 15% of the carrying value of the Accounts, determined in accordance with Accounting Principles at the time the Indebtedness is incurred. (j) Derivative Indebtedness pursuant to a Derivative Agreement relating to Indebtedness issued or to be issued under the Master Indenture (or Related Bonds with respect thereto) may be incurred without limit. "Derivative Indebtedness" means payments for which a Member of the Obligated Group shall have become obligated under a Derivative Agreement, excluding any termination or other payments under such Derivative Agreement not determined by reference to the application of an interest rate or index to the notional amount. (k) Indebtedness may be incurred in connection with the sale of Accounts to the extent Accounts are permitted to be sold pursuant to the Master Indenture. Indebtedness incurred pursuant to any of the paragraphs above may be reclassified as Indebtedness incurred pursuant to any other paragraph if the tests set forth in the clause to which such Indebtedness is to be reclassified are met at the time of such reclassification. Indebtedness containing a "put" or "tender" provision pursuant to which such Indebtedness is or may be required to be purchased prior to its maturity shall not be considered to mature or constitute Balloon Long-Term Indebtedness solely by reason of such "put" or "tender" provision, and the put or tender provision shall not be taken into account in testing compliance with any debt incurrence test pursuant to the Master Indenture, provided that either (i) such "put" or "tender" is optional and the party to whom the option runs has not exercised the option, (ii) the "tender" or "put" is mandatory upon the occurrence of an event or condition (other 20

25 than solely the lapsing of a specified period of time) and such event or condition has not occurred, or (iii) there is a Credit Facility in place to provide liquidity for the purchase of such Indebtedness pursuant to a "put" or "tender." If none of (i), (ii) or (iii) of the preceding sentence apply, such Long-Term Indebtedness shall be deemed to mature on the "put" or "tender" date and may be treated as Balloon Indebtedness. Pursuant to the Master Indenture, each Member of the Obligated Group has agreed that it will not create or suffer to be created or permit the existence of any Lien on Property now owned or hereafter acquired by it other than Permitted Liens. Other than Permitted Liens, the Obligated Group will not create or permit the creation of any Lien on Gross Revenues prior to or on a parity with the Lien established by the Master Indenture. Rate Covenant Pursuant to the Master Indenture, each Member of the Obligated Group covenants to set rates and charges for its facilities, services and products such that (i) the Long-Term Maximum Annual Debt Service Coverage Ratio, calculated at the end of each Fiscal Year, will not be less than 1.15, and (ii) the Actual Long-Term Debt Service Coverage Ratio, calculated at the end of each full Fiscal Year, will not be less than 1.00; provided, however, that in any case where Long- Term Indebtedness has been incurred to acquire or construct capital improvements, the Long- Term Debt Service Requirement with respect thereto will not be taken into account in making the foregoing calculation until the first full Fiscal Year commencing after the occupation or utilization of such capital improvements to the extent proceeds of such Long-Term Indebtedness are available to pay debt service on such Long-Term Indebtedness prior to such Fiscal Year. If at the end of any Fiscal Year the Long-Term Maximum Annual Debt Service Coverage Ratio required by the Master Indenture is not met, the Obligated Group Representative will retain a Consultant within 30 days of the receipt of the Audited Financial Statements for such Fiscal Year to make recommendations to increase such Long-Term Maximum Annual Debt Service Coverage Ratio in the following Fiscal Year to the required level. Any Consultant so retained will be required to submit such recommendations within 45 days after being so retained. So long as a Consultant is retained and each Member of the Obligated Group follows such Consultant's recommendations to the extent permitted by law, the rate covenant will be deemed to have been complied with even if the Long-Term Maximum Annual Debt Service Coverage Ratio for the following Fiscal Year is below the required level so long as sufficient Income Available for Debt Service is generated to pay the actual debt service payable in such Fiscal Year. The Obligated Group is not required to retain a Consultant to make recommendations more frequently than biennially. If a report of a Consultant is delivered to the Master Trustee that states that Governmental Restrictions have been imposed which make it impossible for the coverage requirement in the Master Indenture to be met, then such coverage requirement will be reduced temporarily to the maximum coverage taking into consideration such Governmental Restrictions, but in no event less than 1.00, and thereafter, for so long as such Governmental Restrictions are in effect, a report of a Consultant stating that Governmental Restrictions which make it impossible for the coverage requirement in the Master Indenture to be met are still in effect is delivered to the Master Trustee biennially. 21

26 (ii) foregoing covenants with respect to rates and charges are not to be construed to prohibit the Members from serving indigent patients or from serving any other class or classes of patients at reduced rates or free of any charge. Reserve Requirement Series 2013 Reserve Requirement. The Reserve Requirement with respect to the Series 2013A Bonds (the "Series 2013 Reserve Requirement") is equal to the lesser of (i) the maximum amount of the debt service requirement coming due in the current or any future Bond Year with respect to the Series 2013A Bonds Outstanding; (ii) 125% of the average annual debt service requirement with respect to all Series 2013A Bonds Outstanding (calculated based on a fiscal year ending September 30), or (iii) 10% of the aggregate stated original principal amount of the Series 2013A Bonds Outstanding, determined in accordance with Treasury Regulation Section (f)(2). $3,521, will be deposited in the Reserve Account for the Series 2013A Bonds established under the 2013A Bond Indenture on the date of issuance of the Series 2013A Bonds, which amount is equal to clause (ii) of the preceding sentence on the date of issuance of the Series 2013A Bonds. Moneys on deposit in the Reserve Account shall, subject to the replenishment terms provided in the 2013A Bond Indenture, at all times be in an amount equal to the Series 2013 Reserve Requirement and, except as provided in the 2013A Bond Indenture, be used, to the extent necessary, solely to make up any deficiencies in the Bond Fund relating to the timely payment of principal of and interest on the Series 2013A Bonds. Amounts deposited in the Reserve Account do not secure the 2013B Bank Loan, the 2013C Bank Loan, the Bank Term Loan or the Bank Line of Credit. If on any Interest Payment Date or date on which principal of Series 2013A Bonds shall be due and payable, the Bond Fund does not contain sufficient moneys to pay the principal of and interest on the Series 2013A Bonds due and payable on such date, the Bond Trustee shall transfer moneys from the Reserve Account to the Bond Fund, to the extent of such deficiency, and shall so notify the Obligated Group. If on any Interest Payment Date or date on which principal of Bonds shall be due and payable, moneys are so transferred from the Reserve Account, the Obligated Group shall replenish the Reserve Account to the Series 2013 Reserve Requirement with respect thereto, in 12 substantially equal monthly installments commencing in the month following such transfer. Any deficiency arising in the Reserve Account due to the valuation of the Qualified Investments held therein pursuant to the 2013A Bond Indenture shall be replenished within ninety (90) days of such valuation. On the Business Day next preceding the final payment of all Outstanding Series 2013A Bonds, at scheduled maturity or upon early redemption, the Bond Trustee shall transfer any amounts in the Reserve Account to the Bond Fund, for application toward the payment of the principal of and premium, if any, on such Series 2013A Bonds. Additional Covenants In addition to the covenants discussed above with respect to the Master Indenture and First Supplement, the Obligated Group has covenanted in connection with certain of the Parity Obligations, and may covenant in the future, that it will comply with additional covenants and restrictions set forth in one or more documents delivered in connection with Additional Indebtedness unless otherwise waived, modified or amended. To the extent such covenants relate to a particular series of Related Bonds or Obligations other than the Series 2013A Bonds, they may be modified, waived or amended without the consent of the holders of the Series 22

27 2013A Bonds. Failure by one or more Members of the Obligated Group to comply with such covenants could result in the occurrence of an Event of Default under the Master Indenture. BONDHOLDERS' RISKS The following is a discussion of certain risks that could affect payments to be made with respect to the Series 2013A Bonds. Such discussion is not exhaustive, should be read in conjunction with all other parts of this Official Statement and should not be considered as a complete description of all risks that could affect such payments. Prospective purchasers of the Series 2013A Bonds should analyze carefully the information contained in this Official Statement, including the Appendices hereto, and additional information in the form of the complete documents summarized herein, copies of which are available as described in this Official Statement. General The Series 2013A Bonds are secured by and are payable solely from sources pledged therefor under the Bond Indenture, including payments on Obligation No. 1. Obligation No. 1 is secured by a pledge of the Gross Revenues of the Obligated Group, the Mortgage and other moneys pledged under the Master Indenture. No representation or assurance can be made that Gross Revenues will be realized by the Members of the Obligated Group in amounts sufficient to pay principal of, and premium, if any, and interest on, Obligation No. 1 when due, and thus the Series 2013A Bonds. None of the provisions of the Bond Indenture or the Master Indenture will afford the Bondholders any assurance that the obligations of the Obligated Group will be paid as and when due, if the financial condition of the Obligated Group deteriorates to the point where the Members of the Obligated Group are unable to pay their debts as they come due or the Obligated Group otherwise becomes insolvent. The receipt of future revenues by the Obligated Group is subject to, among other factors, federal and state laws, regulations and policies affecting the health care industry and the policies and practices of major managed care providers, private insurers and other third-party payors and private purchasers of health care services. The effect on the Members of the Obligated Group of recently enacted laws and regulations and recently adopted policies, and of future changes in federal and state laws, regulations and policies, and private policies, cannot be determined at this time. Loss of established contracts with managed care providers by a Member of the Obligated Group could also adversely affect its future revenues. Future economic conditions, which may include an inability to control expenses in periods of inflation, and other conditions, including demand for health care services, the availability and affordability of insurance, including without limitation malpractice and casualty insurance, availability of nursing and other professional personnel, the capability of management of the Members of the Obligated Group, the receipt of grants and contributions, referring physicians' and self-referred patients' confidence in the Members of the Obligated Group, economic and demographic developments in the United States, the State of Florida and the service area of the Obligated Group, and competition from other health care institutions in the service area, together with changes in rates, costs, third-party payments and governmental laws, 23

28 regulations and policies, may adversely affect revenues and expenses and, consequently, the ability of the Obligated Group to make payments under the Financing Agreement. Obligated Group Financings The accounts of the Members of the Obligated Group will be consolidated for financial reporting purposes and will be used in determining whether the test relating to debt service coverage contained in the Master Indenture is met, notwithstanding uncertainties as to the obligations of the Members of the Obligated Group contained in the Master Indenture which bear on the availability of the assets and revenues of the Members of the Obligated Group for payment of debt service on Obligations, including Obligation No. 1 pledged as security for the Series 2013A Bonds. The joint and several obligations described herein of the Members of the Obligated Group to make payments of debt service on such Obligations may not be enforceable to the extent payments on an Obligation (i) are requested to be made from assets which are donorrestricted or which are subject to a direct, express or charitable trust which does not permit the use of such assets for such payments, (ii) are requested with respect to an Obligation under the Master Indenture which was incurred, or payments on any Obligation which was issued, for a purpose which is not consistent with the charitable purposes of the Obligated Group Member from which such payments are requested or which was incurred or issued for the benefit of an entity other than a nonprofit corporation which is exempt from federal income taxes under Sections 501(a) and 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and is not a "private foundation" as defined in Section 509(a) of the Code, (iii) would result in the cessation or discontinuation of any material portion of the health care or related services previously provided by the Obligated Group Member from which such payments are requested, or (iv) are requested to be made pursuant to any loan violating applicable usury laws. An Obligated Group Member may not be required to make payments on or provide amounts for the payment of an Obligation issued by or for the benefit of another entity to the extent that any such payment or transfer would render such paying entity insolvent or would conflict with, not be permitted by or would be subject to recovery for the benefit of other creditors of such entity under applicable fraudulent conveyance, bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights. There is no clear precedent in the law as to whether payments on Obligations by an Obligated Group Member may be voided by a trustee in bankruptcy in the event of a bankruptcy of such Member or by third party creditors in an action brought pursuant to state fraudulent conveyances statutes. Under the United States Bankruptcy Code, a trustee in bankruptcy and, under state fraudulent conveyance statutes, a creditor of a related guarantor, may avoid any obligation incurred by a related guarantor if, among other bases therefor, (1) the guarantor has not received fair consideration or reasonably equivalent value in exchange for the guaranty and (2) the guaranty renders the guarantor insolvent, as defined in the United States Bankruptcy Code or state fraudulent conveyances statutes, or the guarantor is undercapitalized. Application by courts of the tests of "insolvency," "reasonably equivalent value" and "fair consideration" has resulted in a conflicting body of case law. It is possible that, in an action to force an Obligated Group Member to make a payment on an Obligation, a court might not 24

29 enforce such payment in the event it is determined that sufficient consideration for the Member's obligation was not received or that the incurrence of such obligation has rendered or will render the Member insolvent or the Member is or will thereby become undercapitalized. In addition, there exists common law authority and authority under state statutes for the ability of the state courts to terminate the existence of a non-profit corporation or undertake supervision of its affairs on various grounds, including a finding that such corporation has insufficient assets to carry out its stated charitable purposes or has taken some action which renders it unable to carry out such purposes. Such court action may arise on the court's own motion or pursuant to a petition of the state attorney general or such other persons who have interests different from those of the general public, pursuant to the common law and statutory power to enforce charitable trusts and to see to the application of their funds to their intended charitable uses. Certain Matters Relating to Enforceability of Security Interest in Revenues The enforceability of the security interest in Gross Revenues granted in the Master Indenture may be limited by a number of factors, including: (i) provisions prohibiting the direct payment of amounts due to health care providers from Medicaid and Medicare programs to persons other than such providers; (ii) the absence of an express provision permitting assignment of receivables due under the contracts between the Members of the Obligated Group and thirdparty payors, and present or future legal prohibitions against such assignment; (iii) certain judicial decisions which cast doubt upon the right of the Master Trustee, in the event of the bankruptcy of any Member of the Obligated Group, to collect and retain accounts receivable from Medicare, Medicaid and other governmental programs; (iv) commingling of proceeds of accounts receivable with other moneys of the Medical Center and the other Members of the Obligated Group not so pledged under the Master Indenture; (v) statutory liens; (vi) rights arising in favor of the United States of America or any agency thereof; (vii) constructive trusts or equitable or other rights impressed or conferred thereon by a federal or state court in the exercise of its equitable jurisdiction; (viii) federal bankruptcy laws which may affect the enforceability of the Master Indenture, the Financing Agreement or the security interest in the Gross Revenues of the Members of the Obligated Group which are earned by the Members of the Obligated Group within 90 days preceding the commencement of bankruptcy proceedings by or against the Members of the Obligated Group and during the pendency of such proceedings; (ix) rights of third parties in Gross Revenues converted to cash and not in the possession of the Master Trustee; and (x) claims that might arise if appropriate financing or continuation statements are not filed in accordance with the Uniform Commercial Code, as from time to time in effect. Mortgaged Property Obligations issued under the Master Indenture, including Obligation No. 1, other than Obligations which by their terms are not secured by the Mortgage, will be secured pari passu by the Mortgage, but the Mortgaged Property does not include any other real estate owned by the Obligated Group Members. No appraisal has been made of the Mortgaged Property and its value, together with any other collateral, may be significantly less than the principal amount of the Obligations outstanding. The Mortgaged Property is a health care facility and generally would not be suitable for industrial or commercial use. Consequently, it could be difficult to find 25

30 a buyer or lessee for such facility, and, upon a default, the Bond Trustee or the Master Trustee may not obtain an amount sufficient to satisfy the liabilities of the Obligated Group, including any amounts due on Obligation No. 1. Certain Other Matters Relating to Security for Series 2013A Bonds The Master Indenture permits the issuance of additional Obligations on a parity with Obligation No. 1 and the other outstanding Obligations, and also permits incurrence of Additional Indebtedness subject to certain limitations in the Master Indenture. In addition, the Master Indenture contains only limited restrictions on the ability of the Members of the Obligated Group to encumber Property. See the information in Appendix C. Certain amendments to the Master Indenture may be made with the consent of the holders of not less than a majority of the aggregate principal amount of the outstanding Obligations. Such amendments may adversely affect the security of owners of the Series 2013A Bonds, and such percentage may be composed wholly or partially of the holders of Obligations other than Obligation No. 1 securing the Series 2013A Bonds. Certain amendments to the 2013A Bond Indenture may be made with the consent of the owners of not less than a majority of the outstanding principal amount of the Series 2013A Bonds outstanding under the 2013A Bond Indenture. Such amendments may also adversely affect the security of the owners of the Series 2013A Bonds. Bankruptcy In the event an Obligated Group Member files for protection from creditors under the United States Bankruptcy Code, the rights and remedies of the Owners of the Series 2013A Bonds would be subject to various provisions of the United States Bankruptcy Code. If an Obligated Group Member were to commence a proceeding in bankruptcy, payments made by that Obligated Group Member during the 90-day period immediately preceding such commencement (or, under certain circumstances, during the preceding one-year period) may be voided as preferential transfers to the extent such payments allow the recipients thereof to receive more than they would have received in the event of the liquidation of such Obligated Group Member. Security interests and other liens granted by such Obligated Group Member to the Bond Trustee or the Master Trustee and perfected during such preference period may also be voided as preferential transfers to the extent such security interest or other lien secures obligations that arose prior to the date of such grant or perfection. A bankruptcy filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against such Obligated Group Member and its property and as an automatic stay of any act or proceeding to enforce a lien upon or to otherwise exercise control over its property as well as various other actions to enforce, maintain or enhance the rights of the Bond Trustee and the Master Trustee. If the bankruptcy court so ordered, the property of such Obligated Group Member, including its accounts receivable and the proceeds thereof, could be used for the financial rehabilitation of such Obligated Group Member despite any security interest of the Bond Trustee or the Master Trustee therein. The rights of the Bond Trustee and the Master Trustee to enforce their respective interests and other liens could be delayed during the pendency of the rehabilitation proceeding. 26

31 Such Obligated Group Member could also file a plan for the adjustment of its debts in any such proceeding which could include provisions modifying or altering the rights of creditors generally, or any class of them, secured or unsecured. The plan, when confirmed by a court, binds all creditors who had notice or knowledge of the plan and, with certain exceptions, discharges all claims against the debtor to the extent provided for in the plan. No plan may be confirmed unless certain conditions are met, among which are conditions that the plan be feasible and that it shall have been accepted by each class of claims impaired thereunder. Each class of claims has accepted the plan if at least two-thirds in dollar amount and more than onehalf in number of the class cast votes in its favor. Even if the plan is not so accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of nonaccepting creditors impaired thereunder and does not discriminate unfairly. Any such plan could adversely affect the Owners and Beneficial Owners of the Series 2013A Bonds. In the event of bankruptcy of an Obligated Group Member, there is no assurance that certain covenants, including tax covenants, contained in the 2013A Bond Indenture, the Financing Agreement or the Master Indenture and certain other documents would survive. Accordingly, such Obligated Group Member, as debtor in possession, or a bankruptcy trustee could take action which might adversely affect the exclusion of interest on the Series 2013A Bonds from gross income for federal income tax purposes. Enforceability of Remedies Enforcement of remedies under the 2013A Bond Indenture, the Financing Agreement, the Master Indenture or any Obligation may be limited or delayed in the event of application of federal bankruptcy laws or other laws affecting creditors' rights and may be substantially delayed and subject to judicial discretion in the event of litigation or the required use of statutory remedial procedures. Examples of cases of possible limitations on enforceability and of possible subordination of prior claims are (i) statutory liens, (ii) rights arising in favor of the United States of America or any agency thereof, (iii) present or future prohibitions against assignment in any federal statutes or regulations, (iv) constructive trusts, equitable liens or other rights impressed or conferred by any state or federal court in the exercise of its equitable jurisdiction, and (v) federal bankruptcy laws affecting assignment of revenues earned after, or within 90 days prior to, any institution of bankruptcy proceedings by or against any Obligated Group Member, or the Issuer. The various legal opinions to be delivered concurrently with the delivery of the Series 2013A Bonds will be qualified as to the enforceability of the applicable instruments by (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, debt adjustment, moratorium and similar laws of general application affecting the rights and remedies of creditors and secured parties; (ii) general principles of equity regardless of whether such enforcement is sought in proceedings in equity or at law, including those relating to equitable subordination; (iii) the exercise and availability of remedies and defenses; (iv) the enforceability of purported waivers of rights and defenses; (v) principles of charitable trust which can limit the use of the assets of a corporation for purposes other than those set forth in its organizational documents; (vi) matters of public policy; (vii) limitations relating to the use of specific assets, such as those applicable to donor and other restricted funds; (viii) limitations under specific statutes, such as those relating to the investment of a corporation's assets; (ix) restrictions on the use of assets which would result in the cessation or discontinuance of any material portion of the health care or related 27

32 services provided by an Obligated Group Member; and (x) other similar types of laws and principles applicable to not-for-profit or charitable corporations. Any of such limitations, if imposed, may adversely affect the ability of the Master Trustee, the Bond Trustee and the Series 2013A Bondholders to enforce their claims and assert their rights against Obligated Group Members. Impact of Market Turmoil Over the past several years, the financial sector of the economies of the United States and other countries has experienced severe disruption, prompting a number of banks and other financial institutions to seek additional capital, including capital provided through the Federal government, to merge, and, in some cases, to cease operations. These events collectively have led to significant reductions in lending capacity and extension of credit, erosion of investor confidence in the financial sector, and historically aberrant fluctuations in interest rates. This disruption of the credit and financial markets has led to volatility in the securities markets, significant losses in investment portfolios, increased business failures and consumer and business bankruptcies, and is a major cause of the current economic recession. The Obligated Group has holdings in a broad range of investments and credit facilities in various financial institutions. The general market disruption has affected and could continue to adversely affect the value of those investments and agreements. The health care sector, including the Members of the Obligated Group, have been, and will continue to be materially adversely affected by these developments. The consequences of these developments have generally included, realized and unrealized investment portfolio losses, reduced investment income, limitations on access to the credit markets, difficulties in extending existing or obtaining new liquidity facilities, difficulties in remarketing revenue bonds subject to tender, requiring the expenditure of internal liquidity to fund principal payments on tenders of revenue bonds, and increased borrowing costs. In each year since 2008, federal legislation was enacted and regulatory and other initiatives were implemented by agencies of the Federal government and the Federal Reserve Board with the objective of stabilizing the financial markets by enhancing liquidity, providing additional capital to the financial sector and improving the performance and efficiency of credit markets. Other legislation is pending or under active consideration by Congress, additional regulatory action is being considered by various Federal agencies and the Federal Reserve Board and foreign governments are implementing actions, all of which are intended to continue and strengthen efforts to restore the domestic and global credit markets. It is unclear whether these legislative, regulatory and other governmental actions will have the positive effect that is intended. The Stimulus Act; the HITECH Act and Electronic Health Records The American Recovery and Reinvestment Act of 2009 (the "Stimulus Act") Act includes several provisions that are intended to provide financial relief to the health care sector, including $86.6 billion in federal payments to states to fund the Medicaid program and $24.7 billion to provide a 65% subsidy to the recently unemployed for health insurance premium costs. Provisions in the Health Information Technology for Economic and Clinical Health Act (the 28

33 "HITECH Act"), enacted as part of the Stimulus Act, increase the maximum civil monetary penalties for violations of HIPAA and grant enforcement authority of HIPAA to state attorneys general. The HITECH Act also (i) extends the reach of HIPAA beyond "covered entities," (ii) imposes a breach notification requirement on HIPAA covered entities, (iii) limits certain uses and disclosures of individually identifiable health information, and (iv) restricts covered entities' marketing communications. The HITECH Act also established programs under Medicare and Medicaid to provide incentive payments for the "meaningful use" of certified electronic health record ("EHR") technology. Since 2011, the Medicare and Medicaid EHR incentive programs provide incentive payments to eligible professionals and eligible hospitals for demonstrating meaningful use of certified EHR technology. Health care providers demonstrate their meaningful use of EHR technology by meeting objectives specified by CMS for using health information technology and by reporting on specified clinical quality measures. Beginning in 2015, hospitals and physicians that have not satisfied the performance and reporting criteria for demonstrating meaningful use will have their Medicare payments significantly reduced. The Obligated Group is unable to determine the cost of complying with these requirements at this time. Certain Members of Obligated Group participate in the EHR incentive programs; however, the effect of the Stimulus Act and any future regulatory actions on the Obligated Group cannot be determined at this time. In addition, the Stimulus Act provided substantial assistance to Medicaid programs through enhanced federal medical assistance percentages, which determine the federal and state share of the Medicaid program. The recent expiration of the Stimulus Act assistance to Medicaid could have a significant adverse effect on the State's fiscal status and Medicaid funding in the next few years. Nonprofit Health Care Environment Each of the Members of the Obligated Group are non-profit corporations, exempt from federal income taxation as an organization described in Section 501(c)(3) of the Code. As a nonprofit tax-exempt organization, the Members of the Obligated Group are subject to federal, state and local laws, regulations, rulings and court decisions relating to their organization and operation, including their operation for charitable purposes. At the same time, the Members of the Obligated Group conduct large-scale complex business transactions and are major employers in their geographic area. There can often be a tension between the rules designed to regulate a wide range of charitable organizations and the day-to-day operations of a complex health care organization. Recently, an increasing number of the operations or practices of health care providers have been challenged or questioned to determine if they are consistent with the regulatory requirements for nonprofit tax-exempt organizations. These challenges are broader than concerns about compliance with federal and state statutes and regulations, such as Medicare and Medicaid compliance, and instead in many cases are examinations of core business practices of the health care organizations. Areas which have come under examination have included pricing practices, billing and collection practices, charitable care policies and practices, executive compensation, exemption of property from real property taxation, and others. These challenges and questions have come from a variety of sources, including state attorneys general, the Internal 29

34 Revenue Service, or the IRS, labor unions, Congress, state legislatures, and patients, and in a variety of forums, including hearings, audits and litigation. These challenges or examinations include the following, among others: IRS Examination of Compensation Practices. In 2004, the IRS began a new compliance program to measure compliance by tax-exempt organizations with requirements that they not pay excessive compensation and benefits to their officers and other insiders. In February 2009, the IRS issued its Hospital Compliance Project Final Report (the "IRS Final Report") that examined tax-exempt organizations practices and procedures with regard to compensation and benefits paid to their officers and other defined "insiders." The IRS Final Report indicates that the IRS (i) will continue to heavily scrutinize executive compensation arrangements, practices and procedures and (ii) in certain circumstances, may conduct further investigations or impose fines on tax-exempt organizations. Bond Examinations. IRS officials have recently indicated that more resources will be invested in audits of tax-exempt bonds in the charitable organization sector with specific review of private use. In addition, in 2007 the IRS sent approximately two hundred post-issuance compliance questionnaires to nonprofit corporations that have borrowed on a tax-exempt basis regarding their post-issuance compliance with various requirements for maintaining the federal tax exemption of interest on their bonds. The questionnaire includes questions relating to the nonprofit corporation's (i) record retention, which the IRS has particularly emphasized, (ii) qualified use of bond-financed property, (iii) arbitrage yield restriction and rebate requirements, (iv) debt management policies and (v) voluntary compliance and education. On September 11, 2008, the IRS issued an interim report analyzing the responses from the completed questionnaires. The report indicates that there are significant gaps in the implementation by nonprofit corporations of post-issuance and record retention procedures for tax-exempt bonds. IRS representatives indicate that after analyzing responses from the first wave of questionnaires, thousands more will be sent. Revision of IRS Service Form 990 for Nonprofit Corporations. The IRS Form 990 is used by 501(c)(3) not-for-profit organizations (including the Medical Center) to submit information required by the federal government for tax exemption. On December 20, 2007, the IRS released a revised Form 990 that requires detailed public disclosure of compensation practices, corporate governance, loans to management and others, joint ventures and other types of transactions, political campaign activities, and other areas the IRS deems to be compliance risk areas. The revised form also requires the disclosure of a significantly greater amount of both hard data and anecdotal information on community benefit information on Schedule H to the Form, and establishes uniform standards for reporting of information relating to tax exempt bonds, including compliance with the arbitrage rules and rules limiting private use of bondfinanced facilities, including compliance with the safe harbor guidance in connection with management contracts and research contracts. The redesigned Form 990 is intended to result in enhanced transparency as to the operations of exempt organizations. It is also likely to result in enhanced enforcement, as the redesigned Form 990 will make a wealth of detailed information on compliance risk areas to the IRS and other stakeholders. Nonprofit health care organizations also became subject to additional reporting for tax-exempt bonds. These reporting and recordkeeping requirements go beyond what many hospitals have done historically and require substantial additional efforts on the part of hospitals with outstanding tax-exempt bonds. A new 30

35 schedule to the Form 990 return (Schedule K) is intended to address what the IRS believes is significant noncompliance with recordkeeping and record retention requirements. These concerns were reinforced, in the IRS's view, by the results of a bond questionnaire distributed to select hospitals in September 2007, the results of which were released in September Schedule K also focuses on the investment of bond proceeds that could violate the arbitrage rebate requirements and the private use of bond-financed facilities. At this time it is difficult to predict the additional burden that completion of the revised Form 990 may place on the Members of the Obligated Group and their operations. Litigation Relating to Billing and Collection Practices. Lawsuits have been filed against various nonprofit health care providers in federal and state courts across the country regarding billing and collection practices relating to the uninsured. The lawsuits are premised on the notion that federal and state laws require nonprofit health care providers to provide certain levels of free or discounted health care to the uninsured. Thus, the plaintiffs in those lawsuits have alleged, among other things, that the defendants violated federal and state law by billing the uninsured at undiscounted rates, that the medical bills the defendants sent to the uninsured are inflated, and that the defendants engaged in unfair debt collection practices. The foregoing are some examples of the challenges and examinations facing nonprofit health care organizations. They are indicative of a greater scrutiny of the billing, collection and other business practices of these organizations, and may indicate an increasingly more difficult operating environment for health care organizations. The challenges and examinations, and any resulting legislation, regulations, judgments, or penalties, could have a material adverse effect on the Obligated Group. Charity Care. Hospitals are permitted to qualify for tax-exempt status under the Code because the provision of health care historically has been treated as a "charitable" enterprise. This treatment arose before most Americans had health insurance, when charitable donations were required to fund the health care provided to the sick and disabled. Some commentators and others have taken the position that, with the onset of employer health insurance and governmental reimbursement programs, there is no longer any justification for special tax treatment for the health care industry, and the availability for tax-exempt status should be eliminated. Management of the Medical Center, on behalf of the Obligated Group, considers the likelihood of such a dramatic change in the law to be remote; nevertheless, federal and state tax authorities are beginning to demand that tax-exempt hospitals justify their tax-exempt status by documenting their charitable care and other community benefits. As further described above under the caption "BONDHOLDERS' RISKS Nonprofit Health Care Environment Litigation Relating to Billing and Collection Practices," charity care issues also serve as the basis of certain claims against major hospital systems throughout the United States on behalf of uninsured patients. The more than sixty (60) lawsuits filed against non-profit hospitals raise a number of claims against the hospital defendants, including claims that the defendants, by accepting tax-exempt status, entered into agreements with the federal, state and local governments promising to provide free or reduced care to all those who need it; the uninsured patients are beneficiaries of those agreements and can bring suit on them; the defendants engaged in illegal and oppressive tactics against the uninsured; the defendants engaged in illegal price discrimination by charging the uninsured rates far in excess of the rates 31

36 charged to such third party payors as Medicare and certain insurers; the defendants violated state consumer fraud statutes; the defendants allowed a portion of their properties to be used by forprofit entities at less than fair value and engaged in other inappropriate transactions with doctors and certain insiders; the defendants transferred monies illegally to their affiliates for other than charitable purposes; and the defendants and the American Hospital Association, another named defendant in many of the lawsuits, conspired with the defendants to charge illegal prices to the uninsured. Challenges to Real Property Tax Exemptions. Recently, the real property tax exemptions afforded to certain nonprofit health care providers by state and local taxing authorities have been challenged on the grounds that health care providers were not engaged in charitable activities. These challenges have been based on a variety of grounds, including allegations of aggressive billing and collection practices and excessive financial margins. While the Medical Center is not aware of any current challenge to the tax exemption afforded to any material real property of the Members of the Obligated Group, there can be no assurance that these types of challenges will not occur in the future. Federal and State Legislation; National Health Care Reform General. A significant portion of the revenues of the Medical Center and Pavilion are derived from Medicare, Medicaid and other third-party payors. For a breakdown of the sources of payment for services provided by the Medical Center and Pavilion, see APPENDIX A hereto. Medicare is a federal program administered by the Centers for Medicare & Medicaid Services ("CMS"), an agency of the United States Department of Health and Human Services ("HHS"), through fiscal intermediaries and carriers. Medicare provides certain health care benefits to beneficiaries who are 65 years of age or older and other classes of individuals, and Medicare Part B covers outpatient services, certain physician services, medical supplies and durable medical equipment. Medicaid is a federal/state medical assistance program administered by the various states. Medical benefits are available under each participating state's Medicaid program, within prescribed limits, to persons meeting certain minimum income or other need requirements. Significant changes have been and may continue to be made in certain of these programs, which changes could have an adverse impact on the financial condition of the Obligated Group Members. In addition, bills have been and may be introduced in the Congress of the United States of America which, if enacted, could adversely affect the operations of the Obligated Group Members by, for example, decreasing payment by third-party payors such as Medicare and Medicaid or limiting the ability of the physicians on the medical staff of the Obligated Group Members to provide services or increase services provided to patients National Health Legislation. In March 2010 Congress enacted major health care legislation, the Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010, and the Health Care and Education Reconciliation Act of 2010, which was signed into law on March 30, 2010 (collectively, the "2010 Health Legislation"). Some of the provisions of the 2010 Health Legislation took effect immediately or within several months of final approval, while others will be phased in over a number of years. The 2010 Health Legislation is extremely 32

37 complex, and as a result additional legislation is likely to be considered and enacted over time. The 2010 Health Legislation will also require the promulgation of substantial regulations, with significant effect on the health care industry. Thus, the health care industry will be subjected to significant new statutory and regulatory requirements and consequently to structural and operational changes and challenges for a substantial period of time, assuming the 2010 Health Legislation survives any further constitutional challenges or is not significantly modified by future legislation. Management of the Medical Center is analyzing the 2010 Health Legislation to assess the effect of the legislation on their current and projected operations, financial performance and financial condition. Management cannot predict with any reasonable degree of certainty or reliability any interim or ultimate effects of the 2010 Health Legislation. A significant component of the 2010 Health Legislation is reformation of the sources and methods by which consumers will pay for health care for themselves and their families and by which employers will procure health insurance for their employees and dependents and, as a consequence, expansion of the base of consumers of health care services covered by some form of third-party insurance. One of the primary drivers of the 2010 Health Legislation is to provide or make available, or subsidize the premium costs of, health care insurance for some of the millions of currently uninsured or underinsured consumers who fall below certain income levels. The 2010 Health Legislation proposes to accomplish that objective through various provisions, including the following: (i) creating active state-based markets (referred to as exchanges) in which individuals and small employers can purchase health care insurance for themselves and their families or their employees and dependents; (ii) providing subsidies for premium costs to individuals and families based upon their income relative to federal poverty levels, (iii) mandating that individual consumers obtain and certain employers provide a minimum level of health care insurance, and providing for penalties or taxes on consumers and employers that do not comply with these mandates; (iv) establishing insurance reforms that expand coverage generally through such provisions as prohibiting the denial of coverage for pre-existing conditions and eliminating lifetime or annual insurance caps; and (v) expanding existing public programs, including Medicaid and the Children's Health Insurance Program, to cover more individuals and families. To the extent any or all of these provisions achieve the intended result, an increase in the utilization of health care services by those who are currently avoiding or rationing their health care can be expected and bad debt expenses may be reduced. The 2010 Health Legislation is highly politicized. Initiatives to repeal it in whole or in part, to delay elements of implementation or funding, and to offer amendments or supplements to modify its provisions have been proposed. Lawsuits were filed in federal courts challenging, among other things, the constitutionality of the mandate under the 2010 Health Legislation requiring individuals to purchase health care insurance. Two of the cases were decided by the United States Supreme Court on June 28, 2012, in which the Court concluded, among other things, that the mandate and the other parts of the 2010 Health Legislation are constitutional, except that the states have the option as to whether or not to expand coverage under their respective Medicaid programs with substantial financial assistance from the federal government. At this time it is unclear what further action, if any, Congress, any future presidential administration or the federal courts may take with respect to the 2010 Health Legislation. In this volatile context, no projections can be made as to the future implementation or content of the 33

38 2010 Health Legislation. Based upon all of the above, it is more difficult for the Medical Center to project future performance than it has been in the past. Some of the specific provisions of the bills that may affect the hospital operations of the Members of the Obligated Group, their financial performance or their financial condition are described below. This listing is not intended to be, nor should be considered by the reader as comprehensive. The 2010 Health Legislation is complex and comprehensive, and includes a myriad of new programs and initiatives and changes to existing programs, policies, practices and laws. With varying effective dates, the annual Medicare market basket updates for many providers, including hospitals, will be reduced, and adjustments to payment for expected productivity gains will be implemented. Commencing in federal fiscal year 2014, the Medicare disproportionate share hospital (DSH) payments will be reduced to account for reductions in the national rate of consumers who do not have health care insurance and are provided uncompensated care. Commencing in federal fiscal year 2014, a states' Medicaid DSH allotment from federal funds will also be reduced in accordance with the health form methodology set forth in the 2010 Health Legislation. Expansion of Medicaid programs to a broader population with incomes up to 133% of federal poverty levels. Commencing in federal fiscal year 2013, Medicare payments that will otherwise be made to hospitals will be reduced by specified percentages to account for excess and "preventable" hospital readmissions. Commencing in federal fiscal year 2015, Medicare payments to certain hospitals for hospital-acquired conditions will be reduced by 1%. Commencing in federal fiscal year 2011 federal payments to states for Medicaid service related to health care-acquired conditions will be prohibited. Commencing in federal fiscal year 2013, a value-based purchasing program will be established under the Medicare program designed to pay hospitals based on performance on quality measures related to common and high cost conditions. With varying effective dates, the 2010 Health Legislation mandates a reduction of waste, fraud and abuse in public programs by allowing provider enrollment screening, enhanced oversight period for new providers and suppliers, and enrollment moratoria in areas identified as being at elevated risk of fraud in all public programs, and by requiring all Medicare and Medicaid program providers and suppliers to establish compliance programs. A database will be developed to capture and share health care provider data across federal health care programs. There are increased penalties for fraud and abuse violations, significant amendments to existing criminal, civil and administrative anti-fraud and abuse statutes, the imposition of many program integrity provisions that will compel updates and enhancements to business operations and compliance policies, and increased funding for anti-fraud activities. The enforcement provisions could greatly increase potential legal exposure of providers. 34

39 Effective for tax years commencing immediately after approval, additional requirements for tax exemption will be imposed upon tax-exempt hospitals, including obligations to conduct a community needs assessment every three years; adopt an implementation strategy to meet those identified needs; adopt and publicize a financial assistance policy; limit charges to patients who qualify for financial assistance to the lowest amount charged to insured patients; and control billing and collection processes. Hospitals are required to include in their annual Form 990 tax returns a report on how the hospital is addressing the needs identified in each community needs assessment, together with a summary of any such needs that are not being addressed, and why. Failure to satisfy all of these conditions may result in the imposition of fines. Establish an Independent Payment Advisory Board to develop proposals commencing in 2015 to improve the quality of care and limit the rate of growth in spending on the Medicare program. Those proposals will be automatically implemented if Congress does not act to invalidate them. Prohibit new or expanded physician ownership of hospitals. The 2010 Health Legislation provides for the implementation of various demonstration programs and pilot projects under both the Medicare and Medicaid programs to test, evaluate, encourage and expand new payment structures and methodologies to reduce health care expenditures while maintaining or improving quality of care, including bundled payments under Medicare and Medicaid, and comparative effectiveness research programs that compare the clinical effectiveness of medical treatments and develop recommendations concerning practice guidelines and coverage determinations. The demonstration projects include an initiative to develop alternatives to current tort litigations for resolving disputes over injuries caused by health care providers or health care organizations. Other provisions encourage the creation of new health care delivery programs, beginning in 2012, such as accountable care organizations, or combinations of provider organizations, that voluntarily meet quality thresholds to share in the cost savings they achieve for the Medicare program. The projects and programs are designed in part to move Medicare away from a fee-for-service payment system. The outcomes of these projects and programs, including their effect on payments to providers and the financial performance of such providers, cannot be predicted. Based on the foregoing, it is more difficult to project future performance than it has been in the past. There are many unresolved issues in the 2010 Health Legislation and it is likely that there will be the continued enactment of additional laws and promulgation of new regulations and guidelines for an indefinite, but lengthy, period of time in the future. Investors are encouraged to review legislative, legal and regulatory developments as they occur and to assess the elements and potential effects of health care reform initiative as it evolves. Federal and State Policies Affecting Health Care Facilities. In recent years, in addition to the 2010 Health Legislation, a number of bills proposing to regulate, control, or alter the method of financing health care costs have been discussed and certain of these bills have been introduced in Congress and various state legislatures, including Florida. There are wide variations among these bills and proposals. 35

40 Legislation is periodically introduced in Congress and in the Florida Legislature which could result in limitations on revenues, reimbursements, costs or charges for health care facilities. At present, no determination can be made concerning whether, or in what form, such legislation could be introduced and enacted into law. Health care facilities may be affected significantly by changes in federal health care policy. These changes may reduce federal payments under Medicaid and Medicare, increase or reduce federal regulation of health facilities and encourage more competition among health care providers. The impact of future cost control programs and future legislation upon the projected financial performance of the Obligated Group cannot be determined at this time. By way of example, in recent years, Congressional Committees and individual members of Congress have conducted investigations and public hearings on issues such as (i) unfair competition between nonprofit and for-profit corporations and the need for changes in the law relating to the taxation of unrelated business income of nonprofit corporations; (ii) hospital billing and collection practices and the prices charged to uninsured patients; (iii) perceived compensation abuses by various nonprofit organizations; and (iv) the contributions provided and the benefits received by hospitals and other health care institutions from being tax-exempt and the need for reform of the laws relating to tax-exempt status. Hospitals and hospital systems have also received requests for information about general operating issues, including charitable activities, patient billings, executive compensation and ventures with for-profit companies. Federal legislation has been introduced which would require hospitals to maintain Medicare and Medicaid provider status and provide certain levels of charity care in order to maintain their taxexempt status. For example, there have been proposals on the charity care standards that nonprofit, charitable hospitals must meet to maintain their federal income tax-exempt status under the Code and legislation mandating nonprofit, charitable hospitals to have an open door policy toward Medicare and Medicaid patients as well as offer, in a nondiscriminatory manner, qualified charity care and community benefits. Excise tax penalties on nonprofit, charitable hospitals that violate these charity care and community benefit requirements could be imposed or their tax-exempt status under the Code could be revoked. The scope and effect of any legislation that may be adopted at the federal or state level with respect to charity care of nonprofit hospitals cannot be predicted. There can be no assurance that future changes in the laws, rules, regulations and policies governing the tax exemption or taxation of unrelated business income would not have an adverse effect on the future operations of the Obligated Group Members, and any such legislation could have the effect of subjecting a portion of the income of the Obligated Group Members to federal or state taxes. In addition, any changes in the law governing the tax-exempt status of the Obligated Group Members or the Series 2013A Bonds that would require an increase in the quantity of charity care provided or reduced rates for the provision of care to certain parties could adversely affect the operating results or financial condition of the Obligated Group Members. Regardless of legislative and judicial actions to date, hospital providers across the country have continued to see a rise in uncompensated care. As noted above, while the 2010 Health Legislation is intended to reduce the number of uninsured and underinsured persons, it is not clear how quickly and effectively that will be accomplished. Moreover, general economic conditions, other governmental policies that result in coverage exclusions under local, state and federal health care programs (including Medicare and Medicaid), and future governmental 36

41 policies that require tax-exempt hospitals to maintain minimum levels of indigent care as a condition to federal income tax exemption or state income or property tax exemption may increase the frequency and severity of uncompensated care. To the effect that uncompensated care continues to be an issue, increases in reimbursement rates from payors of insured claims may not be sufficient to fully offset the increased cost of uncompensated care. Medicare Reimbursement. Medicare is a federal governmental health insurance system under which physicians, hospitals and other health care providers are reimbursed or paid directly for services provided to eligible elderly and disabled persons. In order to achieve and maintain Medicare certification, a health care provider must meet CMS's "Conditions of Participation" on an ongoing basis, as determined by the state in which the provider is located and/or The Joint Commission. Payments under the Medicare program represented 50.2% of the Medical Center's gross patient revenue in the most recent fiscal year. See APPENDIX A hereto. The Medical Center and Pavilion depend significantly on Medicare as a source of revenue. Because of this dependence, changes in the Medicare program may have a material effect on the Members. For example, Medicare program changes resulting from the Balanced Budget Act of 1997, as subsequently amended and modified, have limited increases in Medicare payments that were otherwise provided by law, and/or reduced Medicare payment or reimbursement for certain health care services provided to Medicare beneficiaries. The Balanced Budget Act of 1997 has had and will continue to have a significant negative effect on acute care hospitals and other Medicare providers. Future reductions in Medicare reimbursement, or increases in Medicare reimbursement in amounts less than increases in the costs of providing care, may have a material adverse financial effect on the Obligated Group. A substantial portion of the Medicare revenues of the Medical Center and Pavilion is derived from payments made for services rendered to Medicare beneficiaries under a prospective payment system, or PPS. Under a prospective payment system, the amount paid to the provider for an episode of care is established by federal regulation and is not related to the provider's charges or costs of providing that care. Presently, inpatient and outpatient services, skilled nursing care, and home health care are paid on the basis of a prospective payment system. Under inpatient PPS, fixed payment amounts per inpatient discharge are established based on the patient's assigned diagnosis related group, or DRG. DRGs classify treatments for illnesses according to the estimated intensity of hospital resources necessary to furnish care for each principal diagnosis. All services paid under the PPS for hospital outpatient services are classified into groups called ambulatory payment classifications, or APCs. Services in each APC are similar clinically and in terms of the resources they require. A payment rate is established for each APC. The capital component of care is paid on a fully prospective basis. PPS-exempt hospitals and units (inpatient psychiatric, rehabilitation and long-term hospital services) are currently reimbursed for their reasonable costs, subject to a cost per discharge target. These limits are updated annually by an index generally based upon inflationary increases in costs of providing health care services. From time to time, the factors used in calculating the prospective payments for units of service are modified by CMS, which may reduce revenues for particular services. Additionally, as part of the federal budgetary process, Congress has regularly amended the Medicare law to 37

42 reduce increases in payments that are otherwise scheduled to occur, or to provide for reductions in payments for particular services. These actions could adversely affect the revenues of the Members of the Obligated Group. Additional payments may be made to individual providers. Hospitals that treat a disproportionately large number of low-income patients (Medicaid and Medicare patients eligible to receive supplemental Social Security income) currently receive additional payments in the form of disproportionate share payments. Additional payments are made to hospitals that treat patients who are costlier to treat than the average patient; these additional payments are referred to as "outlier payments." Hospitals are paid for a portion of their direct and indirect medical education costs. These additional payments are also subject to reductions and modifications in otherwise scheduled increases as a result of amendments to relevant statutory provisions. The costs of providing a unit of care may exceed the revenues realized from Medicare for providing that service. Additionally, the aggregate costs to a provider of providing care to Medicare beneficiaries may exceed aggregate Medicare revenues received during the relevant fiscal period. Medicaid Reimbursement. Medicaid is the federally assisted, state administered, medical assistance program authorized under Title XIX of the Social Security Act that provides reimbursement for a portion of the cost of caring for indigent persons who are aged, blind or disabled, or members of families who are eligible for Aid to Families with Dependent Children. The Medicaid program provides payments for medical items and services for any person who is determined to be eligible for Medicaid assistance on the date of service. Federal and State funds support the Medicaid program. Medicaid benefits are available, within prescribed limits, to persons meeting certain minimum income or other need requirements. Payments under the Medicaid program represented 2.25% of the Medical Center's gross patient revenue in the most recent fiscal year. See APPENDIX A hereto. The Florida Medicaid Program is administered by the Agency for Health Care Administration ("AHCA") and is funded by federal and state appropriations. The financial condition of and budgetary factors facing the State of Florida may affect the absolute level of Medicaid revenues. Payments made to health care providers under the Medicaid program are subject to changes as a result of federal or State legislative and administrative actions, including further changes in the methods for calculating payments, the amount of payments that will be made for covered services and the types of services that will be covered under the program. Such changes have occurred in the past and may continue to occur in the future, particularly in response to federal and state budgetary constraints coupled with increased costs for covered services. Hospitals participating in the Medicaid program are subject to numerous requirements and regulations under the program. Failure to remain in compliance with any program requirements may subject the Medicaid provider to civil and/or criminal penalties, including fines and suspension or expulsion from the program, preventing the provider from receiving any funds under the Medicaid program. Noncompliance with Medicaid requirements, and 38

43 suspension or exclusion from the Medicaid program, can also be a basis for mandatory or permissive suspension or exclusion from the Medicare program. Significant changes have been and may be made in the Medicaid program which could have a material adverse impact on the financial condition of the Obligated Group Members. Health care providers have been affected significantly in the last several years by changes to federal and state health care laws and regulations, particularly those pertaining to Medicaid. The purpose of much of this statutory and regulatory activity has been to contain the rate of increase in health care costs, particularly costs paid under the Medicaid program. Diverse and complex mechanisms to limit the amount of money paid to health care providers under the Medicaid program have been enacted, and it is possible that such limitations may have a material adverse effect on the operations or financial condition of the Obligated Group Members. Florida Indigent Assistance. Florida's Public Medical Assistance Act (the "Assistance Act") provides a mechanism for the funding of health care services to indigent persons. The Assistance Act imposes upon each hospital in Florida an assessment in an amount equal to one and one-half percent (1.5%) of each hospital's annual net operating revenue for inpatient services and one percent (1%) of the annual net operating revenue for outpatient services each fiscal year, with the exception of outpatient radiation therapy services. AHCA determines such revenues based on a hospital's actual experience reported to AHCA and certifies the amount of the assessment for each hospital within six (6) months after the end of each hospital fiscal year. The assessment is payable to and collected by AHCA in equal quarterly amounts, on or before the first day of each calendar quarter beginning with the first full calendar quarter that occurs after AHCA certifies the amount of assessment for each hospital. All moneys collected pursuant to the Assistance Act are to be deposited into the Public Medical Assistance Trust Fund. AHCA may impose administrative fines for the failure of any hospital to timely pay its quarterly assessment. Purchasers, successors or assignees of a facility, which are subject to AHCA's jurisdiction, are liable for any assessments, fines or penalties incurred by a facility or its employees, regardless of when it was identified. The State of Florida Long-Range Financial Outlook Fiscal Year through Fall 2012 Report projects that Medicaid program expenditures will increase by fifteen and five-tenths percent (15.5%) over that period due to the continuing economic crisis and the requirements under the 2010 Health Care Legislation. Budget deficits for the State of Florida and the United States may lead to changes to the Medicaid program and such changes may have a material adverse effect on the operations or financial condition of the Obligated Group Members. Medicare/Medicaid Conditions of Participation. Certain health care facilities must comply with standards called "Conditions of Participation" in order to be eligible for Medicare and Medicaid reimbursement. Under the Medicare rules, hospitals accredited to The Joint Commission ("TJC") are deemed to meet most of the Conditions of Participation ("Deemed Status"). However, CMS may request that the state agency responsible for licensing hospitals, on behalf of CMS, conduct a "sample validation survey" of a hospital to determine whether it is complying with the Medicare or Medicaid Conditions of Participation. Failure to maintain TJC accreditation or to otherwise comply with the Conditions of Participation could materially adversely affect the revenues of the Medical Center. 39

44 Billing Practices. The United States Department of Justice, the Federal Bureau of Investigation and the Office of the Inspector General of HHS have been conducting investigations and audits of the billing practices of many health care providers. The Obligated Group Members may be required to undergo such audits by one or more of these agencies and may be required to make payments to resolve any such audits. It is possible that any such payments may be substantial and could have a material adverse effect on the operations or condition, financial or otherwise, of the Obligated Group Members. In addition, the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") also added provisions that outlaw certain types of manipulative Medicare billing practices. These include improperly coding (for billing purposes) services rendered in order to claim a higher level of reimbursement and billing for the provision of services or items that were not medically necessary. HIPAA also created two new crimes that are based on the traditional crimes of fraud and theft but are applied specifically to health benefit programs. This law increases the legal risk of provider billing and increases the risk that a Medicare provider will be the subject of a fraud investigation. Audits and Withholds. Medicare and Medicaid participating hospitals and nursing homes are subject to audits and retroactive audit adjustments for Medicare payments. Any such adjustments could be in excess of reserves for such purpose, if any, maintained by the Medical Center or the Pavilion, and such excesses could be substantial. Medicare and Medicaid regulations also provide for withholding Medicare and Medicaid payment in certain circumstances, and such withholds could have a substantial adverse effect on the ability of the Obligated Group Members to make payments on their obligations or on their overall financial condition. There is no assurance that a significant payment may not be withheld from an Obligated Group Member in the future. RAC Audits. In accordance with the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ("MMA") and the Tax Relief and Health Care Act of 2006 (the "2006 Tax Act"), CMS has designated the use of recovery audit contractors ("RAC") to search for improper Medicare payments in Arizona, Florida, California, Massachusetts, New York and South Carolina. The CMS initiative originally was part of a demonstration program that expired in 2008, but the provisions of the 2006 Tax Act made the RAC program permanent and require CMS to expand the program to all 50 states which occurred July 1, CMS has selected the RAC contractor for the different regions, and audit activity has commenced. This permanent RAC program began with claims paid beginning October 1, Management cannot anticipate the actual amount or volume of its past Medicare claims that will be reviewed under the RAC program or what the results of any such audits may be. Referral Restrictions. In addition to the foregoing Medicare and Medicaid reimbursement limitations, other aspects of the Medicare and Medicaid program may affect the Obligated Group. In 1977, Congress adopted the Medicare-Medicaid Anti-Fraud and Abuse Amendments of 1977 (as amended, the "Anti-Fraud and Abuse Law"), which have been strengthened by subsequent amendments and the creation of the Office of Inspector General ("OIG") to enforce compliance with the statute. HIPAA also contains provisions for enhanced enforcement, increases to the scope of the Anti-Fraud and Abuse Law, additional sanctions for violations of the laws and other measures designed to protect the integrity of federal health care 40

45 programs. The laws provide for civil monetary and criminal penalties and exclusion from the Medicare/Medicaid programs for knowing and willful solicitation, receipt, offer or payment of remuneration directly or indirectly in return for or to induce the referral of Medicare or Medicaid business. Because the language of the Anti-Fraud and Abuse Law and similar applicable anti-fraud and abuse statutes is very broad, these statutes potentially apply to many ordinary business arrangements pursuant to which remuneration passes between health care providers, physicians, suppliers and others who are in a position to make referrals to each other. There can be no assurance that additional challenges or investigations will not occur in the future, or that existing arrangements will not require restructuring or elimination in order to comply with applicable laws of this nature, particularly if the trend toward greater regulation of relationships between health care providers continues. In addition, other types of common business activities of hospitals and other health care providers, such as establishing reserves for potential adjustments to payments from third-party payors, are being viewed as conduct subject to civil and criminal penalties. Arrangements with physicians are particularly suspect, with increased emphasis on activities often engaged in by hospitals, including the Medical Center, such as joint ventures with physicians, physician recruitment and retention programs, physician referral services, hospital-physician service or management contracts, loans by hospitals to physicians, space or equipment rentals and service or vendor relationships. While management of the Medical Center is not aware of any investigations pending or threatened against it or affiliates, there is no assurance that additional investigations might not ensue, with the potential for sanctions that could have a material adverse effect on the operations or financial condition of the Medical Center. Florida Licensure. The Medical Center is required to be licensed by AHCA. Such licensure requires compliance with an array of operational, physical plant and other statutory and regulatory requirements. In addition, Florida's hospital licensing law includes a requirement for treatment of persons with emergency medical conditions which is similar to that contained in the Medicare law. While the Medical Center believes that it is in material compliance with licensure requirements, there can be no assurance that AHCA will not challenge the Medical Center's past, current or future activities under these laws and regulations, or that it and the other Obligated Group Members will be able to comply on a cost effective basis with licensure requirements that may be enacted or adopted in the future. Florida Patient Self-Referral Act. In 1992, the Florida legislature enacted the Patient Self-Referral Act. This law contains provisions that are similar to those of the Anti-Kickback Statute, the Anti-Fraud and Abuse Law and the Stark Law described hereinafter. In addition, in 1996, the Florida Legislature adopted a patient brokering law that contains certain expansions of the prohibitions. Unlike the federal laws, the Florida laws apply to all patients regardless of payer class. Although the Medical Center believes that it is in compliance with these laws and regulations, there can be no assurance that federal or state regulatory authorities will not challenge past, current or future activities under these laws, and there can be no assurance that it and the other Obligated Group Members will not be found to have violated these laws, and if so, whether any enforcement activity would have a material adverse effect on the operations and financial condition of the Obligated Group Members. 41

46 Health Plans and Managed Care. Most private health insurance coverage is provided by various types of "managed care" plans, including health maintenance organizations, or HMOs, and preferred provider organizations, or PPOs, that generally use discounts and other economic incentives to reduce or limit the cost and utilization of health care services. Medicare and Medicaid also purchase hospital care using managed care options. Payments to hospitals from managed care plans typically are lower than those received from traditional indemnity or commercial insurers. Defined broadly, for the fiscal year ended September 30, 2012, managed care payments constituted approximately 31% of gross patient service revenues of the Obligated Group. See APPENDIX A hereto. Many HMOs and PPOs currently pay providers on a negotiated fee-for-service basis or, for institutional care, on a fixed rate per day of care, which, in each case, usually is discounted from the typical charges for the care provided. As a result, the discounts offered to HMOs and PPOs may result in payment to a provider that is less than its actual cost. Additionally, the volume of patients directed to a provider may vary significantly from projections, and/or changes in the utilization may be dramatic and unexpected, thus jeopardizing the provider's ability to manage this component of revenue and cost. Some HMOs employ a "capitation" payment method under which hospitals are paid a predetermined periodic rate for each enrollee in the HMO who is "assigned" or otherwise directed to receive care at a particular hospital. The hospital may assume financial risk for the cost and scope of institutional care given. If payment is insufficient to meet the hospital's actual costs of care, or if utilization by such enrollees materially exceeds projections, the financial condition of the hospital could erode rapidly and significantly. Often, HMO contracts are enforceable for a stated term, regardless of hospital losses and may require hospitals to care for enrollees for a certain time period, regardless of whether the HMO is able to pay the hospital. Hospitals from time to time have disputes with managed care payors concerning payment and contract interpretation issues. Failure to maintain contracts could have the effect of reducing the Obligated Group Members' market share and net patient services revenues. Conversely, participation may result in lower net income if participating hospitals are unable to adequately contain their costs. Thus, managed care poses one of the most significant business risks (and opportunities) the hospitals face. Regulatory Environment "Fraud" and "False Claims." Health care "fraud and abuse" laws have been enacted at the federal and state levels to broadly regulate the provision of services to government program beneficiaries and the methods and requirements for submitting claims for services rendered to the beneficiaries. Under these laws, hospitals and others can be penalized for a wide variety of conduct, including submitting claims for services that are not provided, billing in a manner that does not comply with government requirements or including inaccurate billing information, billing for services deemed to be medically unnecessary, or billings accompanied by an illegal inducement to utilize or refrain from utilizing a service or product. 42

47 Federal and state governments have a broad range of criminal, civil and administrative sanctions available to penalize and remediate health care fraud, including the exclusion of a hospital from participation in the Medicare/Medicaid programs, civil monetary penalties, and suspension of Medicare/Medicaid payments. Fraud and abuse cases may be prosecuted by one or more government entities and/or private individuals, and more than one of the available sanctions may be, and often are, imposed for each violation. Laws governing fraud and abuse may apply to a hospital and to nearly all individuals and entities with which a hospital does business. Fraud investigations, settlements, prosecutions and related publicity can have a catastrophic effect on hospitals. See "Enforcement Activity" below. Major elements of these often highly technical laws and regulations are generally summarized below. False Claims Act. The False Claims Act, or FCA makes it illegal to submit or present a false, fictitious or fraudulent claim to the federal government, and may include claims that are simply erroneous. FCA investigations and cases have become common in the health care field and may cover a range of activity from intentionally inflated billings, to highly technical billing infractions, to allegations of inadequate care. Violation or alleged violation of the FCA most often results in settlements that require multi-million dollar payments and compliance agreements. The FCA also permits individuals to initiate civil actions on behalf of the government in lawsuits called "qui tam" actions. Qui tam plaintiffs, or "whistleblowers," can share in the damages recovered by the government or recover independently if the government does not participate. The FCA has become one of the government's primary weapons against health care fraud. FCA violations or alleged violations could lead to settlements, fines, exclusion or reputation damage that could have a material adverse impact on a hospital. Anti-Kickback Statute. The federal "Anti-Kickback Statute" is a criminal statute that prohibits anyone from soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in return for a referral (or to induce a referral) for any item or service that is paid by any federal or state health care program. The Anti- Kickback Statute applies to many common health care transactions between persons and entities with which a hospital does business, including hospital-physician joint ventures, medical director agreements, physician recruitment agreements, physician office leases and other transactions. The 2010 Health Reform Legislation reduced the intent standard required for successful prosecution of Anti-Kickback Statute violations. That change is expected to increase the number of enforcement actions. Violation or alleged violation of the Anti-Kickback Statute most often results in settlements that require multi-million dollar payments and compliance agreements. The Anti- Kickback Statute can be prosecuted either criminally or civilly. Violation is a felony, subject to a fine of up to $25,000 for each act (which may be each item or each bill sent to a federal program), imprisonment for up to five years and/or exclusion from the Medicare and Medicaid programs. In addition, civil monetary penalties of $50,000 per item or service in noncompliance (which may be each item or each bill sent to a federal program) plus damages of up to three times the amount paid may be imposed. 43

48 Stark Referral Law. The federal "Stark" statute prohibits the referral of Medicare and Medicaid patients for certain designated health services (including inpatient and outpatient hospital services, clinical laboratory services, and radiation and other imaging services) to entities with which the referring physician (or an immediate family member of the referring physician) has a financial relationship. It also prohibits a hospital furnishing the designated services from billing Medicare, or any other payor or individual, for services performed pursuant to a prohibited referral. The government does not need to prove that the entity knew that the referral was prohibited to establish a Stark violation. If certain technical requirements are met, many ordinary business practices and economically desirable arrangements between hospitals and physicians arguably constitute "financial relationships" within the meaning of the Stark statute, thus triggering the prohibition on referrals and billing. Most providers of designated health services with physician relationships have some exposure to liability under the Stark statute. Medicare may deny payment for all services related to a prohibited referral and a hospital that has billed for prohibited services may be obligated to refund the amounts collected from the Medicare program. For example, if an office lease between a hospital and a large group of heart surgeons is found to violate Stark, the hospital could be obligated to repay CMS for the payments received from Medicare for all of the heart surgeries performed by all of the physicians in the group for the duration of the lease; a potentially significant amount. The government may also seek substantial civil monetary penalties, and in some cases, a hospital may be liable for fines up to three times the amount of any monetary penalty, and/or be excluded from the Medicare and Medicaid programs. Although Stark does not have an extensive enforcement history, potential repayments to CMS, settlements, fines or exclusion for a Stark violation or alleged violation could have a material adverse impact on a Member of the Obligated Group. Exclusions from Medicare or Medicaid Participation. The government may exclude from Medicare/Medicaid program participation a hospital that is convicted of a criminal offense relating to the delivery of any item or service reimbursed under Medicare or a state health care program, any criminal offense relating to patient neglect or abuse in connection with the delivery of health care, fraud against any federal, state or locally financed health care program or an offense relating to the illegal manufacture, distribution, prescription or dispensing of a controlled substance. The government also may exclude individuals or entities under certain other circumstances, such as an unrelated conviction of fraud or other financial misconduct relating either to the delivery of health care in general or to participation in a federal, state or local government program. Exclusion from the Medicare/Medicaid program means that a hospital would be decertified and no program payments can be made. Any hospital exclusion could be a materially adverse event, even within a large hospital system. Administrative Enforcement. Administrative regulations may require less proof of a violation than do criminal laws and thus, health care providers may have a higher risk of imposition of monetary penalties as a result of an administrative enforcement action. Compliance with Conditions of Participation. CMS, in its role of monitoring participating providers' compliance with conditions of participation in the Medicare program, may determine that a provider is not in compliance with its conditions of participation. In that 44

49 event, a notice of termination of participation may be issued or other sanctions potentially could be imposed. Enforcement Activity. Enforcement activity against health care providers has increased and enforcement authorities have adopted aggressive approaches. In the current regulatory climate, it is anticipated that many hospitals and physician groups will be subject to an audit, investigation or other enforcement action regarding the health care fraud laws mentioned above. Enforcement authorities are often in a position to compel settlements by providers charged with or being investigated for false claims violations by withholding or threatening to withhold Medicare, Medicaid and/or similar payments and/or by instituting criminal action. In addition, the cost of defending such an action, the time and management attention consumed, and the facts of a case may dictate settlement. Therefore, regardless of the merits of a particular case, a hospital could experience materially adverse settlement costs, as well as materially adverse costs associated with implementation of any settlement agreement. Prolonged and publicized investigations could be damaging to the reputation and business of a hospital, regardless of outcome. Certain acts or transactions may result in violation or alleged violation of a number of the federal health care fraud laws described above and therefore, penalties or settlement amounts often are compounded. Generally these risks are not covered by insurance. Enforcement actions may involve multiple hospitals in a health system, as the government often extends enforcement actions regarding health care fraud to other hospitals in the same organization. Therefore, Medicare fraud related risks identified as being materially adverse as to a hospital could have materially adverse consequences to a health system taken as a whole. Review of Outlier Payments. CMS is reviewing health care providers that are receiving large proportions of their Medicare revenues from outlier payments. Health care providers found to have obtained inappropriately high outlier payments will be subject to further investigation by the CMS Program Integrity Unit and potentially the Office of Inspector General. Management of the Obligated Group Members does not believe that any potential review of the Obligated Group Members would materially adversely affect any of the Obligated Group Member's results of operations. HIPAA. HIPAA protects the privacy and security of individually identifiable health information. Violations of HIPAA can result in civil monetary penalties and criminal penalties. Such penalties range from $100 to a maximum $50,000 per violation and/or imprisonment, depending on the violator's degree of intent and the extent of the harm resulting from the violation. The maximum monetary penalty for violations of the same HIPAA provision in a calendar year cannot exceed $1,500,000. Provisions of the Stimulus Act amend HIPAA by (i) granting enforcement authority of HIPAA to state attorneys general; (ii) extending the reach of HIPAA beyond "covered entities," (iii) imposing a breach notification requirement on HIPAA covered entities, (iii) limiting certain uses and disclosures of individually identifiable health information, (iv) restricting covered entities' marketing communications, and (v) permitting imposition of civil monetary penalties for a HIPAA violation even if an entity did not know and would not, by exercising reasonable diligence, have known of a violation. 45

50 Security Breaches and Unauthorized Releases of Personal Information. Federal, state and local authorities are increasingly focused on the importance of protecting the confidentiality of individuals' personal information, including patient health information. In addition to the data breach disclosure requirements of HIPAA, many states have enacted laws requiring businesses to notify individuals of security breaches that result in the unauthorized release of personal information. In some states, notification requirements may be triggered even where information has not been used or disclosed, but rather has been inappropriately accessed. State consumer protection laws may also provide the basis for legal action for privacy and security breaches and frequently, unlike HIPAA, authorize a private right of action. In particular, the public nature of security breaches exposes health organizations to increased risk of individual or class action lawsuits from patients or other affected persons, in addition to government enforcement. Failure to comply with restrictions on patient privacy or to maintain robust information security safeguards, including taking steps to ensure that contractors who have access to sensitive patient information maintain the confidentiality of such information, could consequently damage a health care provider's reputation and materially adversely affect business operations. EMTALA. The Emergency Medical Treatment and Active Labor Act, or EMTALA, is a federal civil statute that requires hospitals to treat or conduct a medical screening for emergency conditions and to stabilize a patient's emergency medical condition before releasing, discharging or transferring the patient. A hospital that violates EMTALA is subject to civil penalties of up to $50,000 per offense and exclusion from Medicare and Medicaid programs. In addition, the hospital may be liable for any claim by an individual who has suffered harm as a result of a violation. Licensing, Surveys, Investigations and Audits. Health facilities are subject to numerous legal, regulatory, professional and private licensing, certification and accreditation requirements. These include, but are not limited to, requirements of state licensing agencies and the TJC. Renewal and continuation of certain of these licenses, certifications and accreditations are based on inspections or other reviews generally conducted in the normal course of business of health facilities. Loss of, or limitations imposed on, hospital licenses could reduce hospital utilization or revenues, or a hospital's ability to operate all or a portion of its facilities. Environmental Laws and Regulations. Hospitals are subject to a wide variety of federal, state and local environmental and occupational health and safety laws and regulations. These include but are not limited to: air and water quality control requirements; waste management requirements; specific regulatory requirements applicable to asbestos and radioactive substances; requirements for providing notice to employees and members of the public about hazardous materials handled by or located at the hospital; and requirements for training employees in the proper handling and management of hazardous materials and wastes. Hospitals may be subject to requirements related to investigating and remedying hazardous substances located on their property, including such substances that may have migrated off the property. Typical hospital operations include the handling, use, storage, transportation, disposal and/or discharge of hazardous, infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants and contaminants. As such, hospital operations are particularly susceptible to the practical, financial and legal risks associated with the environmental laws and regulations. Such risks may result in damage to individuals, property or 46

51 the environment; may interrupt operations and/or increase their cost; may result in legal liability, damages, injunctions or fines; may result in investigations, administrative proceedings, civil litigation, criminal prosecution, penalties or other governmental agency actions; and may not be covered by insurance. Business Relationships and Other Business Matters Hospital Pricing. Inflation in hospital costs may evoke action by legislatures, payors or consumers. It is possible that legislative action at the state or national level may be taken with regard to the pricing of health care services. Major purchasers of hospital services could also take action to restrain hospital charges or charge increases. The United States House of Representative Energy and Commerce Committee conducted a nationwide investigation of hospital billing practices and prices charged to uninsured patients. As a result of increased public scrutiny, it is also possible that the pricing strategies of hospitals may be perceived negatively by consumers and hospitals may be forced to reduce fees for their services. Decreased utilization could result and hospitals' revenues may be negatively impacted. Integrated Physician Groups. Hospitals and hospital systems often own, control or have affiliations with relatively large physician groups. Generally, the sponsoring hospital or health system will be the primary capital and funding source for such alliances and may have an ongoing financial commitment to provide growth capital and support operating deficits. These types of alliances are generally designed to respond to trends in the delivery of medicine to better integrate hospital and physician care, to increase physician availability to the community and/or to enhance the managed care capability of the affiliated hospitals and physicians. These goals may not be achieved, however, and an unsuccessful alliance may be costly and counterproductive to all of the above-stated goals. Integrated delivery systems carry with them the potential for legal or regulatory risks in varying degrees. The ability of hospitals or health systems to conduct integrated physician operations may be altered or eliminated in the future by legal or regulatory interpretation or changes, or by health care fraud enforcement. In addition, participating physicians may seek their independence for a variety of reasons, thus putting the hospital or health system's investment at risk, and potentially reducing its managed care leverage and/or overall utilization. Indigent Care, Underinsured and Uninsured Patients. Tax-exempt hospitals often treat large numbers of indigent patients who are unable to pay in full for their medical care. Typically, urban, inner-city hospitals may treat significant numbers of indigents. These hospitals may be susceptible to economic and political changes that could increase the number of indigents or their responsibility for caring for this population. General economic conditions that affect the number of employed individuals who have health coverage affects the ability of patients to pay for their care. Similarly, changes in governmental policy, which may result in coverage exclusions under local, state and federal health care programs (including Medicare and Medicaid) may increase the frequency and severity of indigent treatment by such hospitals and other providers. It also is possible that future legislation could require that tax-exempt hospitals and other providers maintain minimum levels of indigent care as a condition to federal income tax exemption or exemption from certain state or local taxes. 47

52 Physician Medical Staff. The primary relationship between a hospital and physicians who practice in it is through the hospital's organized medical staff. Medical staff bylaws, rules and policies establish the criteria and procedures by which a physician may have his or her privileges or membership curtailed, denied or revoked. Physicians who are denied medical staff membership or certain clinical privileges or who have such membership or privileges curtailed or revoked often file legal actions against hospitals and medical staffs. Such actions may include a wide variety of claims, some of which could result in substantial uninsured damages to a hospital. In addition, failure of the hospital governing body to adequately oversee the conduct of its medical staff may result in hospital liability to third parties. Competition Among Health Care Providers. Increased competition from a wide variety of sources, including other specialty hospitals, hospitals and health care systems, inpatient and outpatient health care facilities, long-term care and skilled nursing services facilities, clinics, physicians and others, may adversely affect the utilization and/or revenues of hospitals. Existing and potential competitors may not be subject to various restrictions applicable to hospitals, and competition, in the future, may arise from new sources not currently anticipated or prevalent. The Medical Center is currently challenging a certificate of need application filed by Tenet Healthcare Corporation to build a new 80-bed community hospital approximately four miles from the Hospital. See APPENDIX A - "THE OBLIGATED GROUP - Proposed Tenet Hospital". Also, competition could come from other forms of health care delivery that could offer low priced services to the same population. These services could be substituted for some of the revenue generating services presently offered by certain of the Obligated Group Members. Overall, the effects of such increased competition on the revenues of the Obligated Group Members, including pressures for increased discounts and contracts with alternative delivery systems, cannot be predicted. It is possible that increased competition could adversely affect the operations and financial condition of the Obligated Group Members. Additionally, scientific and technological advances, new procedures, drugs and appliances, preventive medicine and outpatient health care delivery may reduce utilization and revenues of hospitals in the future or otherwise lead the way to new avenues of competition. In some cases, hospital investment in facilities and equipment for capital-intensive services may be lost as a result of rapid changes in diagnosis, treatment or clinical practice brought about by new technology or new pharmacology. Antitrust. While enforcement of the antitrust laws against hospitals has been less intense in recent years, antitrust liability may arise in a wide variety of circumstances, including medical staff privilege disputes, payor contracting, physician relations, joint ventures, merger, affiliation and acquisition activities, certain pricing or salary setting activities, as well as other areas of activity. The application of the federal and state antitrust laws to health care is evolving, and therefore not always clear. Currently, the most common areas of potential liability are joint action among providers with respect to payor contracting and medical staff credentialing disputes. Violation of the antitrust laws could result in criminal and/or civil enforcement proceedings by federal and state agencies, as well as actions by private litigants. In certain 48

53 actions, private litigants may be entitled to treble damages, and in others, governmental entities may be able to assess substantial monetary fines. Labor Relations and Collective Bargaining. Hospitals are large employers with a wide diversity of employees. Increasingly, employees of hospitals are becoming unionized, and many hospitals have collective bargaining agreements with one or more labor organizations. Employees subject to collective bargaining agreements may include essential nursing and technical personnel, as well as food service, maintenance and other trade personnel. Renegotiation of such agreements upon expiration may result in significant cost increases to hospitals. Employee strikes or other adverse labor actions may have an adverse impact on operations, revenue and hospital reputation. Health Care Worker Classification. Health care providers, like all businesses, are required to withhold income taxes from amounts paid to employees. If the employer fails to withhold the tax, the employer becomes liable for payment of the tax imposed on the employee. On the other hand, businesses are not required to withhold income taxes from amounts paid to a worker classified as an independent contractor. The IRS has established criteria for determining whether a worker is an employee or an independent contractor for tax purposes. If the IRS were to reclassify a significant number of hospital independent contractors (e.g., physician medical directors) as employees, back taxes and penalties could be material. Staffing. In recent years, the health care industry has suffered from a scarcity of nursing personnel, respiratory therapists, pharmacists and other trained health care technicians. A significant factor underlying this trend includes a decrease in the number of persons entering such professions. This is expected to intensify in the future, aggravating the general shortage and increasing the likelihood of hospital-specific shortages. Competition for employees, coupled with increased recruiting and retention costs will increase hospital operating costs, possibly significantly, and growth may be constrained. This trend could have a material adverse impact on hospitals. Professional Liability Claims and General Liability Insurance. In recent years, the number of professional and general liability suits and the dollar amounts of damage recoveries have increased in health care nationwide, resulting in substantial increases in malpractice insurance premiums, higher deductibles and generally less coverage. Professional liability and other actions alleging wrongful conduct and seeking punitive damages are often filed against health care providers. Insurance does not provide coverage for judgments for punitive damages. Litigation also arises from the corporate and business activities of hospitals, from a hospital's status as an employer or as a result of medical staff or provider network peer review or the denial of medical staff or provider network privileges. As with professional liability, many of these risks are covered by insurance, but some are not. For example, some antitrust claims or business disputes are not covered by insurance or other sources and may, in whole or in part, be a liability of an Obligated Group Member if determined or settled adversely. There is no assurance that hospitals will be able to maintain coverage amounts currently in place in the future, that the coverage will be sufficient to cover malpractice judgments 49

54 rendered against a hospital or that such coverage will be available at a reasonable cost in the future. Private Health Plans and Insurers Private insurance companies and other third-party payers are permitted to contract selectively with hospitals either on an "exclusive" or a "preferred" provider basis. Subscribers to a preferred provider plan are given a financial incentive to use those hospitals that have contracted with the plan. Under an exclusive provider plan, private payers would limit policy coverage to services provided by selected providers. Thus, with this contracting authority, private payers could insist upon paying selected hospitals at a rate lower than standard charges or could direct patients away from certain hospitals. Often, such contracts are enforceable for a stated term, regardless of provider losses. Further, certain contracts may contain the requirement that the hospital care for the insurance plan's enrollees for a certain period of time regardless of whether the plan has funds to make payments to the hospital. The Medical Center has contracted with several third-party payors to provide services under such contracts, but there is no assurance that the Medical Center will retain such contracts in the future or obtain other contracts of like kind. Failure to retain or obtain such contracts may adversely affect the future financial conditions of the Medical Center and the other Obligated Group Members. Conversely, participation with third-parties payors may maintain or increase a hospital's patient base, but, if the payment arrangements under such third-party contracts result in payment at less than actual cost, such participation may adversely affect the future financial conditions of the Members of the Obligated Group. Recent efforts by third-party payors have resulted in tiered pricing structures for certain managed care products under which an insured may be subjected to increased co-pays or deductibles depending on whether a particular hospital is classified by the payor as a high-priced or low-priced provider. Management is not aware of any such pricing structures by third-party payors in Florida at this time and therefore the effect of the implementation of such structures upon the Medical Center and future Members of the Obligated Group cannot be determined. Health Plan Financial Pressure and Insolvency Over the last several years, a number of health plans have become insolvent or experienced financial pressure or cash flow issues. Such plans range in size from smaller local provider-based plans to some of the largest plans in the United States. These plans include traditional indemnity insurers, as well as health maintenance organizations and preferred provider organizations. Health plans that experience financial pressure may delay payments to providers, withhold pay entirely, or utilize a claims payment methodology that systematically reduces compensation on a per claim basis. Health plans that become insolvent may seek either federal bankruptcy or state insurance insolvency protection. Such bankruptcy or insurance insolvency protection may require that providers repay certain claims to the health plan, or result in certain claims becoming uncollectible. It is not possible at this time to predict the future of the managed care industry in general or of specific third-party payors, or to predict what impact the state of the financial health of such organizations might have on the Medical Center or other Members of the Obligated Group. 50

55 Tax-Exempt Status and Other Tax Matters Maintenance of the Tax-Exempt Status. The maintenance by the Members of the Obligated Group of their status as organizations described in Section 501(c)(3) of the Internal Revenue Code is contingent upon continued compliance with general rules promulgated in the Code and related regulations regarding the organization and operation of tax-exempt entities, including their operation for charitable and educational purposes and their avoidance of transactions that may cause their assets to inure to the benefit of private individuals. Failure to comply with such legal requirements may cause such organizations to lose their Section 501(c)(3) tax-exempt status. Loss of that status could cause interest on the Series 2013A Bonds to become subject to federal income taxation, potentially retroactive to the date of issuance if loss of exemption is retroactive. The 2013A Bond Indenture does not contain provisions for an increase in the interest rates borne by the Series 2013A Bonds should such Series 2013A Bonds be declared taxable or for mandatory redemption of the Series 2013A Bonds in such event. Loss of tax-exempt status by a Member of the Obligated Group also would subject such entity to taxes that would adversely affect its revenues and which may be substantial. For these reasons, loss of tax-exempt status of any Obligated Group Member could have material adverse consequences on the financial condition of the Obligated Group as a whole. In recent years, the IRS has devoted more resources to auditing federally tax-exempt organizations, primarily large tax-exempt health care systems (and universities). Further, the IRS has announced that it intends to closely scrutinize transactions between non-profit corporations and for profit entities, and in particular has issued audit guidelines for tax-exempt hospitals. Although specific activities of hospitals, such as medical office building leases and compensation arrangements and other contracts with physicians, have been the subject of interpretations by the IRS in the form of private letter rulings, many activities have not been addressed in any official opinion, interpretation or policy of the IRS. Because the Medical Center conducts many operations involving private parties, there can be no assurances that certain of its transactions would not be challenged by the IRS. For example, to the extent Members of the Obligated Group incur losses from the operation of physician practices, such losses are likely to be closely scrutinized by the IRS to ensure that there is no prohibited inurement or private benefit to those physicians. The IRS has taken the position that hospitals which are in violation of the Anti-Fraud and Abuse Law (or other laws) may also be subject to revocation of their tax-exempt status, perhaps retroactively to the date of the violative conduct. As a result, tax-exempt hospitals, which have, and will continue to have, extensive transactions with physicians, are subject to an increased degree of scrutiny and perhaps enforcement by the IRS. Although management of the Medical Center believes that the activities of the Obligated Group are in compliance with presently applicable standards for qualification as tax-exempt organizations, no assurance can be given that such entities will continue to comply with all applicable standards, especially if such standards are made more restrictive in the future. The IRS also has indicated that it intends to concentrate on the taxable subsidiary activities and unrelated trade or business income producing activities of health care systems such as the Medical Center. The IRS will require significantly more information to be filed annually by tax-exempt organizations which information will assist the efforts of the IRS to more closely 51

56 monitor the activities of tax exempt organizations. In addition, this information will be made available to Congress to form the basis for possible future legislation in this area. If the IRS were to find that the Medical Center or other Member of the Obligated Group has participated in activities in violation of certain regulations or rulings, the tax-exempt status of such entity could be in jeopardy. Although the IRS has not frequently revoked the 501(c)(3) taxexempt status of nonprofit health care corporations, it could do so in the future. Loss of taxexempt status by the Medical Center or, possibly, another Member of the Obligated Group, would result in loss of tax exemption of the Series 2013A Bonds and of other tax-exempt debt of the Obligated Group and defaults in covenants regarding the Series 2013A Bonds and other related tax-exempt debt likely would be triggered. Loss of tax-exempt status also could result in substantial tax liabilities on income of the Obligated Group. In certain cases, the IRS has imposed substantial monetary penalties and future charity care or public benefit obligations on tax-exempt hospitals in lieu of revoking their tax-exempt status, as well as requiring that certain transactions be altered, terminated or avoided in the future and/or requiring governance or management changes. These penalties and obligations are typically imposed on the tax-exempt hospital pursuant to a "closing agreement" with respect to the hospital's alleged violation of Section 501(c)(3) exemption requirements. Given the wide range of complex transactions entered into by the Members of the Obligated Group and uncertainty regarding how tax-exemption requirements may be applied by the IRS, Members of the Obligated Group are, and will be, at risk for incurring monetary and other liabilities imposed by the IRS through this "closing agreement" or similar process. Bills have been introduced in Congress that would require a tax-exempt hospital to provide a certain amount of charity care and care to Medicare and Medicaid patients in order to maintain its tax-exempt status and avoid the imposition of an excise tax. Other legislation would have conditioned a hospital's tax-exempt status on the delivery of adequate levels of charity care. Congress has not enacted such bills. However, there can be no assurance that similar legislative proposals or judicial actions will not be adopted in the future. State and Local Tax Exemption. State, county and local taxing authorities undertake audits and reviews of the operations of tax-exempt health care providers with respect to their real property tax exemptions. In some cases, particularly where authorities are dissatisfied with the amount of services provided to indigents, the real property tax-exempt status of the health care providers has been questioned. The majority of the real property of the Obligated Group is currently treated as exempt from real property taxation. Although the real property tax exemption accorded the Members of the Obligated Group has not, to the knowledge of management of the Medical Center, been under challenge or investigation, an audit could lead to a challenge that could adversely affect the real property tax exemptions accorded the Members of the Obligated Group. It is not possible to predict the scope or effect of future legislative or regulatory actions with respect to taxation of nonprofit corporations. There can be no assurance that future changes in the laws and regulations of state or local governments will not materially adversely affect the financial condition of the Obligated Group by requiring payment of income, local property or other taxes. 52

57 Maintenance of Tax-Exempt Status of Interest on the Series 2013A Bonds. The Code imposes a number of requirements that must be satisfied for interest on state and local obligations, such as the Series 2013A Bonds, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of bond proceeds, limitations on the investment earnings of bond proceeds prior to expenditure, a requirement that certain investment earnings on bond proceeds be paid periodically to the United States Treasury, and a requirement that the Issuer files an information report with the IRS. The Obligated Group has covenanted in the Financing Agreement that they will comply with such requirements. Future failure by the Medical Center or other Members of the Obligated Group to comply with the requirements stated in the Code and related regulations, rulings and policies may result in the treatment of interest on the Series 2013A Bonds as taxable, retroactively to the date of issuance. IRS officials have recently indicated that more resources will be invested in audits of taxexempt bonds in the charitable organization sector. The Series 2013A Bonds may be, from time to time, subject to audits by the IRS. The Obligated Group has not sought to obtain a private letter ruling from the IRS with respect to the Series 2013A Bonds, and the opinion of Bond Counsel is not binding on the IRS. There is no assurance that an IRS examination of the Series 2013A Bonds will not adversely affect the market value of the Series 2013A Bonds. See "TAX MATTERS" herein. Limitations on Contractual and Other Arrangements Imposed by the Internal Revenue Code. As tax-exempt organizations, the Obligated Group Members are limited with respect to their use of practice income guarantees, reduced rent on medical office space, low interest loans, joint venture programs and other means of recruiting and retaining physicians. Uncertainty in this area has been reduced somewhat by the issuance by the IRS of guidelines on permissible physician recruitment practices. The IRS scrutinizes a broad variety of contractual relationships commonly entered into by hospitals and has issued a detailed audit guide suggesting that field agents scrutinize numerous activities of hospitals in an effort to determine whether any action should be taken with respect to limitations on or revocation of their tax-exempt status or assessment of additional tax. Any suspension, limitation, or revocation of one or more Obligated Group Member's tax-exempt status or assessment of significant tax liability would have a materially adverse effect on the Obligated Group and might lead to loss of tax exemption of interest on the Series 2013A Bonds. Malpractice and General Liability Insurance In recent years, the number of malpractice and general liability suits and the dollar amount of damage recoveries have increased nationwide, resulting in substantial increases in insurance premiums. Actions alleging wrongful conduct and seeking punitive damages are often filed against hospitals. Insurance does not provide coverage for judgments for punitive damages. The Medical Center self-insures the first $1,000,000 per occurrence for its workers' compensation exposure and maintains commercial insurance for amounts beyond that level. The Medical Center maintains commercial insurance for general liability exposure and malpractice exposure. Although there are various medical malpractice claims, both threatened and pending, against the Medical Center, the Medical Center believes that existing funding levels and coverage limits adequately cover any such liability exposures and the final disposition of any such claims will not have a material adverse effect upon the financial condition of the Medical 53

58 Center, in the aggregate. Should judgments or settlements exceed insurance coverages or selfinsurance reserves, it could have a material adverse effect on the financial condition of the Medical Center. Moreover, the Medical Center is unable to predict the cost or availability of any such insurance in the future. Property and Casualty Insurance Pursuant to the Master Indenture, the Obligated Group maintains insurance coverage (including one or more self-insurance or shared or pooled-insurance programs) to protect it and its Property and operations, including without limitation professional liability claims. The recent hurricane seasons and the performance of the stock markets have reduced the capacity of the insurance industry in general which has led to increased premiums and reduced coverage for purchasers of insurance. Management of the Medical Center believes that the current coverage limits provide reasonable coverage under the circumstances to protect the property of the Medical Center and Pavilion. Nevertheless, should losses exceed insurance coverage, it could have a material adverse effect on the financial condition of the Obligated Group. Moreover, the Medical Center is unable to predict the cost or availability of any such property and casualty insurance when its current coverage expires. Florida Certificate of Need The Health Facilities and Health Services Planning Act of the State provides for a certificate of need program which applies to, among other matters, the offering or development of new institutional health services. The certificate of need program in Florida is administered by AHCA. Florida's certificate of need program requires, among other things, the AHCA's review of new construction or establishment of additional health care facilities, including a replacement health care facility, conversion from one type of health care facility to another, an increase in the total licensed bed capacity for comprehensive rehabilitation, the establishment of a hospice or hospice inpatient facility, or the establishment of inpatient tertiary health services by a health care facility. Florida's certificate of need requirements may restrict Members of the Obligated Group from adding or changing facilities and services as necessary to respond to competitive and market forces. Failure to obtain a certificate of need in order to carry out any future capital plans or initiate new services could adversely affect the financial condition of the Members of the Obligated Group. Further, changes to existing certificate of need requirements or elimination of certificate of need requirements entirely could adversely affect the Members of the Obligated Group by making it easier for competitors to expand or new competitors to enter the market without the need for the regulatory approval now required by the certificate of need program. Changes in Health Care Delivery due to Technology and Services Scientific and technological advances, new procedures, drugs and appliances, preventive medicine, occupational health and safety, and outpatient health care delivery may reduce utilization and revenues of the Members of the Obligated Group in the future. Technological advances in recent years have accelerated the trend toward the use by hospitals of sophisticated and costly equipment and services for diagnosis and treatment. The acquisition and operation of certain equipment or services may continue to be a significant factor in hospital utilization, but 54

59 the ability of the Members of the Obligated Group to offer such equipment or services may be subject to the availability of equipment or specialists, governmental approval or the ability to finance such acquisitions or operations. Other Risk Factors Investments. The Obligated Group has significant holdings in a broad range of investments. Market fluctuations may affect the value of those investments and those fluctuations may be and historically have been at times material. Construction Risks. Construction projects, including the Project, are subject to a variety of risks, including but not limited to delays in issuance of required building permits or other necessary approvals or permits, strikes, shortages of materials and adverse weather conditions. Such events could delay occupancy. Cost overruns may occur due to change orders, delays in the construction schedule, scarcity of building materials and other factors. Cost overruns could cause the costs to exceed available funds. The Medical Center has entered into a contract for the design and construction of the Project with The Haskell Company of Jacksonville, Florida. The contract provides for the design and construction of the Project for a guaranteed maximum price of $35,842,030. The Medical Center has determined that it will not require the provision of performance or payment bonds with respect to the contract, based upon its analysis of the economic strength of The Haskell Company, its history in completing jobs of similar scope and other factors it deemed appropriate. Other Future Risks. In the future, the following additional factors, among others, may adversely affect the operations of health care providers, including the Members of the Obligated Group, to an extent that cannot be determined at this time: Adoption of legislation that would establish a national or statewide single-payor health program or that would establish national, statewide or otherwise regulated rates applicable to hospitals and other health care providers. Reduced demand for the services of the Members of the Obligated Group that might result from decreases in population. payor. Bankruptcy of an indemnity/commercial insurer, managed care plan or other Efforts by insurers and governmental agencies to limit the cost of hospital services, to reduce the number of beds and to reduce the utilization of hospital facilities by such means as preventive medicine, improved occupational health and safety and outpatient care, or comparable regulations or attempts by third-party payors to control or restrict the operations of certain health care facilities. The occurrence of a natural or man-made disaster that could damage the facilities of the Members of the Obligated Group, interrupt utility service to the facilities, result in an abnormally high demand for health care services or otherwise impair the Members of the Obligated Group's operations and the generation of revenues from the facilities. 55

60 Limitations on the availability of, and increased compensation necessary to secure and retain, nursing, technical and other professional personnel. Acceleration. The Series 2013A Bonds are subject to acceleration upon an Event of Default under the 2013A Bond Indenture. General TAX MATTERS The Code establishes certain requirements which must be met subsequent to the issuance of the Series 2013A Bonds in order that interest on the Series 2013A Bonds be and remain excluded from gross income for purposes of federal income taxation. Non-compliance may cause interest on the Series 2013A Bonds to be included in federal gross income retroactive to the date of issuance of the Series 2013A Bonds, regardless of the date on which such noncompliance occurs or is ascertained. These requirements include, but are not limited to, provisions which prescribe yield and other limits within which the proceeds of the Series 2013A Bonds and the other amounts are to be invested and require that certain investment earnings on the foregoing must be rebated on a periodic basis to the Treasury Department of the United States. The Issuer and the Obligated Group have covenanted in the 2013A Bond Indenture with respect to the Series 2013A Bonds to comply with such requirements in order to maintain the exclusion from federal gross income of the interest on the Series 2013A Bonds. In the opinion of Bond Counsel, assuming compliance with certain covenants, under existing laws, regulations, judicial decisions and rulings, interest on the Series 2013A Bonds is excluded from gross income for purposes of federal income taxation. Interest on the Series 2013A Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals or corporations; however, interest on the Series 2013A Bonds may be subject to the federal alternative minimum tax when any Series 2013A Bond is held by a corporation. The federal alternative minimum taxable income of a corporation must be increased by seventy-five percent (75%) of the excess of such corporation's adjusted current earnings over its alternative minimum taxable income (before this adjustment and the alternative tax net operating loss deduction). "Adjusted Current Earnings" will include interest on the Series 2013A Bonds. Except as described above, Bond Counsel will express no opinion regarding other federal income tax consequences resulting from the ownership of, receipt or accrual of interest on, or disposition of Series 2013A Bonds. Prospective purchasers of Series 2013A Bonds should be aware that the ownership of Series 2013A Bonds may result in collateral federal income tax consequences, including (i) the denial of a deduction for interest on indebtedness incurred or continued to purchase or carry Series 2013A Bonds; (ii) the reduction of the loss reserve deduction for property and casualty insurance companies by fifteen percent (15%) of certain items, including interest on Series 2013A Bonds; (iii) the inclusion of interest on Series 2013A Bonds in earnings of certain foreign corporations doing business in the United States for purposes of the branch profits tax; (iv) the inclusion of interest on Series 2013A Bonds in passive income subject to federal income taxation of certain Subchapter S corporations with Subchapter 56

61 C earnings and profits at the close of the taxable year; and (v) the inclusion of interest on Series 2013A Bonds in "modified adjusted gross income" by recipients of certain Social Security and Railroad Retirement benefits for the purposes of determining whether such benefits are included in gross income for federal income tax purposes. As to questions of fact material to the opinion of Bond Counsel, Bond Counsel will rely upon representations and covenants made on behalf of the Issuer and the Obligated Group, certificates of appropriate officers and certificates of public officials (including certifications as to the use of proceeds of the Series 2013A Bonds and of the property financed or refinanced thereby) and on the opinions being given by counsel to the Obligated Group in connection with the delivery of the Series 2013A Bonds with respect to the Members of the Obligated Group being organizations described in Section 501(c)(3) of the Code, without undertaking to verify the same by independent investigation. PURCHASE, OWNERSHIP, SALE OR DISPOSITION OF THE SERIES 2013A BONDS AND THE RECEIPT OR ACCRUAL OF THE INTEREST THEREON MAY HAVE ADVERSE FEDERAL TAX CONSEQUENCES FOR CERTAIN INDIVIDUAL AND CORPORATE BONDHOLDERS, INCLUDING, BUT NOT LIMITED TO, THE CONSEQUENCES DESCRIBED ABOVE. PROSPECTIVE BONDHOLDERS SHOULD CONSULT WITH THEIR TAX SPECIALISTS FOR INFORMATION IN THAT REGARD. Information Reporting and Backup Withholding Interest paid on tax-exempt bonds such as the Series 2013A Bonds is subject to information reporting to the Internal Revenue Service in a manner similar to interest paid on taxable obligations. This reporting requirement does not affect the excludability of interest on the Series 2013A Bonds from gross income for federal income tax purposes. However, in conjunction with that information reporting requirement, the Code subjects certain non-corporate owners of Series 2013A Bonds, under certain circumstances, to "backup withholding" at the rate specified in the Code with respect to payments on the Series 2013A Bonds and proceeds from the sale of Series 2013A Bonds. Any amount so withheld would be refunded or allowed as a credit against the federal income tax of such owner of Series 2013A Bonds. This withholding generally applies if the owner of Series 2013A Bonds (i) fails to furnish the payor such owner's social security number or other taxpayer identification number ("TIN"), (ii) furnished the payor an incorrect TIN, (iii) fails to properly report interest, dividends, or other "reportable payments" as defined in the Code, or (iv) under certain circumstances, fails to provide the payor or such owner's securities broker with a certified statement, signed under penalty of perjury, that the TIN provided is correct and that such owner is not subject to backup withholding. Prospective purchasers of the Series 2013A Bonds may also wish to consult with their tax advisors with respect to the need to furnish certain taxpayer information in order to avoid backup withholding. Other Tax Matters Relating to the Series 2013A Bonds During recent years, legislative proposals have been introduced in Congress, and in some cases enacted, that altered certain federal tax consequences resulting from the ownership of obligations that are similar to the Series 2013A Bonds. In some cases, these proposals have contained provisions that altered these consequences on a retroactive basis. Such alteration of 57

62 federal tax consequences may have affected the market value of obligations similar to the Series 2013A Bonds. From time to time, legislative proposals are pending which could have an effect on both the federal tax consequences resulting from ownership of the Series 2013A Bonds and their market value. No assurance can be given that legislative proposals will not be enacted that would apply to, or have an adverse effect upon, the Series 2013A Bonds. For example, in connection with federal deficit reduction, job creation and tax law reform efforts, proposals have been and others are likely to be made that could significantly reduce the benefit of, or otherwise affect, the exclusion from gross income of interest on obligations like the Series 2013A Bonds. There can be no assurance that any such legislation or proposal will be enacted, and if enacted, what form it may take. The introduction or enactment of any such legislative proposals may affect, perhaps significantly, the market price for, or marketability of, the Series 2013A Bonds. Prospective purchasers of the Series 2013A Bonds should consult their own tax advisors as to the tax consequences of owning the Series 2013A Bonds in their particular state or local jurisdiction and regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Tax Treatment of Original Issue Discount Under the Code, the difference between the maturity amount of the Series 2013A Bonds maturing on November 1, 2028 (the "Discount Bonds"), and the initial offering price to the public, excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers, at which price a substantial amount of the Discount Bonds of the same maturity and, if applicable, interest rate, was sold is "original issue discount." Original issue discount will accrue over the term of the Discount Bonds at a constant interest rate compounded periodically. A purchaser who acquires the Discount Bonds in the initial offering at a price equal to the initial offering price thereof to the public will be treated as receiving an amount of interest excludable from gross income for federal income tax purposes equal to the original issue discount accruing during the period he or she holds the Discount Bonds, and will increase his or her adjusted basis in the Discount Bonds by the amount of such accruing discount for purposes of determining taxable gain or loss on the sale or disposition of the Discount Bonds. The federal income tax consequences of the purchase, ownership and redemption, sale or other disposition of the Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those above. Bondholders of the Discount Bonds should consult their own tax advisors with respect to the precise determination for federal income tax purposes of interest accrued upon sale, redemption or other disposition of the Discount Bonds and with respect to the state and local tax consequences of owning and disposing of the Discount Bonds. Tax Treatment of Bond Premium The difference between the principal amount of the Series 2013A Bonds maturing on November 1, 2013 through and including November 1, 2023 and on November 1, 2033 and 2043 (collectively, the "Premium Bonds"), and the initial offering price to the public (excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of such Premium Bonds of the same maturity and, if applicable, interest rate, was sold constitutes to an initial purchaser amortizable bond 58

63 premium which is not deductible from gross income for federal income tax purposes. The amount of amortizable bond premium for a taxable year is determined actuarially on a constant interest rate basis over the term of each of the Premium Bonds, which ends on the earlier of the maturity or call date for each of the Premium Bonds which minimizes the yield on such Premium Bonds to the purchaser. For purposes of determining gain or loss on the sale or other disposition of a Premium Bond, an initial purchaser who acquires such obligation in the initial offering is required to decrease such purchaser's adjusted basis in such Premium Bond annually by the amount of amortizable bond premium for the taxable year. The amortization of bond premium may be taken into account as a reduction in the amount of tax-exempt income for purposes of determining various other tax consequences of owning such Premium Bonds. Bondholders of the Premium Bonds are advised that they should consult with their own tax advisors with respect to the state and local tax consequences of owning such Premium Bonds. The Obligated Group LITIGATION On the date of delivery of the Series 2013A Bonds, counsel to the Obligated Group will render an opinion that, except as described in this Official Statement, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending, or to the best of his knowledge after due inquiry threatened, against or affecting the Obligated Group, wherein an unfavorable decision, ruling or finding would materially adversely affect the Obligated Group, its financial condition or its ability to comply with its Obligations under the Master Indenture, or the Mortgage or the validity or enforceability of the Series 2013A Bonds, the 2013A Bond Indenture, the Master Indenture, the Financing Agreement or the Mortgage. The Issuer On the date of delivery of the Series 2013A Bonds, counsel to the Issuer will render an opinion that there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending, or to their knowledge, threatened against or affecting the Issuer, wherein an unfavorable decision, ruling or finding would adversely affect the validity of the Series 2013A Bonds, the 2013A Bond Indenture or the Financing Agreement. LEGAL MATTERS Certain legal matters incident to the issuance of the Series 2013A Bonds are subject to the approving opinion of Bryant Miller Olive P.A., Orlando, Florida, Bond Counsel, whose approving opinion will be delivered with the Series 2013A Bonds (the proposed form of which is set forth as APPENDIX E "Form of Opinion of Bond Counsel" attached hereto). The actual legal opinion to be delivered may vary from that text if necessary to reflect facts and law on the date of delivery. The opinion will speak only as of its date, and subsequent distribution of it by recirculation of the Official Statement or otherwise shall create no implication that Bond Counsel has reviewed or expresses any opinion concerning any of the matters referenced in the opinion subsequent to its date. 59

64 Bond Counsel has not been engaged to, nor has it undertaken to, review (1) the accuracy, completeness or sufficiency of this Official Statement or any other offering material relating to the Series 2013A Bonds; provided, however, that Bond Counsel will render an opinion to the Underwriter of the Series 2013A Bonds (upon which only the Underwriter may rely) relating to the accuracy of certain statements contained herein under the heading "TAX MATTERS" and certain statements which summarize provisions of the 2013A Bond Indenture, the Financing Agreement, the Mortgage, the Master Indenture and the Series 2013A Bonds, or (2) the compliance with any federal or state law with regard to the sale or distribution of the Series 2013A Bonds. Certain legal matters will be passed upon for the Issuer by its counsel, Haile, Shaw & Pfaffenberger, P.A., North Palm Beach, Florida, for the Obligated Group by its counsel Mark E. Raymond, Esq., Palm Beach Gardens, Florida and for the Underwriter by its counsel, Nabors, Giblin & Nickerson, P.A., Tampa, Florida. Bond Counsel, and Counsel to the Issuer and Underwriter will receive fees for services rendered in connection with the issuance of the Series 2013A Bonds, which fees are contingent upon the issuance and sale of the Series 2013A Bonds. FINANCIAL ADVISOR The Obligated Group has retained Kaufman, Hall & Associates, Inc., Skokie, Illinois as financial advisor in connection with the the issuance of the Series 2013A Bonds. Although Kaufman, Hall & Associates, Inc. has assisted in the preparation of this Official Statement, Kaufman, Hall & Associates, Inc. was not and is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. RATINGS Moody's Investors Service ("Moody's") and Fitch Ratings ("Fitch") have assigned their municipal bond ratings of "Baa2" and "BBB+", respectively, to the Series 2013A Bonds. Such ratings reflect only the view of such rating agencies and further explanation of the significance of such ratings may be obtained from Moody's at 7 World Trade Center, New York, New York 10007, (212) and from Fitch at One State Street Plaza, New York, New York 10004, (212) The ratings are not a recommendation to buy, sell or hold the Series 2013A Bonds and there is no assurance that such rating will remain in effect for any given period of time or that it will not be revised downward or withdrawn entirely if, in the judgment of Moody's and/or Fitch, circumstances so warrant. Any downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Series 2013A Bonds. Neither the Underwriter nor the Issuer has undertaken responsibility to bring to the attention of the holders of the Series 2013A Bonds any proposed revision or withdrawal of the rating of the Series 2013A Bonds, or to oppose any proposed revision or withdrawal. 60

65 UNDERWRITING The Series 2013A Bonds are being purchased by RBC Capital Markets, LLC (the "Underwriter") pursuant to a Contract of Purchase (the "Purchase Contract") among the Issuer, the Obligated Group and the Underwriter. Pursuant to the Purchase Contract, the Underwriter will purchase the Series 2013A Bonds from the Issuer at a price of $53,916, (par amount of $50,680,000.00, plus net original issuance premium of $3,666, and less an underwriting discount of $430,780.00). The obligation of the Underwriter to accept delivery of the Series 2013A Bonds is subject to the various conditions contained in the Purchase Contract. The Underwriter will be obligated to purchase all of the Series 2013A Bonds if any Series 2013A Bonds are purchased. The Series 2013A Bonds may be offered and sold to certain dealers (including dealers depositing such Series 2013A Bonds into investment trusts) at prices lower than or yields higher than the public offering prices or yields, and such public offering prices or yields may be changed, from time to time, by the Underwriter without any requirements of prior notice. The Underwriter may also receive a fee for conducting a competitive bidding process regarding the investment of certain proceeds of the Series 2013A Bonds. FINANCIAL STATEMENTS The consolidated financial statements of Jupiter Medical Center, Inc. and Affiliated Companies as of September 30, 2012 and 2011, and for each of the years then ended, included in APPENDIX B to this Official Statement, have been audited by Ernst & Young LLP, independent certified public accountants, as stated in their report appearing in APPENDIX B to this Official Statement. VERIFICATION OF MATHEMATICAL COMPUTATIONS As of the delivery of the Series 2013A Bonds, Causey Demgen & Moore P.C. (the "Verification Agent") will verify, from information provided to it, the mathematical accuracy of the computations contained in the schedules provided by the Underwriter, to determine that the funds held pursuant to the Escrow Agreements will be sufficient to pay when due the principal, interest and redemption premium, if any, of the Refunded Bonds. The Verification Agent will express no opinion as to the exclusion from gross income for federal income tax purposes of the interest on the Series 2013A Bonds. DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS Pursuant to Section , Florida Statutes, as amended, no person may directly or indirectly offer or sell securities of the Issuer except by an offering circular containing full and fair disclosure of all defaults as to principal or interest on its obligations since December 31, 1975, as provided by rule of the Florida Department of Financial Services (the "Department"). Pursuant to Rule 69W , Florida Administrative Code, the Department has required the disclosure of the amounts and types of defaults, any legal proceedings resulting from such 61

66 defaults, whether a trustee or receiver has been appointed over the assets of the Issuer, and certain additional financial information, unless the Issuer believes in good faith that such information would not be considered material by a reasonable investor. As described herein, the Issuer has the power to issue bonds for the purpose of financing other projects for other borrowers which are payable from the revenues of the particular project or borrower. Revenue bonds issued by the Issuer for other projects may be in default as to principal and interest. The source of payment, however, for any such defaulted bond is separate and distinct from the source of payment for the Series 2013A Bonds and, therefore, any default on such bonds would not, in the judgment of the Issuer, be considered material by a potential purchaser of the Series 2013A Bonds. The Obligated Group has represented that it has not been in default in the payment of principal or interest after December 31, 1975, with respect to any obligation issued or guaranteed by it. The Issuer CONTINUING DISCLOSURE The Issuer has determined that no financial or operating data concerning the Issuer is material to any decision to purchase, hold or sell the Series 2013A Bonds and the Issuer will not provide any such information The Obligated Group Simultaneously with the issuance of the Series 2013A Bonds, the Obligated Group and the Bond Trustee will enter into a Continuing Disclosure Agreement substantially in the form attached hereto as APPENDIX F pursuant to which the Obligated Group will covenant for the benefit of the Bondholders and beneficial owners of the Series 2013A Bonds to provide audited financial statements of the Obligated Group and certain other financial information and operating data relating to the Obligated Group on an annual basis, on or before 180 days after the end of each fiscal year. The Obligated Group will also provide copies of its quarterly unaudited, internally prepared financial statements within 45 days of the first three fiscal quarters and within 90 days after the end of the fourth fiscal quarter. The Obligated Group will also be obligated pursuant to the Continuing Disclosure Agreement to provide notice of the occurrence of certain specified material events to the Municipal Securities Rulemaking Board ("MSRB") in a timely manner not in excess of ten (10) business days after the occurrence of certain specified material events. See APPENDIX F "Form of Continuing Disclosure Agreement" for a description of the financial information and operating data required to be provided and other terms of the Continuing Disclosure Agreement. Prior Undertakings In connection with the issuance of certain prior bonds, the Obligated Group entered into an undertaking pursuant to Rule 15c2-12 of the Securities and Exchange Commission. The Obligated Group failed to comply with all or a portion of such undertaking during the last five 62

67 years. On February 22, 2013 the Medical Center filed its 2007, 2008, 2009 and 2010 fiscal years audited financial statements with the MSRB. On March 18, 2013 the Medical Center filed its additional operating data for the 2008, 2009, 2010, 2011 and 2012 fiscal years with the MSRB. The Obligated Group now believes that it has brought its prior undertaking into compliance and has implemented procedures to assure that future undertakings (including the undertaking in connection with the issuance of the Series 2013A Bonds) are complied with on a timely basis. MISCELLANEOUS The summaries of and references to all documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such reference or summary is qualified in its entirety by reference to each such document, statute, report or other instrument. So far as any statements made in this Official Statement involve matters of opinion or are estimates, whether or not expressly stated, they are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. CERTIFICATE CONCERNING OFFICIAL STATEMENT The Obligated Group has reviewed the information contained herein and has approved the content and use of this Official Statement. This Official Statement has been duly authorized, executed and delivered by the Issuer. PALM BEACH COUNTY (FLORIDA) HEALTH FACILITIES AUTHORITY APPROVED: By: /s/ Gerald N. Robinson Chair JUPITER MEDICAL CENTER, INC. By: /s/ John Couris President and Chief Executive Officer 63

68 [THIS PAGE INTENTIONALLY LEFT BLANK]

69 APPENDIX A THE OBLIGATED GROUP The information contained in this Appendix A was provided and approved by the Obligated Group. Except as sourced otherwise, all data was supplied by the Obligated Group. None of the Authority, the Underwriter or their respective legal counsel has undertaken to independently verify such information, and none of such parties makes any representation as to its accuracy or completeness. Capitalized terms used in this APPENDIX A and not otherwise defined have the meanings set forth in the body of this Official Statement or in APPENDIX C.

70 TABLE OF CONTENTS OVERVIEW AND ORGANIZATIONAL STRUCTURE...1 LOCATION...1 HISTORY...1 EXISTING FACILITIES OF THE MEDICAL CENTER...2 PATIENT SERVICES...3 DEGEORGE PAVILION PROJECT...4 BOARDS OF TRUSTEES OF THE OBLIGATED GROUP MEMBERS...5 SENIOR MANAGEMENT...7 ACCREDITATIONS, LICENSES, OTHER APPROVALS AND AWARDS...9 SERVICE AREA DESCRIPTION...9 DEMOGRAPHICS OTHER AREA HOSPITALS AND NURSING HOMES/MARKET SHARE PROPOSED TENET HOSPITAL MEDICAL STAFF NURSING EMPLOYEES/LABOR RELATIONS FINANCIAL INFORMATION AND OPERATING STATISTICS MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL PERFORMANCE INSURANCE PLAN OF FINANCE AND FUTURE BORROWINGS INVESTMENT POLICY VOLUNTEER SERVICES LITIGATION OTHER OUTSTANDING INDEBTEDNESS/LEASES INFORMATION TECHNOLOGY SYSTEMS... 27

71 Overview and Organizational Structure THE OBLIGATED GROUP The current Members of the Obligated Group are Jupiter Medical Center, Inc. (the "Medical Center"), Jupiter Medical Center Pavilion, Inc. ("Pavilion") and Jupiter Medical Center Foundation, Inc. (the "Foundation"). Each of the Members of the Obligated Group is a Florida corporation not-for-profit. Each Member of the Obligated Group is organized on a non-stock, membership basis. Ultimate control over each corporation resides in its members. The Medical Center is the sole member of Pavilion and the Foundation. The members of the Medical Center are those persons admitted as members in accordance with the bylaws of the Medical Center. In practice, the members of the Medical Center are those same individuals who serve on the Board of Trustees, and in this manner the Board of Trustees of the Medical Center has the ultimate governance authority over all of the Members of the Obligated Group. Each Member of the Obligated Group is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, and contributions to it may therefore be deducted from gross income for federal tax purposes to the extent permitted by law. The Medical Center is also the sole member of Jupiter Medical Center Physicians Group, Inc. and it owns a 60% membership interest in Jupiter Outpatient Surgery Center, LLC, but neither of these entities is a Member of the Obligated Group. As of the date of this Official Statement, the Medical Center serves as the "Obligated Group Representative" for purposes of the Master Indenture. Location The main facilities of the Obligated Group are located in the Town of Jupiter, Florida. The Town of Jupiter, Florida is located in extreme northeastern Palm Beach County, Florida, approximately twenty miles north of West Palm Beach, Florida. Jupiter is also approximately ninety miles north of Miami, Florida and approximately twenty miles south of Stuart, Florida. History The Medical Center was formed in 1972, Pavilion was created in 1984 and the Foundation was created in Prior to 1977 there were no hospital or nursing home facilities in the Jupiter portion of Palm Beach County. The closest acute care hospitals were twenty miles to the north in Stuart and ten miles to the south in Palm Beach Gardens. In 1974, a group composed primarily of community-minded physicians donated approximately twenty-seven acres of land as the site of a new medical center to be called "Palm Beach-Martin County Medical Center." The main campus of the Medical Center is located on this land. In January, 1975, donated funds and borrowed money were used to construct a 26,000 square foot outpatient building that opened in October 1976 and a 120-bed long-term skilled nursing facility that opened in September A-1

72 In 1978, the Palm Beach County Health Facilities Authority (the "Authority") issued revenue bonds for the benefit of the Medical Center. The proceeds of the bonds were used to construct a 156-bed acute care hospital which opened in February, In 1993, the Authority issued bonds in order to finance construction of a three-story addition to the Medical Center, a consolidated imaging department, an expanded emergency department, combined inpatient and ambulatory surgery departments, and expansion room for other clinical services. In 1999, the Authority issued bonds to finance both a 16,000 square foot expansion to house an obstetrics unit, including twelve labor and delivery beds and a c-section surgical suite, and the renovation and expansion of the first and second floors of the existing outpatient cancer center. Finally, in 2009 the Authority issued bonds to finance various capital expenditures, including expansion of the Medical Center s data processing center and renovation of its emergency power back-up systems. During its existence the Obligated Group has also acquired and constructed various other buildings and capital improvements to its facilities, using both conventional financing and other funds of the Obligated Group. Existing Facilities of the Medical Center The Medical Center owns approximately 400,000 square feet of building space in fifteen separate buildings, eight of which are located on the main campus, and it leases another approximately 14,000 square feet of space in two of those buildings. All facilities that are not on the main campus are located within one mile of the main campus. The tables below set forth summary information regarding certain of the major facilities owned and leased by the Medical Center. Main Campus Buildings Building Description and Function Main Hospital Buildings 255,000 sq. ft., housing 163 inpatient beds, 30-bed emergency room, 10 operating suites, laboratory and diagnostic imaging. Jupiter Convalescent Pavilion 40,000 sq. ft., housing a 120-bed sub-acute and long-term care skilled nursing facility. Ahlbin Building 10,000 sq. ft., containing administration and human resources. Foshay Cancer Center 20,000 sq. ft., containing outpatient oncology and radiation facilities. Raso Education Center 8,730 sq. ft., housing meeting rooms, auditorium, computer training labs and internet cafe. Central Energy Plant Building 8,500 sq. ft., housing chilled water and other energy and electrical equipment. A-2

73 Off-Site Buildings Jupiter Outpatient Center Jupiter Professional Center Jupiter Medical Park West Jupiter Medical Park Building Description and Function 50,000 sq. ft., 51% owned and 39% occupied by the Medical Center. Houses outpatient imaging and surgery center. 31,000 sq. ft., 28% owned and 38% occupied by the Medical Center. Houses the Niedland Breast Center and the Sleep Center. 29,700 sq. ft., 34% owned and 67% occupied by the Medical Center. Houses wound-care, wellness and rehab centers, physician office space and information systems offices and facilities. 30,500 sq. ft., 100% owned and 57% occupied by the Medical Center. Houses corporate, including Foundation, offices and physician office space. Patient Services The hospital facilities of the Medical Center include (i) 163 licensed inpatient beds, consisting of 17 critical care beds, 8 progressive care beds, 46 monitored telemetry beds, 24 oncology beds, 56 medical/surgical beds and 12 obstetrical beds, (ii) emergency room facilities including 26 beds, 4 of which are devoted to chest pain issues, (iii) operating room facilities including 9 surgical suites and 1 cystology suite, (iv) a full service medical laboratory and (v) diagnostic imaging including one MRI machine, two CT scanners, two ultrasound machines, nuclear medicine equipment, five x-ray rooms and an interventional vascular lab. The Medical Center provides a wide range of acute care services and post acute services on both an inpatient and outpatient basis. Set forth below are the primary patient services available: Cancer Services Cardiology Ob/Gyn Comprehensive Breast Care Diabetes Education Digestive Health Emergency Services Health and Rehabilitation Hospice Care Imaging Laboratory Services Men's Health Nursing Home Care Occupational Health Orthopedic and Spine Outpatient Medical Nutrition Pain Management Sleep Center Stroke Program Surgical Services Robotic Surgery Thoracic Surgery Urgent Care Weight Loss (Bariatrics) Wound-Care/Hyperbarics The Pavilion operates a 120-bed skilled nursing care facility, containing 30 sub-acute and 90 long term care beds. The Medical Center is the sole stockholder of Jupiter Post-Acute Services, Inc., a Florida corporation (JPAS). JPAS, the Medical Center and Nuvista Healthcare Investors, LLC A-3

74 ("Nuvista") have entered into a joint venture agreement providing for the creation of M.T. Health Center, LLC ("MTHC"), and the creation, ownership and operation by MTHC of a combined post-acute healthcare campus to be known as the "Institute for Health Living" ("IHL"). IHL is planned to be comprised of a 129-bed skilled nursing facility, a 70- bed assisted living facility, and a 30-bed memory/dementia care facility located in Jupiter, Florida approximately four miles from the Medical Center main campus. MTHC has acquired a site for IHL, and groundbreaking of the new facility is expected to occur in The percentage ownership interests of Nuvista and JPAS in MTHC are variable, depending on the amount of capital contributed by each over time. The initial contribution of Nuvista to MTHC was valued at approximately $18.2 million, consisting of cash and in-kind contributions, for which Nuvista will own approximately 83% of MTHC. In consideration for an approximately 17% interest in MTHC owned by JPAS, Pavilion is transferring the certificate of need for sixty of its skilled nursing beds to MTHC. After the transfer of sixty beds to MTHC, Pavilion's remaining beds will be dedicated to sub-acute rehabilitation and Pavilion will no longer accept long term residents. DeGeorge Pavilion Project The Medical Center is beginning development of the DeGeorge Pavilion Project (the "Project"). The Project consists of the construction of an almost 90,000 square foot three-story building that will add 44 beds to the Medical Center facilities, bringing the total to 207 beds. Key components of the Project are (i) kitchen, dining and office space on the first floor, (ii) thirty new orthopedic single patient rooms, physical therapy facilities and a patient and family dining room on the second floor and (iii) eight labor, delivery and recovery rooms, fourteen post-partum patient rooms, a C-section suite with two C-section rooms and a three-bay prep/recovery area on the third floor. The Project also includes upgrades to the central energy plant to accommodate the increased demands resulting from the Project. The total cost of the Project is approximately $46 million, of which approximately $20 million will be financed with proceeds of the Series 2013A Bonds and $15 million of which will be financed with proceeds of the Series 2013B Bank Loan, with the balance being paid from funds of the Medical Center. Of the $35 million in project financing, approximately $20 million is anticipated to be long-term financing, with the balance being repaid over a relatively short term from proceeds of a capital campaign being undertaken by the Medical Center. The Medical Center has received pledges for the donation of funds to pay the cost of the Project in the amount of approximately $39.6 million, of which approximately $25.7 million has been received to date, leaving approximately $13.9 million yet to be collected. The Medical Center has entered into a contract for the design and construction of the Project with The Haskell Company of Jacksonville, Florida. The contract provides for the design and construction of the Project for a guaranteed maximum price of $35,842,030. The Medical Center has determined that it will not require the provision of performance or payment bonds with respect to the contract, based upon the economic strength of The Haskell Company, its history in completing jobs of similar scope and other factors. The Medical Center has engaged Northstar Management Co., LLC of St. Louis, Missouri as project manager for the Project. A-4

75 No certificate of need is required for the Project, and all permits required from any governmental authority for the lawful construction of the Project are expected to be received in April, The Medical Center has issued a limited notice to proceed to The Haskell Company, authorizing the commencement of approximately $5 million of construction activity with respect to the central energy plant. The Medical Center expects to issue a notice to proceed for the balance of the Project promptly following the issuance of the Series 2013A Bonds and Series 2013B Bank Loan. Construction is scheduled to be completed in January Boards of Trustees of the Obligated Group Members Each of the Members of the Obligated Group is governed by a Board of Trustees. The number of members of each Board of Trustees is established by the bylaws of the respective corporations, and may change from time to time. As of the date of this Official Statement, there are fourteen trustees of the Medical Center, eight trustees of Pavilion, and twenty-six trustees of the Foundation. The Board of Trustees of the Medical Center is self-perpetuating, in that the members of the Board of Trustees serve until they resign or are removed, the Board of Trustees appoints trustees to fill any vacancies on the Board of Trustees. The trustees of the Foundation and Pavilion are elected by the Board of Trustees of the Medical Center, and they also serve until they resign or are removed. Medical Center Board of Trustees. The table below sets forth information regarding the Board of Trustees of the Medical Center. Name Occupation Years on Board Paul Chiapparone, Chairman Retired- Vice-Chairman EDS 3 Joseph Taddeo, Immed. Past Retired- CEO US Tobacco 6 Chairman Mark Corry, M.D., Secretary Physician, Family Practice 9 Ernest Cantelmo, Treaurer Retired- EVP, Quality RF Services 8 Herbert Baum Retired- President/CEO, Campbell Soup 1 R. Neill Borland, M.D. Physician, Urologist 6 Douglas Brown Retired- EVP,EnterpriseRent-a-Car 6 Jennifer Doss Retired- bank executive 4 Martin Dytrych, CPA Certified Public Accountant 2 Barrie Godown, CPA Certified Public Accountant 4 Karen Golonka Mayor, Town of Jupiter, Florida 6 James Mullen, M.D. Physician, Nephrologist 4 Ryan Simovitch, M.D. Physician, Orthopedic Surgeon 1 Jack Waterman, M.D. Physician, Nephrologist Medical Center Chief of Staff 4 A-5

76 Foundation Board of Trustees. The table below sets forth information regarding the Board of Trustees of the Foundation. Name Occupation Years on Board Donald H. McCree, Jr., Former President & CEO of LBJ Schroder Secretary 6 Edward Babington, Treasurer Associated with Englewood Community Chest and Tenafly Community Chest 4 Leonard Abramson Retired Chairman & CEO of U. S. Healthcare, Inc. 11 Herb Baum Retired, President & CEO, Campbell Soup 2 George W. Bovenizer III Associated with New Jersey Machine, Lionheart Ventures and Community Acquisition Corp 6 Kevin Boyle Founder & CEO of Kevin G. Boyle Securities 2 Robert A. Briskin, M.D. Physician, Internal Medicine 1 Tyler R. Cain Associated with Add-Vision, Inc. and The Mathers Fund 8 Arthur Calcagnini Retired owner, Lombard & Co. 1 Theodore N. Danforth Private investor 5 Lawrence F. De George Partner, DEG Capital Partners 3 Lodewijk de Vink Former Pres of Schering Plough International, former Chairman & CEO of Warner Lambert, Inc., Director of Alcon, Roche 3 Richard J Katz, Jr. President & Founder of Richard J Katz and Company, Inc. 5 Amin Khoury Founder, Chairman of Board & CEO of B/E Aerospace, Inc. 5 David L. Long Associated with Time Incorporated 3 John D. Mabie Chairman, Mid Continent Capital, Chicago IL 5 William C. Mattison, Jr. Principal of Gerard Klauer Mattison & Co., Inc. 12 Jane Napier Board Member, Hobart and William Smith College 2 David J. S. Nicholson James E. Perrella Chairman & Founder of York Management & Research and Stiles-Nicholson Foundation 3 Former President & CEO of Ingersoll Rand; Director of Becton, Dickinson & Co., Arvin Meritor, Inc. & Bombardier 9 Anthony A. Petrarca Founder and CEO of Tri-C Construction 2 Katharine F. Plum Dunlevy Milbank Foundation 16 Frank J. Ryan Former Chairman of Ethicon, a division of Johnson & Johnson 5 Ann Schwartz President, JMC Auxiliary 2 Joseph R. Taddeo Retired, CEO, US Tobacco 6 Dennis Williams Former President & CEO of IDEX Corporation 1 Pavilion Board of Trustees. The table below sets forth information regarding the Board of Trustees of Pavilion. Name Occupation Years on Board John D. Couris, Chairman President and CEO, Medical Center 3 Terri Freeman, Vice Chairman Director of Risk Management, Medical 11 Center Don Daniels, Secretary/Treasurer Land Survey Consultant 8 Betsy Heartfield Administrator, Pavilion 9 E. Drew Gackenheimer Retired - Nursing Home Administrator New Marilyn Lawrence Volunteer 4 Frank Spitalny Retired - Insurance 2 Norberto Vazquez, M.D. Physician, Internal Medicine 9 A-6

77 Potential Conflicts of Interest. The Members of the Obligated Group may occasionally transact business with firms or businesses owned by or with which members of the Board of Trustees are affiliated. However, the Obligated Group is of the opinion that such relationships do not represent a material or improper conflict of interest. The policies and procedures of the Members of the Obligated Group require that members of the Board not participate in votes taken with respect to matters in which they have a financial interest, and they require members of the Board to disclose any such financial interest. Major Committees of Boards of Trustees. There are seven standing committees of the Medical Center Board of Trustees: the Executive, Governance, Quality, Planning, Finance, Compensation and Audit committees. There are four standing committees of the Foundation Center Board of Trustees: the Audit, Finance, Investment and Nominating committees. Senior Management Principal members of the senior management of the Obligated Group are: John D. Couris, President and Chief Executive Officer. Mr. Couris has been President and Chief Executive Officer of the Medical Center since Prior to his position at the Medical Center, Mr. Couris served as Chief Operating Officer/Administrator for Morton Plant North Bay Hospital, part of the BayCare Health System in Tampa Bay, Florida. He began his career at Massachusetts General Hospital in Boston, Massachusetts, where he held several positions within the organization including Human Resources, Materials Management and Radiology. He graduated from Boston University and holds a Master of Science in Management from Lesley University in Cambridge, Massachusetts. He is an active member of the American College of Healthcare Executives, Young Presidents Organization, American Hospital Association Board of Regents for the Southeast, and serves as a member of the Board of Directors of the Northern Palm Beach County Chamber of Commerce. Dale E. Hocking, CPA, Vice President and Chief Financial Officer. Dale Hocking is responsible for maintaining the integrity and accuracy of the financial reporting for Jupiter Medical Center, its charitable Foundation, and the Pavilion. He also handles the revenue cycle and supply chain operations. Dale previously served as the Senior Vice President and Chief Financial Officer for Central Florida Health Alliance in Leesburg, Florida and Vice President and Chief Financial Officer of the Mayo Clinic, St. Luke's Hospital, and Methodist Medical Center all located in Jacksonville, Florida. Dale was an auditor for the international accounting firm of Ernst and Young. He holds a Bachelor of Science in Accounting from the University of Florida in Gainesville, Florida, and is a Florida Certified Public Accountant. Dale serves on the Board of the Jupiter Outpatient Surgery Center on behalf of Jupiter Medical Center. He is a member of the American Institute of Certified Public Accountants, Florida Institute of Certified Public Accountants and Healthcare Financial Management Association. Teresa Wentz, Vice President and Chief Operating Officer. Teresa (Terri) Wentz is responsible for the oversight and direction of clinical and operational departments within the hospital as well as risk management, medical staff and physician relations. Ms. Wentz joined the Medical Center in 1993 as the Director of Human Resources and was promoted to Chief Operating Officer in She has also held the positions of Chief Professional Services Officer and Chief Administrative Officer during her tenure. Prior to joining the Medical Center, she was employed at Glades General Hospital in Belle Glade, Florida, where she served as Director of Personnel and Community Development. She is a graduate of Rollins College in Winter Park, A-7

78 Florida, with a dual degree in Business Administration and Economics, and holds a Master in Business Administration from South University in Savannah, Georgia. Steven Seeley, Vice President and Chief Nursing Officer. Steven (Steve) Seeley oversees all care delivery for nursing and ancillary clinical departments at the Medical Center. Prior to joining the Medical Center in 2011, Steven held numerous executive positions in nursing and patient care services (including Interim CNO) at Holy Cross Hospital in Fort Lauderdale, Florida. He received a Master of Science in Nursing from Nova Southeastern University in Davie, Florida, and a Bachelor of Arts in Healthcare Services from St. Thomas University in Miami, Florida. Steven is a member of the American Organization of Nurse Executives, Florida Organization of Nurse Executives (Treasurer), South Florida Organization of Nurse Executives (President-Elect), American Association of Critical Care Nurses, Emergency Nurses Association and the National Association of Healthcare Quality. He currently serves as Treasurer on the Board of Directors of the South Florida Nursing Consortium. Mike Fehr, Vice President and Chief Information Officer. Mike Fehr is responsible for maintaining and developing the information systems at the Medical Center. Prior to joining Jupiter Medical Center in 1999, Mike served as Vice President and Chief Information Officer at Intracoastal Health Systems in West Palm Beach, Florida. He is a graduate of the University of Connecticut and holds a Master of Healthcare Administration from Nova University. Mike is a member of the Healthcare Information Management and Systems Society. Peter Gloggner, Vice President for Human Resources. Peter Gloggner oversees employment, volunteer services, team member relations and leadership development at the Medical Center. In addition, Peter oversees compensation, benefits, team member health services and recruitment. Prior to joining the Medical Center in 2011, he served as Vice President of Human Resources at Union Hospital in Elkton, Maryland for more than six years. Peter is a graduate of the University of Missouri in Columbia, Missouri and holds a Master in Business Administration from William Woods University in Fulton, Missouri. He is a member of the Society of Human Resource Management, achieving the Senior Professional Human Resources certification and is active with the Northern Palm Beach Chamber of Commerce. Betsy Heartfield, Vice President, Long Term Care & Rehabilitative Services/Pavilion Administrator. Betsy Heartfield oversees all administrative functions at the Pavilion, as well as post-acute care services, inpatient rehabilitation and all outpatient rehab clinics at the Medical Center. Betsy joined the Medical Center in 2004 after serving as Administrator of ManorCare in West Palm Beach, Florida. She holds a Bachelor of Science degree in Accounting from New Hampshire College and a Master in Physical Therapy from the University of Miami in Coral Gables, Florida. She is a member of the Florida Healthcare Association. Paula Zalucki, Vice President, Physician Services. Paula Zalucki is responsible for physician alignment strategies, practice management operations, business ventures involving physicians and clinical research at the Medical Center. Paula has held several leadership positions in hospital systems in Texas, Georgia and Florida and is a Fellow of the American College of Healthcare Executives (ACHE). She is a graduate of University of Houston in Houston, Texas, and holds a Master of Science degree in Business Administration from the Roy E. Crummer Graduate School of Business at Rollins College in Winter Park, Florida. A-8

79 Stacey Brandt, Vice President of Marketing and Strategic Business Development. Stacey Brandt plays an integral role in developing and executing the Medical Center s strategic plans and special projects, and is involved in the Medical Center s governmental affairs. She also oversees the Medical Center s marketing, advertising, public relations and outreach strategies and activities to increase recognition of Jupiter Medical Center and its services. Prior to joining the Medical Center in 2001, Ms. Brandt served as Director of Communications for Mason Strategic Communications, a full-service public relations and marketing firm based in Fort Lauderdale, Florida. She is a graduate of the University of Florida, and served as an active member of the Public Relations Society of America and Florida Society for Healthcare Marketing & Public Relations. She currently serves on the Board of Directors for the Hobe Sound Chamber of Commerce. Accreditations, Licenses, Other Approvals and Awards The Medical Center is licensed by the State of Florida Agency for Health Care Administration ("AHCA") to operate 163 acute-care hospital beds. In July 2012, the Medical Center was surveyed by The Joint Commission (formerly, the Joint Commission on Accreditation of Healthcare Organizations), and effective July 12, 2012 the Medical Center received a three-year accreditation. In February 2012, The Joint Commission has also certified the Medical Center programs for hip, knee and shoulder replacement and as a primary stroke center. The Medical Center is approved by the American College of Surgeons Commission on Cancer as a comprehensive cancer center. The American College of Radiology has certified the Medical Center imaging services for MRIs, breast MRI, ultrasound and CT scan and awarded the Breast Imaging Center of Excellence designation. The American Academy of Sleep Medicine has accredited the sleep center, making it the only hospital-based accredited sleep center in Palm Beach and Martin counties. Pavilion is licensed by AHCA to operate a 120-bed skilled nursing home. The current license was issued September 1, 2012 for a period ending August 31, The Medical Center is certified for participation in Medicare and Medicaid. The Medical Center is a member of the American Hospital Association and the Florida Hospital Association. The Medical Center is also a NICHE (Nurses Improving Care for Health System Elders) designated hospital. Healthgrades ranked the Medical Center as among the top fifty best hospitals in the United States for 2010, 2011 and 2012 and as a recipient of the Distinguished Hospital Award for Clinic Excellence for the last nine years. Service Area Description The primary service area for the Medical Center - the geographic area where the majority of patients reside - is depicted on the following page, and consists of an area in extreme northeastern Palm Beach County and southeastern Martin County. The primary service area encompasses the incorporated limits of the Town of Jupiter and the Village of Tequesta, as well as unincorporated areas of Palm Beach and Martin Counties to the south and west thereof. A-9

80 Jupiter Medical Center Service Area and Surrounding Hospitals 6 7 Surrounding Hospitals 1 Jupiter Medical Center A Columbia Hospital (HCA) Good Samaritan Hospital (TENET) Palm Beach Gardens Medical Center (TENET) St. Mary s Medical Center (TENET) Martin Memorial Medical Center (Martin Health System) Martin Memorial Medical Center South (Martin Health System) 4 Jupiter MC Primary Service Area Jupiter MC Secondary Service Area