RIVERSIDE HEALTH SYSTEM and OBLIGATED AFFILIATES. Kankakee, Illinois

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1 and OBLIGATED AFFILIATES Kankakee, Illinois ~ Combined Financial Statements and Supplementary Information March 31, 2015

2 FINANCIAL STATEMENT CERTIFICATION The accompanying balance sheet (combining and combined} of Health System as of March 31,2015 and the related Statement of Income (combining and combined} and changes in in General Fund Balance and Statement of Cash Flows for the period then ended on a calendar basis, have been prepared by management, which is responsible for their integrity and objectivity. These statements have not been complied, reviewed or audited by outside accountants. Health System maintains a system of internal accounting control designed to provide reasonable assurance that assets are safeguarded and that transactions are properly executed, recorded and summarized to produce reliable records and reports. To the best of managements knowledge and belief, the statements and related information were prepared in conformity with generally accepted accounting principles and are based on recorded transactions and managements best estimates and judgment The statements contained within pertain to the following issues from the Illinois Finance Authority: Illinois Finance Authority, Revenue Bonds, Series 2013 CUSIP: 45203HRJ3, 45203HRKO, 45203HRL8, 45203HRM6, 45203HRN4, 45203HRP HR07, 45203HRR5, 45203HRS3, 45203HRT1 Illinois Finance Authority, Revenue Bonds, Series 2009 CUSIP: 45200FZM4, 45200FZL6, 45200FZN2 Illinois Finance Authority, Revenue Refunding Bonds, Series 2006C CUSIP: , 45200BQ50, , , , P BP85,452008P77,45200BP69,45200BP51 Illinois Finance Authority, Variable Rate Revenue Bonds, Series 2006A CUSIP: 45203HKM3 Illinois Finance Authority, Variable Rate Demand Revenue Bonds, Series 2004 CUSIP: 45203HKN1 Illinois Health Facility Authority, Variable Rate Demand Revenue Bonds, Series CUSIP: 45200PUS4 Illinois Health Facility Authority, Revenue Bonds, Series 1996A and CUSIP: 45200LME3 Illinois Health Facility Authority, Variable Rate Demand Revenue Bonds, Series 1994 CUSIP: 45200LAS5 Bill Douglas, CPA Treasurer/Chief Financial Officer Health System

3 Combined Balance Sheets March 31,2015 Assets 3/31/2015 Change Since 12/31/2014 Current assets: Cash and cash equivalents Short-term investments $ 44,953,052 39,830,900 3,474, ,161 Receivables: Patient and resident accounts, less allowance for doubtful accounts of approximately $17,000,000 in 2015 Other 39,589,352 2,416,284 42,005,636 (1,047,390) 1,661, ,574 Inventory of supplies, at lower of cost (first-in, first-out) or market value Prepaid expenses Current portion of estimated insurance recoveries 7,791,286 5,937,138 11,957,348 (73,948) 572,373 Total current assets 152,475,360 5,341,377 Assets whose use is limited or restricted: By board of directors for capital improvements and other Under bond indenture agreements held by trustee Deposits under residency agreements Donor-restricted investments 227,899,060 10,969,920 6,581,030 3,010, ,460,738 4,347,364 20,149 6, ,374,015 Land, buildings, and equipment, net of accumulated depreciation 248,748,921 (395,689) Other assets: Due from HealthCare Foundation, Inc. Deferred financing costs Long-term investments Estimated insurance recoveries Other assets 5,596,253 1,819,985 3,526,810 5,349,155 1,334,572 17,626,775 (18,106) (33,160) ,184 63,008 Total assets $ 667,311,794 9,382,711

4 Combined Balance Sheets March 31,2015 3/ Change Since 12/31/2014 Current liabilities: Current installments of long-term debt Accounts payable Accrued expenses Estimated payables under third-party reimbursement programs Due to unconsolidated subsidiary $ 4,640,000 3,083,045 22,062,130 26,706, ,989 (4,816,776) 1,431,999 (757,325) Total current liabilities 56,728,888 (4,142,102) Refundable security deposits Refundable advance residency fees Long-term debt, excluding current installments and unamortized 330,569 6,581,030 (24,813) 6,500 bond discount and premium Estimated insurance liabilities Other long-term liabilities 170,000,959 32,306,466 6,085,820 (11,528) 879, ,363 Total liabilities 272,033,732 (2,701,234) Net assets: Unrestricted Temporarily restricted Permanently restricted 392,095,113 2,704, ,816 11,911, ,183 5 Total net assets 395,278,062 12,083,945 Total liabilities and net assets $ 667,311,794 9,382,711

5 Combined Statements of Operations For the Three Months ended March 31, 2015 and 2014 Revenue: Net patient service revenue $ 65,921,671 Provision for uncollectible accounts (1,276,215) Net patient service revenue less provision for uncollectible accounts 64,645,456 Resident and health center services revenue 1,785,574 Other revenue 1,539, Total revenue and other support 67,970,308 Expenses: Salaries and employee benefits 32,560,102 Purchased services and supplies 21,395,000 Depreciation and amortization 5,265,804 Utilities I,434,383 Professional fees 290,731 Insurance 1,846,910 Interest 2,187,213 Total expenses 64,980,143 Income from operations 2,990,165 Nonoperating (losses) gains: lnvestment (loss) income, net 5,593,283 Change in fair value of derivative instruments (18,278) Other, net 207,404 Total nonoperating (losses) gains, net 5,782,409 Revenue and gains (deficient) in excess of expenses and losses 8,772,574 Net assets released from restriction for purchases of land, buildings, and equipment (Decrease) increase in unrestricted net assets $ 8,772, ,212,775 (1,999,590) 78,213,185 2,040,871 1,318,870 81,572,926 38,180,475 24,841,002 5,924,708 1,304, ,042 1,998,260 1,938,582 74,389,914 7,183,012 5,047,316 (525,962) 207,391 4,728,745 11,911,757 11,911,757

6 Combined Statements of Changes in Net Assets For the Three Months ended March 3 I, 20 IS 2015 Increase in unrestricted net assets Temporarily restricted net assets: Contributions for specific purposes Investment return earned on temporarily and permanently restricted investments Net assets released from restriction for purchases of land, buildings, and equipment Increase in temporarily restricted net assets Change in pennanently restricted net assets: Change in net unrealized gains and losses on permanently restricted investments Change in net assets Net assets at beginning of year Net assets at March 31,2015 $ 11,911, , ,188 12,083, ,194,117 $ 395,278,062

7 Combined Statements of Cash Flows For the Three Months ended March 31, Cash flows from operating activities: Revenue and gains deficient of expenses and losses Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization Provision for doubtful accounts Amortization of bond discount, net Restricted contributions and investment return Changes in assets and liabilities: Patient and resident accounts receivable Other receivables Inventory of supplies, prepaid expenses, and other assets Accounts payable and accrued expenses Estimated payables under third-party reimbursement programs Estimate insurance receivables and liabilities Refundable security deposits, net Other long-term liabilities Net cash provided by operating activities Cash flows from investing activities: Net change in short-term investments Net change in assets whose use is limited or restricted Net change in long-term investments Acquisition of land, buildings, and equipment, net Net cash provided by investing activities Cash flows from financing activities: Proceeds (repayment) of long-term debt, net Reductions in deferred financing costs Net cash provided by financing activities Net change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at March 31, 2015 $ 11,911,757 5,924,708 1,999,590 5, ,188 (952,200) (1,661,964) (498,425) (3,384,777) (757,325) 879,346 (24,813) 592,784 14,205,948 (754,161) (4,374,015) (96,168) (5,529,019) (10,753,363) (11,528) 33,160 21,632 3,474,217 41,478,835 $ 44,953,052

8 Combining Schedule - Balance Sheet lnfonnation March 31,2015 Senior Medical Oakside Living Assets Center Coq;!oration Center Eliminations Combined Current assets: Cash and cash equivalents $ 36,666,359 4,068,836 4,217,857 44,953,052 Short-tenn investments 13,905,904 25,924,996 39,830,900 Receivables: Patient and resident accounts, less allowance for doubtful accounts of approximately $17,000,000 35,774,327 1,653,208 2,161,817 39,589,352 Other 20,841, , ,000 (18,853,870) 2,416,284 56,616,027 1,981,662 2,261,817 {18,853,870) 42,005,636 Inventory of supplies 6,539,636 1,227,185 24,465 7,791,286 Prepaid expenses 5,820,965 43,356 72,817 5,937,138 Current portion of estimated insurance recoveries 11,957,348 11,957,348 Total current assets 117,600,335 21,226,943 32,501,952 (18,853,870) 152,475,360 Assets whose use is limited or restricted: By board of directors for capital improvements and other 227,899, ,899,060 Under bond indenture agreements held by trustee 8,352, ,783 2,289,034 10,969,920 Deposits under residency agreements 6,581,030 6,581,030 Donor-restricted investments 3,010,728 3,010,728 Land, buildings, and equipment, net 239,261, ,783 8,870, ,460,738 of accumulated depreciation 200,135,690 11,256,995 37,356, ,748,921 Other assets: Due from HealthCare Foundation, Inc. 5,221, ,921 5,596,253 Deferred financing costs 1,337,648 48, ,591 1,819,985 Long-term investments 3,526,810 3,526,810 Estimated insurance recoveries 5,349,155 5,349,155 Other assets 36,027 1,298,545 1,334,572 15,470,972 1,347, ,512 17,626,775 Total assets $ 572,468,888 34,160,012 79,536,764 ( 18,853,870) 667,311,794

9 Combining Schedule- Balance Sheet Information March 31,2015 Senior Medical Oakside Living Liabilities and Net Assets Center Corl!oration Center Eliminations Combined Current liabilities: Current installments of long-term debt $ 3,800, , ,070 4,640,000 Accounts payable 2,453,630 2,885,926 16,325,854 (18,582,365) 3,083,045 Accrued expenses 19,131, ,246 2,478,984 (271,505) 22,062,130 Estimated payables under third-party reimbursement programs 26,706,724 26,706,724 Due to unconsolidated subsidiary 236, ,989 Total current liabilities 52,092,598 4,181,252 19,308,908 (18,853,870) 56,728,888 Refundable security deposits 330, ,569 Refundable advance residency fees 6,581,030 6,581,030 Long-term debt, excluding current installments and unamortized bond discount and premium 133,275,012 7,872,047 28,853, ,000,959 Estimated insurance liabilities 32,306,466 32,306,466 Other long-term liabilities 3,871,911 1,173,814 1,040,095 6,085,820 Total liabilities 221,545,987 13,227,113 56,114,502 (18,853,870) 272,033,732 Net assets: Unrestricted 347,739,952 20,932,899 23,422, ,095,113 Temporarily restricted 2,704,133 2,704,133 Permanently restricted 478, ,816 Total net assets 350,922,901 20,932,899 23,422, ,278,062 Total liabilities and net assets $ 572,468,888 34,160,012 79,536,764 (18,853,870) 667,311,794

10 Combining Schedule- Statement of Operations Infonnation For the Three Months ended March 31, 2015 Senior Medical Oakside Living Center Cor~oration Center Eliminations Combined Revenue: Net patient service revenue $ 74,336,868 1,505,181 4,370,726 80,212,775 Provision for uncollectible accounts (1,928,663) (70,927) (1,999,590) Net patient service revenue less provision for uncollectible accounts 72,408,205 1,434,254 4,370,726 78,213,185 Resident and health center services revenue 2,040,871 2,040,871 Other revenue 1,300,932 19, ,221 (174,878) 1,318,870 Total revenue 73,709,137 I,453,849 6,584,818 (174,878) 81,572,926 Expenses: Salaries and employee benefits 34,422, ,458 3,079,818 38,180,475 Purchased services and supplies 22,800, ,740 1,886,745 (174,878) 24,841,002 Depreciation and amortization 5,290, , ,712 5,924,708 Utilities 1,009,074 49, ,654 1,304,845 Professional fees 168,140 30,723 3, ,042 Insurance 1,901,655 20,635 75,970 1,998,260 Interest 1,452,448 99, ,205 1,938,582 Total expenses 67,044,519 1,340,990 6,179,283 (174,878) 74,389,914 Income (loss) from operations 6,664, , ,535 7,183,012 Nonoperating (losses) gains: Investment loss, net 4,497, , ,746 5,047,316 Change in fair value of derivative instruments (323,461) {123,875) (78,626) (525,962) Other, net , ,391 Net nonoperating losses 4,174, , ,120 4,728,745 Revenue and gains in excess of expenses and losses 10,838, , ,655 11,911,757 Other changes in unrestricted net assets: Net assets released from restriction for purchases of land, buildings, and equipment (Decrease) increase in unrestricted net assets $ 10,838, , ,655 11,911,757

11 Combining Schedule- Statement of Changes in Net Assets Information For the Three Months ended March 31, 2015 Senior Medical Oakside Living Center Coq~oration Center Increase in unrestricted net assets $ 10,838, , ,655 Temporarily restricted net assets: Contributions for specific purposes 172,183 Investment return earned on temporarily and permanently restricted investments 5 Net assets released from restriction for purchases of land, buildings, and equipment Increase in temporarily restricted net assets 172,188 Change in permanently restricted net assets: Change in net unrealized gains and losses on permanently restricted investments Change in net assets 11,011, , ,655 Net assets at beginning of year 339,911,822 20,502,688 22,779,607 Net assets at end of year $ 350,922,901 20,932,899 23,422,262 Eliminations Combined 11,911, , ,188 12,083, ,194, ,278,062

12 Hospital Utilization The table below sets forth the Hospital's comparative information with respect to utilization for the years ended December 31, 2012 through December 31, 2014 and for the three months ended March 31, 2014 and For the Year Ended December 31: Three Months Ended March 31, Admissions 11,043 10,412 9,945 2,444 2,626 Patient Days 51,979 50,962 50,073 12,001 13,939 Average Daily Census Average Length of Stay (all services) Outpatient Visits (non-emergency) 165, , ,400 41,289 49,725 Emergency Care Visits 40,841 39,635 41,048 9,179 10,283 Outpatient Surgery 8,401 7,863 8,263 1,877 2,112 Inpatient Surgery 2,643 2,625 2, Market Share Presence St. Mary's Hospital is the only other hospital in the community, and in the primary service area. Presence St. Mary's Hospital is a 303 licensed bed facility located within one-half mile of the Hospital St. Mary's St. Mary's St. Mary's St. Mary's Admissions Inpatient Surgery Outpatient Surgery Emergency Room Visits Deliveries 62.5% 37.5% 70.2% 29.8% 63.6% 36.4% 54.1% 45.9% 70.6% 29.4% 62.1% 37.9% 65.0% 35.0% 67.9% 32.1% 72.8% 27.2% 68.6% 31.4% 67.9% 32.1% 54.1% 45.9% 56.8% 43.2% 65.1% 34.9% 69.1% 31.0% 65.9% 34.1% 71.7% 28.3% 70.3% 29.7% 59.7% 40.3% 73.1% 26.9% ********************************************* Source: Illinois CompData

13 Sources of Inpatient Revenue by Payor Type (Percent) Year Medicare Medicaid Blue Cross Commercial Other* * Other includes private pay. Note 1: Net Patient Service Revenue Three Months Ended March 31, Gross patient service revenue Less provision for: Contractual adjustments under third-party reimbursement programs Other Net patient service revenue $ 201,382,820 89,758,612 45,702,537 $ 65,921,671 $ 247,839, ,196,691 54,430,169 $ 80,212,775