Preliminary Reoffering Circular Dated January 17, 2017

Transcription

1 This Preliminary Reoffering Circular and the information contained herein are subject to completion or amendment without notice. Under no circumstances shall this Preliminary Reoffering Circular constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. NOT A NEW ISSUE Preliminary Reoffering Circular Dated January 17, 2017 $25,000,000 * State of Connecticut Health and Educational Facilities Authority Variable Rate Revenue Bonds (Ascension Health Credit Group) Series 1999B Dated: Date of Original Issuance Mandatory Tender: February 1, 2017 $99,510,000 * Indiana Health Facility Financing Authority Revenue Bonds (Ascension Health Credit Group) Series 2001A-2 Due: November 15, as shown on the inside cover Purchase Date: As shown on the inside cover This Reoffering Circular (this Reoffering Circular ) contains certain information describing the reoffering of the (i) $25,000,000 * State of Connecticut Health and Educational Facilities Authority Variable Rate Revenue Bonds (Ascension Health Credit Group), Series 1999B (the Connecticut Bonds ), and (ii) $99,510,000 * Indiana Health Facility Financing Authority Revenue Bonds (Ascension Health Credit Group), Series 2001A-2 (the Indiana Bonds and, collectively with the Connecticut Bonds, the Bonds and each, a Series of Bonds), each in a new Long-Term Interest Rate Period, each effective February 1, 2017 to the respective Purchase Date for such Series of Bonds identified on the inside cover of this Reoffering Circular (each a Purchase Date for such Series). The Connecticut Bonds were issued pursuant to a Bond Indenture, dated as of November 1, 1999 (as supplemented and amended, the Connecticut Bond Indenture ), between the State of Connecticut Health and Educational Facilities Authority (the Connecticut Issuer ) and Wells Fargo Bank, National Association, as successor bond trustee (the Connecticut Bond Trustee ). The Indiana Bonds were issued pursuant to a Bond Indenture, dated as of December 1, 2001 (as supplemented and amended, the Indiana Bond Indenture and, collectively with the Connecticut Bond Indenture, the Bond Indentures and each a Bond Indenture ), between the Indiana Finance Authority (successor to the Indiana Health Facility Financing Authority) (the Indiana Issuer and, together with the Connecticut Issuer, the Issuers and each an Issuer ) and Wells Fargo Bank, National Association, as successor bond trustee (the Indiana Bond Trustee and, together with the Connecticut Bond Trustee, the Bond Trustees and each a Bond Trustee ). Capitalized terms used but not defined herein shall have the meanings set forth in the Reoffering Circular dated February 18, 2009 (the 2009 Reoffering Circular ) relating to the Bonds, incorporated by reference herein. See Purpose of this Reoffering Circular herein. The proceeds of the Connecticut Bonds were loaned by the Connecticut Issuer to two borrowers (as hereinafter further described) pursuant to separate Loan Agreements, each dated as of November 1, 1999 (as supplemented and amended, the Connecticut Loan Agreements ), each between the Connecticut Issuer and the applicable borrower. The proceeds of the Indiana Bonds were loaned by the Indiana Issuer to Ascension Health ( Ascension Health ) pursuant to a Loan Agreement, dated as of December 1, 2001 (as supplemented and amended, the Indiana Loan Agreement and, collectively with the Connecticut Loan Agreements, the Loan Agreements, and each a Loan Agreement ), between the Indiana Issuer and Ascension Health. The Connecticut Bonds are secured by two Obligations ( Senior Obligations No. 4 and No. 5 ), each issued pursuant to a Master Trust Indenture dated as of November 1, 1999, as amended and supplemented to date (the Senior Master Indenture ), among Ascension Health, the other Obligated Group Members (as defined in the Senior Master Indenture, the Senior Obligated Group Members ) and U.S. Bank National Association, as master trustee (the Senior Master Trustee ), and a Supplemental Master Trust Indenture for Master Indenture Obligation No. 4 and a Supplemental Master Trust Indenture for Master Indenture Obligation No. 5, each dated as of November 1, 1999, as supplemented and amended, between Ascension Health, acting on behalf of itself and the other Senior Obligated Group Members, and the Senior Master Trustee. The Indiana Bonds are secured by an Obligation ( Senior Obligation No. 30 and, together with Senior Obligations No. 4 and No. 5, the Senior Obligations ) issued pursuant to the Senior Master Indenture and a Supplemental Master Trust Indenture for Master Indenture Obligation No. 30, dated as of December 1, 2001, as supplemented and amended, between Ascension Health, acting on behalf of itself and the other Senior Obligated Group Members, and the Senior Master Trustee. On December 21, 2011, Ascension Health Alliance d/b/a Ascension ( Ascension ), a Missouri nonprofit corporation formed on September 13, 2011 and the sole corporate member of Ascension Health, became a member of the Senior Credit Group and, on December 22, 2011, was appointed the Senior Credit Group Representative under the Senior Master Indenture. Ascension Health remains a member of the Senior Credit Group. The Senior Obligations are the joint and several obligations of Ascension and the other Senior Obligated Group Members. The Bonds are currently assigned and are expected to continue to carry as of February 1, 2017, the municipal bond ratings of AA+, Aa2 and AA+ by Fitch Ratings, Moody s Investors Service, Inc. and S&P Global Ratings, a Standard & Poor s Financial Services LLC business, respectively. Neither the Connecticut Issuer nor the Indiana Issuer has participated in the preparation of this Reoffering Circular, and neither Issuer makes any representation with respect hereto or is in any manner responsible for any of the information contained herein or for the remarketing of either Series of the Bonds. Other than as provided herein, the 2009 Reoffering Circular has not been updated since its date. This Reoffering Circular has been prepared for use by Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC for the sole purpose of providing information relating to the matters set forth herein. This Reoffering Circular should only be read in conjunction with the 2009 Reoffering Circular and the other documents incorporated herein by reference. * Preliminary, subject to change. BofA Merrill Lynch J.P. Morgan The date of this Reoffering Circular is January, morgan Stanley

2 MATURITY SCHEDULE * $25,000,000 * State of Connecticut Health and Educational Facilities Authority Variable Rate Revenue Bonds (Ascension Health Credit Group) Series 1999B Year (November 15) Purchase Date Interest Price or Rate Yield CUSIP % % $99,510,000 * Indiana Health Facility Financing Authority Revenue Bonds (Ascension Health Credit Group) Series 2001A-2 Year (November 15) Purchase Date Interest Price or Rate Yield CUSIP % % * Preliminary, subject to change. A registered trademark of The American Bankers Association. CUSIP data herein is provided by Standard & Poor s CUSIP Service Bureau, a Standard & Poor s Financial Services LLC business. The CUSIP number is provided for convenience of reference only.

3 Reoffering Circular Relating to the $25,000,000 * State of Connecticut Health and Educational Facilities Authority Variable Rate Revenue Bonds (Ascension Health Credit Group) Series 1999B $99,510,000 * Indiana Health Facility Financing Authority Revenue Bonds (Ascension Health Credit Group) Series 2001A-2 Purpose of this Reoffering Circular The purpose of this Reoffering Circular (this Reoffering Circular ), including the cover and inside cover page hereto, is to set forth information in connection with the reoffering of the (i) $25,000,000 * State of Connecticut Health and Educational Facilities Authority Variable Rate Revenue Bonds (Ascension Health Credit Group), Series 1999B (the Connecticut Bonds ), and (ii) $99,510,000 * Indiana Health Facility Financing Authority Revenue Bonds (Ascension Health Credit Group), Series 2001A-2 (the Indiana Bonds and, collectively with the Connecticut Bonds, the Bonds and each, a Series of Bonds), each in a new Long-Term Interest Rate Period, each effective February 1, 2017 to the respective Purchase Date for such Series of Bonds identified on the inside cover page of this Reoffering Circular (each a Purchase Date for such Series). The Connecticut Bonds were issued pursuant to a Bond Indenture, dated as of November 1, 1999 (as supplemented and amended, the Connecticut Bond Indenture ), between the State of Connecticut Health and Educational Facilities Authority (the Connecticut Issuer ) and Wells Fargo Bank, National Association, as successor bond trustee (the Connecticut Bond Trustee ). The Indiana Bonds were issued pursuant to a Bond Indenture, dated as of December 1, 2001 (as supplemented and amended, the Indiana Bond Indenture and, collectively with the Connecticut Bond Indenture, the Bond Indentures and each a Bond Indenture ), between the Indiana Finance Authority (successor to the Indiana Health Facility Financing Authority) (the Indiana Issuer and, together with the Connecticut Issuer, the Issuers and each an Issuer ) and Wells Fargo Bank, National Association (formerly known as Wells Fargo Bank Indiana, National Association), as bond trustee (the Indiana Bond Trustee and, together with the Connecticut Bond Trustee, the Bond Trustees and each a Bond Trustee ). The proceeds of the Connecticut Bonds were loaned by the Connecticut Issuer to Hall-Brooke Foundation, Inc., a Connecticut not for profit corporation ( Hall-Brooke ), and St. Vincent s Medical Center, a Connecticut not for profit corporation ( St. Vincent s and, together with Hall-Brooke, the Original Connecticut Borrowers and each an Original Connecticut Borrower ) pursuant to separate Loan Agreements, each dated as of November 1, 1999 (as supplemented and amended, the Connecticut Loan Agreements ), each between the Connecticut Issuer and the applicable Original Connecticut Borrower. Pursuant to a Certificate of Merger, dated as of June 25, 2013, Hall-Brooke merged with and into St. Vincent s in compliance with Section 3.07 of the Senior Master Indenture (as defined below). St. Vincent s, for itself and as successor by merger to Hall-Brooke, is hereinafter referred to as the Connecticut Borrower. The proceeds of the Indiana Bonds were loaned by the Indiana Issuer to Ascension Health ( Ascension Health ) pursuant to a Loan Agreement, dated as of December 1, 2001 (as supplemented and amended, the Indiana Loan Agreement and, collectively with the Connecticut Loan Agreements, the Loan Agreements, and each a Loan Agreement ), between the Indiana Issuer and Ascension Health. The Connecticut Bonds are secured by two Obligations ( Senior Obligations No. 4 and No. 5 ), each issued pursuant to a Master Trust Indenture dated as of November 1, 1999, as amended and supplemented (the Senior Master Indenture ), among Ascension, Ascension Health, the Connecticut Borrower, the other Obligated Group Members (as defined in the Senior Master Indenture, the Senior Obligated Group Members ) and U.S. Bank National Association, as master trustee (the Senior Master Trustee ), and a Supplemental Master Indenture for Master Indenture Obligation No. 4 and a Supplemental Master Indenture for Master Indenture Obligation No. 5, each dated as of November 1, 1999 (as supplemented and amended, collectively, the Connecticut Supplemental Master Indentures ), between Ascension Health, acting on behalf of itself and the other Senior Obligated Group Members, and the Senior Master Trustee. The Indiana Bonds are secured by an Obligation ( Senior Obligation * Preliminary, subject to change. 1

4 No. 30 and, together with Senior Obligations No. 4 and No. 5, the Senior Obligations ) issued pursuant to the Senior Master Indenture and a Supplemental Master Indenture for Master Indenture Obligation No. 30, dated as of December 1, 2001 (as supplemented and amended, the Indiana Supplemental Master Indenture and collectively, with the Connecticut Supplemental Master Indentures, the Supplemental Master Indentures ), between Ascension Health, acting on behalf of itself and the other Senior Obligated Group Members, and the Senior Master Trustee. On December 21, 2011, Ascension Health Alliance d/b/a Ascension ( Ascension ), a Missouri nonprofit corporation formed on September 13, 2011 and the sole corporate member of Ascension Health, became a member of the Senior Credit Group and, on December 22, 2011, was appointed the Senior Credit Group Representative under the Senior Master Indenture. Ascension Health remains a member of the Senior Credit Group. The Senior Obligations are the joint and several obligations of Ascension and the other Senior Obligated Group Members. Reference is made to (i) the Official Statement, dated October 15, 1999 (the 1999 Official Statement ), relating to, inter alia, the Connecticut Bonds, (ii) the Official Statement Supplement dated May 21, 2007 (the 2007 Supplement ), relating to the Indiana Bonds, which includes, as an Exhibit, the Official Statement, dated December 4, 2001 (the 2001 Official Statement ), relating to, inter alia, the Indiana Bonds, and (iii) the Reoffering Circular, dated February 18, 2009 (the 2009 Reoffering Circular ) relating to the Bonds, which are on file with the Municipal Securities Rulemaking Board (the MSRB ) on its Electronic Municipal Market Access ( EMMA ) system and incorporated herein by reference, for a summary description of the Bonds, including a description of the security for the Bonds. The 2009 Reoffering Circular amends and supplements the 1999 Official Statement and the 2001 Official Statement. Other than by the 2009 Reoffering Circular and this Reoffering Circular, the 1999 Official Statement and the 2001 Official Statement have not been amended since their respective dates, and other than by this Reoffering Circular, the 2009 Reoffering Circular has not been amended and supplemented since its date. Neither the Connecticut Issuer nor the Indiana Issuer has participated in the preparation of this Reoffering Circular or makes any representation with respect hereto and is not in any manner responsible for any of the information contained herein or for the remarketing of either Series of the Bonds. Description of the Bonds General While in a Long-Term Interest Rate Period, the Bonds operate in the manner described under the captions THE BONDS and APPENDIX C SUMMARY OF PRINCIPAL DOCUMENTS Bond Indentures in the 2009 Reoffering Circular. Reference is made to the information under such captions and such APPENDIX C in the 2009 Reoffering Circular for a description of the Bonds while in a Long-Term Interest Rate Period. The summary description of the Bonds while in a Long-Term Interest Rate Period is qualified in its entirety by reference to the Bond Indentures, and is not to be considered as a full statement of the provisions of such documents. Purchase The Bonds of each Series are subject to purchase on their respective Purchase Dates. Ascension Health or the Connecticut Borrower, as applicable, is obligated to provide funds for the purchase of the applicable Series of the Bonds on the related Purchase Date if remarketing proceeds are not available for such purchase. In addition, Ascension and the Senior Obligated Group Members are obligated to provide funds for the purchase of unremarketed Bonds pursuant to the Supplemental Master Indentures. See THE BONDS Purchase of Bonds in the 2009 Reoffering Circular. 2

5 Redemption Extraordinary Redemption The Bonds of each Series are subject to extraordinary redemption prior to maturity under certain circumstances described in the 2009 Reoffering Circular. See THE BONDS Redemption Extraordinary Redemption in the 2009 Reoffering Circular. Optional Redemption * The Bonds of each Series in a Long-Term Interest Rate Period that has a Purchase Date earlier than the maturity date of such Series of Bonds are not subject to optional redemption prior to their respective Purchase Date. The Bonds of each Series in a Long-Term Interest Rate Period that extends to the maturity date for such Series of Bonds are subject to optional redemption prior to their stated maturities, at the option of the applicable Issuer upon request of the Senior Credit Group Representative, in whole or in part, in such amounts specified by the Senior Credit Group Representative, on any date on or after, at a redemption price equal to the principal amount thereof, plus accrued interest to the date fixed for redemption, without premium. Mandatory Redemption * date. Each Series of the Bonds is subject to mandatory sinking fund redemption prior to its respective maturity Connecticut Bonds. The Connecticut Bonds are subject to redemption prior to their stated maturity date, in part, from Sinking Fund Installments on the dates set forth below, at the principal amount thereof and interest accrued thereon to the date fixed for redemption, without premium, in the amounts indicated below. Sinking Fund Installment Date (November 15)* * Preliminary, subject to change. Final maturity. Sinking Fund Installments* 2017 $ 1,500, ,600, ,700, ,700, ,800, ,800, ,900, ,000, ,000, ,100, ,200, ,300, ,400,000 * Preliminary, subject to change. 3

6 Indiana Bonds. The Indiana Bonds are subject to redemption prior to their stated maturity date, in part, from Sinking Fund Installments on the dates set forth below, at the principal amount thereof and interest accrued thereon to the date fixed for redemption, without premium, in the amounts indicated below. Sinking Fund Installment Date (November 15)* * Preliminary, subject to change. Final maturity. Sinking Fund Installments* 2032 $ 7,200, ,900, ,700, ,600, ,110,000 Security for the Bonds A summary description of the security for the Bonds is set forth in the 2009 Reoffering Circular under the caption SECURITY FOR THE BONDS. Reoffering of the Bonds The Bonds of each Series currently bear interest at a Long-Term Interest Rate in a Long-Term Interest Rate Period, ending January 31, The Bonds of each Series are subject to mandatory tender on February 1, 2017 (the first day of a new Interest Rate Period for each Series). The Bonds are being reoffered and each Series will bear interest at a Long-Term Interest Rate in a new Long-Term Interest Rate Period, beginning February 1, 2017 and ending on the day prior to the respective Purchase Date for such Series of Bonds identified on the inside cover page of this Reoffering Circular, subject to mandatory tender on the respective Purchase Date. Interest on each Series of the Bonds in the new Interest Rate Period will be payable on the respective Purchase Date and on May 15 and November 15, beginning on May 15, Bondholders Risks Except as noted herein and in the 2009 Reoffering Circular, each Series of Bonds is payable solely from and secured by Loan Repayments made pursuant to the related Loan Agreement and payments made pursuant to the related Senior Obligation. No representation or assurance can be made that revenues will be realized by Ascension, Ascension Health, the Connecticut Borrower or other Senior Credit Group Members in amounts sufficient to make the payments under the Loan Agreements or the Senior Obligations and thus, to pay principal of, redemption premium and interest on the related Bonds and the purchase price thereof. Other than as described below, certain risks that may affect the Bonds and the Senior Credit Group are incorporated herein by reference to the Official Statement dated April 27, 2016 related to the $165,630,000 Michigan Finance Authority Hospital Project and Refunding Revenue Bonds (Ascension Senior Credit Group) Series 2016E (the 2016 Official Statement ) which is on file on the MSRB s EMMA system. Such risks are described under the caption BONDHOLDERS RISKS in the 2016 Official Statement. In addition, the following additions and amendments to BONDHOLDERS RISKS in the 2016 Official Statement are made: All references to APPENDIX A in BONDHOLDERS RISKS are replaced with INFORMATIONAL FILING. 4

7 FEDERAL BUDGET CUTS The second paragraph of the Federal Budget Cuts section is amended to read as follows: The American Taxpayer Relief Act of 2012 ( ATRA ) postponed this scheduled reduction until March 1, On March 11, 2013, CMS implemented the 2% reductions for all Medicare Parts A and B claims with dates-of-service or dates-of-discharge on or after April 1, 2013, and for all payments made to Medicare Advantage Organizations ( MAOs ), Part D plans and other programs (including Managed Care Organizations) with enrollment periods beginning on or after April 1, Additionally, ATRA affects hospital Medicare reimbursement in that it requires the Medicare program to recoup funds from hospitals based on changes made from to documentation and coding that have increased Medicare inpatient prospective payment system ( IPPS ) payments but that do not represent real increases in the intensity of services provided to patients. In the final IPPS regulations for federal fiscal year 2014, CMS stated that it intends to phase in this recoupment over time, starting with a 0.8% reduction in the Medicare standardized amount for The fiscal year 2015 IPPS final rule reduced standardized amounts by a second 0.8% installment, for a cumulative reduction of 1.6% for fiscal year The fiscal year 2016 IPPS final rule reduced standardized amounts by an additional 0.8%, for a cumulative reduction of 2.4%. The fiscal year 2017 IPPS final rule, which implements the final year of reductions pursuant to ATRA, reduced standardized amounts by an additional 1.5%, for a cumulative reduction of 3.9%. HEALTH CARE REFORM The third and fourth paragraphs of the Health Care Reform section are amended to read as follows: The changes in the health care industry brought about by the ACA may have both positive and negative effects, directly and indirectly, on the nation s hospitals and other health care providers, including the Senior Credit Group Members. For example, the projected increase in the numbers of individuals with health care insurance occurring as a consequence of Medicaid expansion, creation of health insurance exchanges, subsidies for insurance purchase and the penalty on certain individuals who do not purchase insurance could result in lower levels of bad debt and increased utilization or profitable shifts in utilization patterns for hospitals. A negative impact to the hospital industry overall will likely result from scheduled cumulative reductions in Medicare payments; such reductions are substantial. The ACA s cost-cutting provisions to the Medicare program include reduction in Medicare market basket updates to hospital reimbursement rates under the IPPS, as well as additional reductions to or elimination of Medicare reimbursement for certain patient readmissions and hospital-acquired conditions. Industry experts also expect that government cost reduction actions may be followed by private insurers and payors. Because approximately 36% of the net patient service revenues of the Senior Credit Group for its fiscal year ended June 30, 2016 are from Medicare spending, the reductions may have a material impact, and could offset any positive effects of the ACA. Health care providers could be further subjected to decreased reimbursement as a result of implementation of recommendations of the Independent Payment Advisory Board ( IPAB ). The ACA directs the IPAB to make recommendations to reduce Medicare cost growth if such growth exceeds legislated targets. The IPAB s recommended reductions will be automatically implemented unless Congress adopts alternative legislation that meets equivalent savings targets. While hospitals are largely exempted from the recommendations from the IPAB, the impact on providers may filter up to hospitals, and industry experts also expect that government cost reduction actions may be followed by private insurers and payors. The IPAB was to begin submitting its annual recommendations no later than January 15, However, the president of the United States has yet to appoint the members of the IPAB. The Medicare Trustees 2016 report predicted that the IPAB will likely be triggered in fiscal year Congressional Republicans have stated they will block appointments to the IPAB, so the actual effect of any IPAB decisions may be delayed. 5

8 The eleventh paragraph of the Health Care Reform section is amended to read as follows: As a part of this value-based payment initiative, in October of 2016, DHHS published regulations pursuant to the Medicare Access and CHIP Reauthorization Act of 2015 ( MACRA ) which significantly affect the method of reimbursement for healthcare providers billing under the Medicare Physician Fee Schedule. MACRA created a new quality reporting system called the Merit-Based Incentive Payment System ( MIPS ) that is based on concepts from the Physician Quality Reporting System, the Value Based Modifier and the eligible professional Medicare Electronic Health Record Incentive programs and consolidates elements of each into a single quality reporting program. The Medicare Electronic Health Record Incentive Program for eligible hospitals remains separate from MIPS. Starting in 2019, most physicians and mid-level providers will be subject to a reimbursement adjustment based on their MIPS performance. The potential MIPS adjustment starts at +/-4% in 2019 and extends to +/-9% in Qualifying providers who opt to participate in Advanced Alternative Payment Models ( AAPMs ) can be excluded from MIPS by satisfying threshold requirements for AAPM participation. Qualifying providers who choose to participate in an AAPM and satisfy certain requirements will receive a five percent lump sum incentive payment for years , as well as higher payment adjustments to the Medicare Physician Fee Schedule than MIPS participants for years 2026 and beyond. Generally, the first performance year to report quality metrics pursuant to MACRA is 2017 with payment adjustments for the 2017 performance year being implemented in A new paragraph as set forth below is added as the last paragraph of the Health Care Reform section: Due to the results of the recent presidential election, there can be no assurance that the ACA or other health care laws and regulations will remain in their current form. There can be no assurance that any potential changes to the laws and regulations governing health care would not have significant negative financial impact to the Senior Credit Group. PATIENT SERVICE REVENUES The second paragraph of the Patient Service Revenues Medicare and Medicaid Programs section is amended to read as follows: For the fiscal year ended June 30, 2016, Medicare payments represented approximately 36% of the Senior Credit Group s net patient service revenue less provision for bad debt expense. For the fiscal year ended June 30, 2015, Medicare payments represented approximately 37% of the Senior Credit Group s net patient service revenue less provision for bad debt expense. The first sentence of the last paragraph of the Patient Service Revenues Medicare section is amended to read as follows: For information concerning the Medicare payments received by the Senior Credit Group for the fiscal years ended June 30, 2014, 2015 and 2016, see INFORMATIONAL FILING INFORMATION CONCERNING THE ASCENSION SENIOR CREDIT GROUP FINANCIAL AND OPERATING INFORMATION Sources of Revenue. The second paragraph of the Patient Service Revenues Medicaid section is amended to read as follows: The ACA requires Medicaid to be expanded to all individuals under the age of 65 with income less than 138% of the federal poverty limit, effective in To fund this expansion, the ACA provides that the federal government will fund 100% of the costs of this expansion from fiscal years , decreasing to 90% of the costs of this expansion in fiscal year 2020 and thereafter. In June 2012, the Supreme Court held that the federal government cannot withhold existing federal funds for states that refuse to expand Medicaid as required by the ACA. As of October 1, 2016, 32 states and the District of 6

9 Market Risk Columbia had adopted the Medicaid expansion in some form, with the remainder declining to participate in the expansion, or remaining undecided. Some states in which Ascension operates have expanded Medicaid and others have not. The last paragraph of the Patient Service Revenues Medicaid section is amended to read as follows: For the fiscal year ended June 30, 2016, Medicaid payments represented approximately 13% of the Senior Credit Group s net patient service revenue less provision for bad debt expense. For the fiscal year ended June 30, 2015, Medicaid payments represented approximately 11% of the Senior Credit Group s net patient service revenue less provision for bad debt expense. The sixth paragraph of the Patient Service Revenues Private Health Plans and Managed Care section is amended to read as follows: Defined broadly, for the fiscal year ended June 30, 2016, commercial care and other managed care payments (excluding Medicare and Medicaid contracts) constituted approximately 50% of the Senior Credit Group s net patient service revenue less provision for bad debt expense. For the fiscal year ended June 30, 2015, commercial care and other managed care payments (excluding Medicare and Medicaid contracts) represented approximately 50% of the Senior Credit Group s net patient service revenue less provision for bad debt expense. REGULATORY ENVIRONMENT The first sentence of the Regulatory Environment Enforcement Affecting Clinical Research section is amended to read as follows: In addition to increasing enforcement of laws governing payment and reimbursement, the federal government has also increased enforcement of laws and regulations governing the conduct of clinical trials at hospitals. TAX MATTERS All references to Series 2016 Variable Rate Bonds in the Tax Matters section are replaced with Bonds. The second sentence and last sentence of the last paragraph of Tax Matters is deleted. As of December 31, 2016, the Senior Credit Group had outstanding approximately $584.6 million of bonds bearing interest at weekly interest rates which could be put upon seven days notice, and $1.8 billion of bonds bearing fixed rates of interest for fixed interim periods subject to mandatory tender for purchase at the end of their respective long-term interest rate periods. None of these variable rate bonds are supported by dedicated letters of credit or other dedicated liquidity facilities. Ascension is required to pay the tender price of tendered and unremarketed bonds. In such an event, management would utilize other sources to provide the liquidity necessary to pay such purchase price. Potential sources include liquidating investments (which could be accompanied by draws on lines of credit to restore fund balances) and issuing commercial paper. In addition, the interest rates on such bonds from time to time has fluctuated significantly and may increase Ascension s cost of capital. Remarketing Agents On and after the Purchase Date, each Series of Bonds will be remarketed in accordance with the applicable Bond Indenture by Morgan Stanley & Co. LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC. 7

10 Ascension and the Senior Credit Group Ascension is a Missouri nonprofit corporation formed on September 13, 2011 and is the sole corporate member of Ascension Health. Through Ascension Health, Ascension is the indirect sole corporate member of certain non-profit corporations that own and operate acute care hospitals and other health care facilities and service providers with approximately 24,251 available beds as of June 30, On December 21, 2011, Ascension became a member of the Ascension Senior and Subordinate Credit Groups under the Senior Master Indenture and Subordinate Master Indenture (defined below) and, on December 22, 2011, was appointed as (i) the Senior Credit Group Representative under the Senior Master Indenture and (ii) the Subordinate Credit Group Representative under the subordinate master trust indenture dated as of February 1, 2005, as supplemented (the Subordinate Master Indenture ), among Ascension Health, other corporations that are subordinated obligated group members thereunder from time to time, and U.S. Bank National Association, as subordinate master trustee. Certain information concerning Ascension and the Ascension Senior Credit Group is contained in the Informational Filing of Ascension for the period ended September 30, 2016, posted November 15, 2016 (the Informational Filing ), which is on file on the MSRB s EMMA system, and is incorporated herein by reference. Continuing Disclosure; Financial Information The Senior Credit Group Representative, on behalf of itself and the other Senior Credit Group Members, has undertaken all responsibilities for any continuing disclosure to Holders of the Bonds as described below, and the Issuers shall have no liability to the Holders of the Bonds or any other person with respect to Securities and Exchange Commission Rule 15c2-12. The Continuing Disclosure Annual Report for the Fiscal Year Ended June 30, 2016 (the 2016 Annual Report ) is provided on behalf of the Ascension Senior Credit Group for the benefit of the Holders and Beneficial Owners of the Bonds. The 2016 Annual Report provides certain financial information and operating data relating to the Senior Credit Group, including the consolidated financial statements of Ascension for the Years Ended June 30, 2016 and The 2016 Annual Report is on file on the MSRB s EMMA system and the information contained in such 2016 Annual Report is incorporated herein by reference. The Senior Credit Group Representative, on behalf of itself and the other Senior Credit Group Members, has covenanted for the benefit of Holders and Beneficial Owners of each Series of the Bonds to provide, an Annual Report (an Annual Report ) no later than 180 days following the end of the Senior Credit Group Representative s fiscal year. Each Annual Report shall provide certain financial information and operating data relating to the Senior Credit Group. The Senior Credit Group Representative has also covenanted to provide, in a Quarterly Report (a Quarterly Report ), certain quarterly unaudited financial information for the first three quarters of each fiscal year relating to the Senior Credit Group no later than 60 days following the end of each of the first three quarters of the Senior Credit Group Representative s fiscal year. The specific nature of the information to be contained in the Annual Report and Quarterly Report is described under the caption CONTINUING DISCLOSURE and APPENDIX D CONTINUING DISCLOSURE AGREEMENTS in the 2009 Reoffering Circular. See also the description of the amendment of the continuing disclosure agreement relating to the Connecticut Bonds in the second to the last paragraph under this caption. Financial information may also be obtained from Ascension online at the following web address: No assurances can be given that Ascension will continue to make such information available on its website. Ascension and Ascension Health have previously entered into continuing disclosure agreements for the benefit of certain outstanding bonds. With the exception of filings relating to defeasances and bond calls, a notice of a rating increase, a notice of a rating decrease, the late filing of a notice with respect to a merger, the filing of notices for both the entry into a definitive agreement for the sale of the assets of three Subordinate Obligated Group 8

11 Members, and the cancellation of such agreement, Ascension and Ascension Health believe they have complied in all material respects with their obligations under such continuing disclosure agreements during the past five years. The continuing disclosure agreements for four series of outstanding bonds (including the Connecticut Bonds) provided that Ascension Health would provide unaudited financial statements within 60 days of the end of each quarter of the fiscal year. Ascension and Ascension Health s practice, including for the past five years and consistent with the remainder of their continuing disclosure agreements, has been to provide unaudited financial statements within 60 days of the end of the first three quarters of the fiscal year, and audited financial statements when available, generally within 90 days after the end of the fiscal year. These continuing disclosure agreements have been amended to remove the requirement for the provision of unaudited financial statements for the fourth quarter of each fiscal year. Prior to the amendment, management of Ascension and Ascension Health believed it was not practical or material to provide unaudited financial statements for the fourth quarter of each fiscal year in such close proximity to the release of full-year audited financial statements. Ascension voluntarily disclosed to the Securities and Exchange Commission (the SEC ) certain failures to satisfy its continuing disclosure obligations. Ascension entered into a settlement with the SEC related to Ascension s failure to disclose certain failures to file notices of defeasance in an official statement delivered in Under the terms of the settlement, Ascension consented to the entry of a Cease and Desist Order by the SEC. The SEC issued that Order on August 24, Under the terms of the settlement and the Order, Ascension must cease and desist from committing or causing any violations and future violations of Section 17(a)(2) of the Securities Act of 1933, as amended, which prohibits any untrue statement of material fact or an omission of material fact in connection with the offer or sale of securities. Further, under the terms of the settlement and the Order, Ascension must, among other things, (1) establish appropriate written policies and procedures and periodic training regarding continuing disclosure obligations to effect compliance with federal securities laws, (2) comply with existing continuing disclosure undertakings, including updating past delinquent filings, (3) disclose in a clear and conspicuous fashion the terms of the settlement in any final official statement for an offering by Ascension within five years of the settlement, (4) certify to the SEC in writing compliance with the undertakings in the settlement, and (5) cooperate in any subsequent investigation by the SEC regarding the false statement identified in the settlement. The settlement and Order do not include any fines or monetary penalties. The settlement and Order provide that Ascension does not admit or deny the findings in the settlement or Order (except those related to the jurisdiction of the SEC). Ratings The Bonds are currently assigned and are expected to continue to carry as of February 1, 2017, the municipal bond ratings of AA+, Aa2 and AA+ by Fitch Ratings, Moody s Investors Service, Inc. and S&P Global Ratings, a Standard & Poor s Financial Services LLC business (collectively, the Rating Agencies ), respectively. There is no assurance that the ratings mentioned above will remain in effect for any given period of time or that they might not be lowered or withdrawn entirely by the Rating Agencies, if in their judgment circumstances so warrant. Any downward change in or withdrawal of any ratings might have an adverse effect on the market price or marketability of the Bonds. Remarketing Ascension has appointed Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC as the Remarketing Agents in connection with the mandatory tender of the Bonds on February 1, Morgan Stanley, parent company of Morgan Stanley & Co. LLC, as a Remarketing Agent of the Bonds, has entered into a retail distribution arrangement with its affiliate, Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its reoffering efforts with respect to the Bonds. 9

12 J.P. Morgan Securities LLC, as a Remarketing Agent of the Bonds, has entered into negotiated dealer agreements (each, a Dealer Agreement ) with each of Charles Schwab & Co., Inc. ( CS&Co. ) and LPL Financial LLC ( LPL ) for the retail distribution of certain securities offerings at the original reoffering prices. Pursuant to each Dealer Agreement, each of CS&Co. and LPL may purchase Bonds from J.P. Morgan Securities LLC at the original reoffering price less a negotiated portion of the selling concession applicable to any Bonds that such firm sells. Tax Matters On the date each Series of Bonds originally was issued, Orrick, Herrington & Sutcliffe LLP ( Bond Counsel ) delivered its opinion (each, an Original Opinion ) to the effect that, based on an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on such Series of Bonds is excluded from gross income for federal income tax purposes under Section 103 of the 1986 Code (the Code ). Each Original Opinion stated that interest on such Series of Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observed that such interest is included in adjusted current earnings when calculating federal corporate alternative minimum taxable income. Bond Counsel expressed no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, each Series of the Bonds. Each Original Opinion speaks only as of its date. In connection with the reoffering of each Series of Bonds in connection with the conversion of the interest rate period of each Series of the Bonds, Bond Counsel will deliver an opinion with respect to each Series of the Bonds (each a Reoffering Opinion ) to the effect that the conversion of the interest rate period of such Series of Bonds will not, in and of itself, result in the inclusion of interest on such Series of Bonds in gross income for federal income tax purposes. No opinion will be expressed as to whether interest on any Series of the Bonds is currently excludable from gross income for federal income tax purposes or as to any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, any Series of the Bonds. Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) ( Premium Bonds ) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Bondholder s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Bondholder. Bondholder s of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. Each Issuer and Ascension, Ascension Health or the Connecticut Borrower have made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to assure that interest on the applicable Series of Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the applicable Series of Bonds being included in gross income for federal income tax purposes, possibly from the date of issuance of such Series of Bonds. Each Original Opinion assumed the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of any Series of Bonds may adversely affect the value of, or the tax status of the interest on, such Series of Bonds. Although Bond Counsel delivered its Original Opinions to the effect that interest on each Series of Bonds is excluded from gross income for federal income tax purposes, the ownership or disposition of, or the amount, accrual or receipt of interest on, such Series of Bonds may otherwise affect a Bondholder s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Bondholder or the Bondholder s other items of income or deduction. Bond Counsel has expressed no opinion regarding any such other tax consequences. 10

13 Future legislative proposals, if enacted into law, clarification of the Code, or court decisions may cause any exclusion of interest on any Series of Bonds from gross income for purposes of federal income taxation to be adversely affected by the conversion of the interest rate period of such Series of Bonds. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisers regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Each Original Opinion was based on legal authority as of the date of its delivery, covered certain matters not directly addressed by such authorities, and represented Bond Counsel s judgment as to the proper treatment of such Series of Bonds for federal income tax purposes. Each Reoffering Opinion will be based on legal authority as of the date of its delivery, will cover matters not directly addressed by such authorities, and will represent Bond Counsel s judgment as to the proper treatment of the applicable Series of Bonds for federal income tax purposes. None of the Original Opinions nor the Reoffering Opinions will be binding on the Internal Revenue Service ( IRS ) or the courts. Furthermore, Bond Counsel has not given any opinion or assurance about activities of any Issuer, Ascension, Ascension Health or the Connecticut Borrower or other users of bond financed or refinanced property after the date on which each Original Opinion was delivered or after the date on which the Reoffering Opinion will be delivered, nor has Bond Counsel given any opinion or assurance about the effect of changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS after the date on which each Original Opinion was delivered or after the date on which the Reoffering Opinion will be delivered. Each Issuer and Ascension, Ascension Health or the Connecticut Borrower have covenanted and agreed for the benefit of Bondholders, however, not directly or indirectly to use or permit the use (to the extent within its control) of proceeds of the applicable Series of Bonds or other funds, or take or omit to take any action, if and to the extent such use, or the taking or omission to take such action, would cause interest on such Series of Bonds to be subject to federal income tax by reason of Section 103 of the Code, and any applicable regulations promulgated thereunder. Bond Counsel s original engagement with respect to each Series of Bonds ended with the issuance of such Series of Bonds. Bond Counsel s engagement with respect to the reoffering of the Bonds will end upon delivery of the Reoffering Opinion. Unless separately engaged, Bond Counsel is not obligated to defend any Issuer, Ascension, Ascension Health, the Connecticut Borrower or the Beneficial Owners regarding the tax-exempt status of any Series of Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the applicable Issuer, Ascension, Ascension Health or the Connecticut Borrower and their appointed counsel, including the Bondholders, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which an Issuer, Ascension, Ascension Health or the Connecticut Borrower legitimately disagree may not be practical. Any action of the IRS, including but not limited to selection of any Series of Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, such Series of Bonds, and may cause an Issuer, Ascension, Ascension Health or the Bondholders to incur significant expense. Documents Incorporated By Reference The members of the Senior Credit Group and Subordinate Credit Group are identical. As a result, financial and operating information for the Ascension Credit Group apply to both the Senior Credit Group and Subordinate Credit Group. The following documents are incorporated herein by reference and are available from the MSRB s EMMA system: 1999 Official Statement 2001 Official Statement 2007 Supplement 2009 Reoffering Circular 11