North Memorial Health Care

Transcription

1 North Memorial Health Care Quarterly Financial Disclosure Statement Quarter Ended December 31, 2014

2 North Memorial Health Care Quarterly Financial Disclosure Statement December 31, 2014 Table of Contents Quarterly Disclosure: Fourth Quarter 2014 Overview of the Organization 2014 Q4 Unaudited Financial Statements North Memorial Health Care Consolidated Obligated Group - Consolidating Schedules Obligated Group - Financial Ratios Managements Discussion of Results & Operations Debt & Investment Summary

3 Tab 1 Quarterly Financial Disclosure Statement Quarter Ended December 31, 2014

4 Overview of the Organization North Memorial Health Care Quarterly Financial Disclosure Statement Quarter Ended December 31,2014 Introduction: North Memorial Health Care is non-profit health care system serving the northwest quadrant of the Minneapolis, Minnesota metro area. North Memorial consists of 2 hospitals, 185 employed physicians, 5000 employees, ambulance services, home health services, clinics and joint ventures. North Memorial Hospital in Robbinsdale, MN is licensed for 518 beds and offers a broad range of inpatient and outpatient services. Some of these services include: emergency & trauma services, obstetrical care, Level 3 neo-natal intensive care, heart and vascular services, diagnostic imaging, stroke center, rehabilitation services as well as general medical and surgical care. North is certified as a Level 1 Trauma Center by the American College of Surgeons and is well known for its emergency and trauma services. At the hospital, North Memorial employs physicians in the areas of emergency services, cardiology, cardiac surgery, cancer care, hospitalists and intensivists. North Memorial owns and operates 13 primary care clinics and 2 urgent care clinics. In addition, North Memorial has many independent clinic group affiliations which refer a majority of their business to North. North Memorial has a large ambulance and air care division which serves much of Minnesota and western Wisconsin. This service currently has 135 ambulances with 27 bases and 7 helicopters based out of 5 locations. North Memorial Home Health provides home health nurses, inpatient hospice care and operates an outpatient hospice facility. In addition to the Robbinsdale campus, North Memorial has a second hospital campus in Maple Grove, Minnesota. The Maple Grove Campus includes an 88,000 sq.ft. medical office building, a 112,000 sq.ft outpatient center and a 130 bed hospital with future expansion capacity up to 300 beds. The Maple Grove Hospital is owned by Maple Grove Hospital Corporation which is owned 75% by North Memorial and 25% by Fairview Health Services.

5 Recent Awards: North Memorial Medical Center named Healthgrades America's 50 Best Hospitals: Recipient three years in a row Top 1% of hospitals in the nation providing overall clinical excellence across a broad spectrum of conditions and procedures consistently for a minimum of seven consecutive years. North Memorial Medical Center recognized by Healthgrades as a recipient of the Patient Safety Excellence Award: Recipient three years in a row Top 10% of hospitals in the nation providing safe, high quality care based on analysis of inpatient data and safety indicators from Medicare and the Agency of Healthcare Research (AHRQ). North Memorial Medical Center named Healthgrades Distinguished Hospital Award for Clinical Excellence: Recipient nine years in a row Distinguished Hospitals for Clinical Excellence had an overall26.4% lower riskadjusted mortality rate across 19 procedures and conditions where in-hospital mortality was the clinical outcome, compared to all other hospitals In 2014 HealthGrades recognized the following North Memorial Medical Center specialty areas in the top 5% in the nation: Neurosciences, Neurosurgery, Treatment for Stroke, Overall GI Services, GI Medical Treatement, Critical Care, Overall Pulmonary Services In 2014 HealthGrades recognized the following North Memorial Medical Center specialty areas in the top 1 0% in the nation: Cardiology In 2014 HealthGrades recognized North Memorial Medical Center with their highest level Quality Five Star Rankings for the following surgical/procedural areas: Esophageal/Stomach Surgeries,Treatment ofgi Bleed, Treatment ofbowel Obstruction, Treatment of Sepsis, Treatment of Respiratory Failure, Treatment of Chronic Obstructive Pulmonary Disease, Treatment of Pneumonia, Treatment of Heart Attack, Treatment of Heart Failure, Total Knee Replacement In 2014, North Memorial's Stroke Program has been designated by the DNV as a Comprehensive Stroke Center. This nationally recognized certification is given only to hospitals that effectively offer the most advanced treatment available for stroke patients. Maple Grove Hospital was named one of the nation's 100 Top Hospitals by Truven Health Analytics. The 100 Top Hospitals balanced scorecard measures hospital performance across 10 areas: mortality; inpatient complications; patient safety; average patient stay; expenses; profitability; patient satisfaction; adherence to clinical standards of care; and

6 post-discharge mortality and readmission rates for acute myocardial infarction (heart attack), heart failure, and pneumonia. Blue Distinction Center+ For Cardiac Care was awarded to North Memorial Medical Center by Blue Cross and Blue Shield of MN for quality cardiac care and efficiency. Blue Distinction Center+ For Hip and Knee Replacement was awarded to North Memorial Medical Center by Blue Cross and Blue Shield ofmn for quality care, safety and efficiency Get With the Guidelines by the American Heart Association was awarded to North Memorial Medical Center for quality stroke care and patient outcomes. Gold Plus Achievement Award Hospital from the American Heart Association and the American Stroke Association was awarded to North Memorial Medical Center. In addition, North Memorial Medical Center was recognized as a recipient of the association's Target: Stroke Honor Roll, for improving stroke care. In 2013, North Memorial earned an "A" grade for patient safety from the Leapfrog Group, a national leader and advocate in hospital transparency. North Memorial Medical Center received the UCare Salute to Excellence! Award for delivering high-quality care to its Medicaid and Minnesota Senior Health Options members. North Memorial Medical Center received the 2014 American Heart Association Mission Lifeline Bronze Award recognizing quality for cardiac STEMI patients. We were the only Twin Cities hospital to be recognized. Health Care Informatics' Innovation Award received for using process improvement to reduce the number of elective inductions and Cesarean deliveries performed before 39 weeks of pregnancy. Minnesota Monthly Magazine named 22 North Memorial employed and affiliated doctors to their 2014 Best Doctors for Women list. Mpls/St. Paul Magazine named 36 North Memorial employed and affiliated doctors to their Top Docs list in In 2013, The StarTribune featured Maple Grove Hospital as a Top 100 Workplace in Minnesota for the third consecutive year.

7 Tab2 Quarterly Financial Disclosure Statement Quarter Ended December 31, 2014

8 QUARTERLY DISCLOSURE CERTIFICATE To the best knowledge of the undersigned, the Unaudited Consolidated Financial Statements of North Memorial Health Care were prepared in accordance with generally accepted accounting principles from the Financial Accounting Standards Board, for the quarter ending, December 31, The Statements are true, correct and complete but shall be subject to audit and year-end adjustments if required. North Memorial Hea Date

9 North Memorial Health Care Financial Statements Senior Management 4th Quarter 2014

10 North Memorial Health Care Consolidated Statement of Revenue and Expenses For the Quarter and Year Ended December 31, 2014 (OOO's omitted)."..."..."... i!~ ~.~E!~.:...."..." Year to Date Revenue Patient Revenue Net Patient Revenue $ 200,872 $ 187,900 $ 753,326 $ 711,080 Provision for Uncollectible Accounts (6,316) (6,565) (25,897) (28,672) Total Net Patient Revenue 194, , , ,408 Other Operating Revenue 12,880 14,943 50,207 53,316 Net Revenue 207, , , ,724 Expenses Salaries and Wages 95,541 85, , ,577 Employee Benefits 20,675 23,098 92,464 92,050 Supplies 30,185 27, , ,183 Purchased Services 22,079 17,324 77,016 62,940 Other 22,215 19,081 77,089 74,103 Depreciation 10,780 11,416 42,809 45,486 Interest 3,278 3,334 13,273 13,796 Total Operating Expenses 204, , , ,135 Net Operating Margin 2,683 8,980 7,927 2,589 Net investment gain (loss) 6,131 15,097 14,346 39,618 Joint Venture Income I Other (2,410) (737) (4,706) 293 Minority interest (1,290) (1,438) (3,993) (4,442) Total Non-Operating Revenue 2,431 12,922 5,647 35,469 Revenue over Expenses $ 5,114 $ 21,902 $ 13,574 $ 38,058 Operating Margin 1.3% 4.6% 1.0% 0.4% Profit Margin 2.4% 10.5% 1.7% 4.9% Operating Cash Flow Margin 8.1% 12.1% 8.2% 8.4% Labor expense percent of net revenue 56.0% 55.2% 57.9% 58.7%

11 North Memorial Health Care Consolidated Statement of Cash Flows For the Quarter and Year Ended December 31, 2014 (OOO's omitted) 4th Quarter December 31, 2014 Net Cash Flows From Operating Activities Funds Provided by Operations Revenue over Expenses $ 5,114 $ 13,574 Depreciation and Amortization 10,790 43,503 Provision for Bad Debt 6,316 25,897 (Gain) Loss on Sale of Assets 169 (453) Net Change in Unrealized (Gain) Loss on Investments 363 (3,123) Change in Minority Interest 1,290 3,993 Provision for Insurance Claims 1,953 1,805 Total Provided by Operations 25,995 85,196 Funds Provided by (Used for) Working Capital Net Patient Receivables (18,915) (42,348) Accounts Payable 11,748 10,682 Other, Net 2,545 2,699 Net Provided by (Used for) Working Capital (4,622) (28,967) Net Cash Flow from Operating Activities 21,373 56,229 Cash Flows From Investing Activities Purchases of Property and Equipment (16,856) (29,354) Proceeds from Sale of Asset 388 1,146 Purchases of Insurance Subsidiary Investments (141) 2,035 Net (Purchases) Withdrawals of Assets Whose Use is Limited (5,744) (11,668) Net (Increase) Decrease in Other Assets (3,329) (2,516) Net Cash Flow From Investing Activities (25,682) (40,357) Cash Flows From Financing Activities (Payments) I Proceeds from Long-term debt (1,375) (10,234) Change in Deferred Credits 9,809 7,271 Increase (Decrease) in Contributed Capital {1,800) (4,300) Net Cash Flow From Financing Activities 6,634 (7,263) Increase in Cash and Short-Term Investments 2,325 8,609 Cash and Short-Term Investments, Beginning of Period 41,731 35,447 Cash and Short-Term Investments, End of Period $ 44,056 $ 44,056

12 North Memorial Health Care Consolidated Balance Sheet As of December 31,2014 and 2013 (OOO's omitted) Assets Liabilities -- - December December December December Inc/(Dec) Inc/(Dec) Current Assets Current Liabilities Cash $ 44,056 $ 35,447 $ 8,609 Current Maturities $ 9,450 $ 9,622 $ (172) Accounts Receivable Accounts Payable 40,365 29,683 10,682 Net Patient 110,202 93,751 16,451 Accrued Expenses Other 11,204 10,059 1,145 Vacation Pay 17,061 15,854 1,207 Inventories 8,375 8,414 (39) Payroll Expenses 29,472 24,783 4,689 Prepaid Expenses 5,093 4, Due to Third Party Payors 1, Assets limited as to use 2,079 1, Interest and Other 13,343 4,628 8,715 Total Current Assets 181, ,580 27,429 Total Current Liabilities 111,326 85,378 25,948 Assets With Limited Use Board Designated Investments 257, ,591 13,155 Other Liabilities Invest.@ cost $221,215 A.H.A.L Claims 6,966 5,161 1,805 Collateral under SEC Lending 3,538 3,621 (83) Payable under SEC Lending 3,360 4,045 (685) Bond Fund Investments 7,349 7, Deferred Credits 20,213 12,942 7,271 A.H.A.L Investments 7,627 9,662 (2,035) Long-Tenn Debt, Less Restricted Investments 6,625 5, Current Maturities 258, ,132 (9,846) Total Assets w!limited Use 282, ,725 12,160 Total Other Liabilities 288, ,280 (1,455) Capital Debt Cost I Other $ 39,263 36,664 2,599 Net Assets Beginning of Year 427, ,097 38,981 Plant Assets Net Income 13,574 38,058 (24,484) Land and Improvements 24,000 24,117 (117) Change in Restricted Balances {460) Accum Depree - Improvements (5,973) (5,561) (412) 441, ,078 14,037 Buildings 343, ,620 2,184 Accumulated Benefit Accum Depree - Bldg (140,840) (126,401) (14,439) Obligation (23,703) (12,994) (10,709) Equipment and Fixtures 372, ,201 5,721 Contributed Capital (5,260) (960) (4,300) Accum Depree - Equip (290,246) (276,720) (13,526) Minority interest 9,907 5,914 3,993 Construction in Progress 15,386 9,471 5,915 End of period 422, ,038 3,021 Total Plant Assets 319, ,727 (14,674) Total Liabilities and Total Assets $ 822,210 $ 794,696 $ 27,514 Net Assets $ 822,210 $ 794,696 $ 27,514

13 North Memorial Health Care Consolidated Key Indicators For December 31, 2014 and 2013 Leverage Ratios Debt Service Coverage Debt to Capitalization Liquidity Ratios Days Revenue in Accounts Receivable Average Payment Period Days of Cash on Hand Profitability Indicators Operating Margin Quarter Year to Date Profit Margin Quarter Year to Date % % 1.0% 2.4% 1.7% % % 4.9%

14 1. Organization North Memorial Health Care Notes to Consolidated Interim Financial Statements North Memorial Health Care consists of an integrated, multi-organizational healthcare system, serving patients in the northwest quadrant of Minneapolis and suburbs. The North Memorial structure includes the parent company North Memorial Health Care, wholly owned subsidiaries and joint ventures as follows: Entity North Memorial Health Care Maple Grove Hospital Oakdale Health Enterprises Institute For Athletic Medicine Oakdale Medical Center, LLC Maple Grove Surgery Center Minnesota Diagnostic Imaging Monticello Cancer Center Ownership 100% Tax- Exempt 75% Tax- Exempt 100% 37% Tax-exempt 100% Tax- Exempt 50% 60% 40% Services Hospital - Robbinsdale Primary Care Clinics Medical Transportation Cancer Center Cardiovascular Clinic Outpatient Clinics Hospital Ambulance Services Physical Therapy Medical Office Buildings Outpatient Surgery Outpatient Imaging Cancer Center Associated Health Assurance 100% Tax- Exempt Captive Insurance Company Preferred One - Administrative Services - Community Health Plan - Insurance Company 25% 50% 25% Claims services HMO Health Insurance

15 North Radiation Therapy 50% Radiation Oncology Blaine Urgency Center, LLC 50% Urgency Center North Memorial Health Care is the sole member of the obligated group with regard to the Master Trust Indenture. Maple Grove Hospital was been accounted for on the equity method through Q From Q forward, Maple Grove Hospital is accounted for on the consolidation method. 2. Allowance and Provision for Uncollectable Accounts Patient Accounts Receivable: Accounts receivable are reduced by a contractual allowance and an allowance for uncollectible accounts. In evaluating the collectability of self pay accounts receivable (which includes both patients without insurance and patients with deductible and copayment balances that are currently due or are estimated to be due in the future for which third-party coverage exists for part of the bill), North Memorial analyzes its past history and identifies trends for each of its major payer sources of revenue to estimate the appropriate allowance for uncollectible accounts and a provision for uncollectible accounts. Management regularly reviews data about these major payer sources of revenue in evaluating the sufficiency of the allowance for uncollectible accounts. For receivables associated with services provided to patients who have third-party coverage, North Memorial analyzes contractually due amounts and provides an allowance for uncollectible accounts and a provision for uncollectible accounts, if necessary (for example, for expected uncollectible deductibles and copayments on accounts for which the third-party payer has not yet paid, or for payers who are known to be having financial difficulties that make the realization of amounts due unlikely). North Memorial's allowance for uncollectible accounts for self-pay patients was 55.6% of self-pay receivables at December 31, 2014 and 56.1% for the same period in North Memorial's self-pay write-offs decreased $1.72 million from $23.4 million for fourth quarter of 2013 to $21.6million for same period during North Memorial has not changed its charity care or uninsured discount policies during the three months ended December 31, North Memorial does not maintain an allowance for uncollectible accounts from thirdparty payers, nor did it have any write-offs from third-party payers. Patient Service Revenue: North Memorial recognizes patient service revenue associated with services provided to patients who have third-party payer coverage on the basis of contractual rates for the services rendered. For uninsured patients that do not qualify for charity care, North Memorial recognizes revenue on the basis of its standard

16 rates for services provided (or on the basis of discounted rates, if negotiated or provided by policy). On the basis of historical experience, a significant portion of North Memorial's uninsured patients and patients responsible for co-payments and deductibles will be unable or unwilling to pay for the services provided. Thus, North Memorial records a significant provision for uncollectible accounts related to patient responsibility amounts in the period the services are provided. Patient service revenue, net of contractual allowances and discounts (but before the provision for uncollectible accounts), recognized YTD from these major payer sources, is as follows: Patient Service revenue (net of contractual Allowances and discounts) Third-Party Payers Self-Pay/Patient responsibility Total All Payers _,$:... ;:1'""""8--'-7""", 0=3=0--"$:.. _,_7-'!,5=2=6--"$"------'1o...::9_,4=,5=5-"'-6 3. Investments North Memorial invests its board designated funds in a well diversified portfolio of stocks, bonds, and real estate with the assistance of an independent investment advisor, Watershed Investment Consultants. The target allocation for the portfolio is 60% equities, 30% fixed income and 10% real estate. In June of2008 North Memorial elected to implement FASB 159 and as a result, securities are carried on the balance sheet at fair market value and the change in value for any period appears on the income statement. As of 12/31/14 the portfolio had a market value of $257. 7mil. and a cost basis of $221.2mil. 4. Debt North Memorial has two outstanding bond issues, the 2005 series and the 2011 series. The 2005 series balance is $53.8mil and has a fixed rate of 4.7%. The 2011 series consists of two fixed rate private placements of $60mil. and $15mil. with interest rates of 4.3% and 4.7%. North Memorial also guarantees 75% of the 2007 Maple Grove Hospital bonds. (See tab 5 for additional detail) 5. Contingencies North Memorial is a party in various legal proceedings and potential claims arising in the ordinary course of business. Although the outcome ofthese lawsuits cannot be predicted with certainty, management believes the ultimate disposition of such matters will not have an adverse effect on North Memorial's financial condition or operations. North Memorial purchases general liability, auto liability, helicopter liability and property insurance in the commercial marketplace. Worker's compensation is selfinsured through the company's captive insurance company subject to per claim caps with

17 the worker's compensation reinsurance association. Medical malpractice is purchased commercially for the employed physicians and through the captive insurance for all other staff with excess limits purchased commercially. Management works with its broker to determine appropriate coverage limits. Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. Compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action, including fines, penalties and exclusion from the Medicare and Medicaid programs. As a result, there is at least a reasonable chance that recorded estimates could change by a material amount in the near term. North Memorial believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on its consolidated financial statements. 6. New Accounting Standards On January 1, 2012, North Memorial adopted Accounting Standards Update to provide greater transparency about its net patient service revenue and the related allowance for uncollectible accounts. Specifically, this new guidance requires health care entities to change the presentation of their statement of operations by reclassifying the provision for uncollectible accounts associated with patient service revenue from an operating expense to a deduction from patient service revenue (net of contractual allowances and discounts). Additionally health care entities are required to provide enhanced disclosures about their policies for recognizing revenue and assessing uncollectible accounts. The guidance also requires disclosures of patient service revenue (net of contractual allowances and discounts) as well as qualitative and quantitative information about changes in the allowance for uncollectible accounts. This guidance had no impact on North Memorial's financial condition or the results of operations.

18 Tab3 Quarterly Financial Disclosure Statement Quarter Ended December 31, 2014

19 North Memorial Obligated to Consolidated Financial Statements For the Twelve Months December 31, 2014 YTD Non-Obligated Eliminations I YTD Obligated Group Members Reclasses Consolidated Revenues Patient Revenue Patient Revenue 597, ,001 (1,157) 753,326 Provision for Uncollectible Accour (21,276) (4,957) 336 (25,897) Total Net Patient Revenue 576, ,044 (821) 727,429 Other Operating Revenue 65,078 8,834 (23,705) 50,207 Net Revenue 641, ,878 (24,526) 777,636 Expenses Salary and Wages 312,890 45, ,128 Employee Benefits 81,928 10,536-92,464 Supplies 87,260 21, ,930 Purchased Services 65,039 34,568 (22,591) 77,016 Utilities 9,141 1,587 (143) 10,585 Maintenance and Repairs 23,078 2,915 (47) 25,946 Rental 11,263 1,155 (1,440) 10,978 Other 20,935 8,950 (305) 29,580 Depreciation 31,503 11,306-42,809 Interest 5,662 7,611-13,273 Total Operating Expenses 648, ,536 (24,526) 769,709 Net Operating Margin (7,415) 15,342-7,927 Investment income (loss) 17, ,324 Unrealized gain (loss) (4, 135) 1,157 - (2,978) Joint Venture & Other (4,706) - - (4,706) Minority Interest - - (3,993) (3,993) Revenue over Expenses 1,062 16,505 (3,993) 13,574

20 North Memorial Obligated to Consolidated Financial Statements As of: December 31,2014 YTO Non~Obligated Eliminations I YTO ~ated Group Members Reclasses Consolidated Assets Current Assets Cash 14,337 29,719 44,056 Accounts Receivable Net Patient 84,579 25, ,202 Other 12,877 (874) (799) 11,204 Inventories 6,392 1,983 8,375 Prepaid Expenses 4, ,093 Assets Limited as to use 2,079 2,079 Total Current Assets 122,685 59,123 (799) 181,009 Assets with Limited Use Board Designated 250,165 7, ,746 Collateral Under SEC Lending 3,538 3,538 Bond funds 5,726 1,623 7,349 A.H.A.L Investments 7,627 7,627 Restricted Investments 6, Total Assets Limited 259,429 23, ,885 Capital Debt Cost I Other 10,662 5,375 23,226 39,263 Plant Assets Land and Improvements 22,890 1,110 24,000 Accumulated Depreciation (5,661) (312) (5,973) Buildings 212, , ,804 Accumulated Depreciation (117,436) (23,404) (140,840) Equipment & Fixtures 334,620 38, ,922 Accumulated Depreciation (271,761) (18,485) (290,246) Construction in Progress 15, ,386 Total Plant Assets 190, , ,053 Total Assets 583, ,410 22, ,210 Liabilities Current Liabilities Current Maturities LTD 5,679 3,771 9,450 Due to third party payers ,635 Accounts Payable 33,456 6,924 (15) 40,365 Accrued Expenses Vacation Pay 15,662 1,399 17,061 Payroll Expenses 26,121 3,351 29,472 Interest and Other 9,406 4,719 (782) Total Current Liabilities 91,192 20,931 (797) 111,326 Other Liabilities A.H.A.L Claims 6,966 6,966 Payable under SEC Lending 3,360 3,360 Deferred Credits 22,588 (2,375) 20,213 L T Debt less Current Maturities , ,286 Total Other Liabilities 138, , ,825 Net Assets Beginning of Year 376,681 48,885 1, ,078 Capital Contribution (21,042) 15,782 (5.260) Net change in unrealized gain on Foundation investments Net Income 1,060 16,491 (3,977) ,741 44,797 13, ,855 Minority interest 9,907 9,907 Accumulated Benefit Obligation (23,703) (23,703) End of Period 354,038 44,797 23, ,059 Total Liabilities and Net Assets 583, , ,210

21 Obligated Group Ratios $(000) Days Cash on Hand Actual Actual Consolidated 12/31/ /31/ /31/2014 Cash & Investments 264, ,428 Borrowed Moneys< One Year 5,679 6,028 Unrestricted Liquid Funds 258, ,400 Operating Expenses 648, ,617 (less dep. & amort.) (31,503) (34,436) #Days Expenses per Day 1,691 1,625 Days Cash on Hand (ratio = at least 85) Debt to Capitalization Indebted ness 112, ,271 Plus Letters of Credit Plus Guarantees 109, ,396 Total Indebtedness 221, ,667 Net Assets - Obligated Group 354, ,372 Total Indebtedness+ Net Assets Debt to Capitalization Ratio (ratio = or less than.55:1) Debt Service Coverage (rolling 12 mo.) Net Revenue 641, ,208 Total Operating Expenses 648, ,617 Realized Gains (Losses) (4, 135) 23,593 Plus Interest 5,662 5,931 Plus Depreciation 31,503 34,436 Plus Non-recurring Items Income Available for Debt Service 25,615 49,551 Debt Service Requirement 7,663 11,959 Debt Service Coverage

22 Tab4 Quarterly Financial Disclosure Statement Quarter Ended December 31,2014

23 MANAGEMENT'S DISCUSSION OF FINANCIAL OPERATIONS Review of Financial Performance- Quarter ended 12/31/2014 (North Memorial Health Care: Maple Grove Hospital is reported on the consolidation method, other joint ventures reported on the equity method) North Memorial experienced a fourth quarter profit on operations of $2. 7mil. as compared to Q profit of $9.0mil. Total revenue over expenses for the quarter was a profit of$5.1mil and included a net investment gain of$6.1mil. YTD 2014 operating margin is a profit of$7.9mil. as compared to a 2013 YTD profit of $2.6mil. Total revenue over expenses YTD is $13.6mil and includes a net investment gain of $14.3mil. Operating Income: NMHC operating income for the quarter ended December 31, 2014 was a profit of $2.7mil. As compared to 4th quarter 2013, total net revenue increased 5.7%. Net patient revenue increased by 6.9%. Provision for uncollectible accounts decreased by 3.8% and other operating revenue decreased 13.8%. Total operating expenses for the quarter increased by 9.3% with salaries increasing by 11.9%, employee benefits decreasing 10.5% and purchased services increasing by 27.5% as compared to Q NMHC operating income YTD 2014 was a profit of$7.9mil. as compared to a YTD 2013 profit of $2.6mil. Total net revenue was up 5.7%. Net patient revenue increased by 5.9%. Provision for uncollectible accounts decreased by 9. 7% and other operating revenue decreased 5.8%. Total operating expense increased by 5.0% with salaries increasing by 5.5%, employee benefits increasing.5% and purchased services increasing by 22.4% as compared to YTD Labor expense as a percent of net revenue dropped from 58.7% in 2013 to 57.9% in Non-operating Income Fourth quarter 2014 investment gains were $6.1mil. The investment portfolio had a gain of 1. 7% as compared to a custom index of 1. 7% for the same period. Joint ventures had a net loss for the quarter of ($2.4mil) as compared to a loss of ($.7mil) for the 4th quarter in YTD 2014 investment gains were $14.3mil. The investment portfolio had a gain of 5.5% as compared to a custom index of6.3% for the same period. Joint Ventures had a loss of ($4.7mil) for the year as compared to a profit of$.3mil. in Balance Sheet Cash has increased from $35.4mil. at 12/31113 to $44.0mil. as of 12/31/2014. Board designated investments have increased $13.2mil. YTD to $257.7mil. Total consolidated Net Assets increased from $794.7mil. as of 12/31/13 to $822.2 mil. at 12/31/14.

24 Tab 5 Quarterly Financial Disclosure Statement Quarter Ended December 31, 2014

25 North Memorial Health Care Debt and Investment Summary Debt Structure 12/31/2014 Outstanding Structure Final Credit (OOOs) Maturity Enhancement Int. Rate North Memorial 2005 Bond Issue 53,800 Fixed Rate 2035 None 4.7% 2011A Bond Issue- (1) 49,193 Fixed Rate 2018 None 4.3% 2011B Bond Issue- (2) 12,885 Fixed Rate 2026 None 4.7% Oakdale LLC Maple Grove Mortgage 14,101 Fixed Rate 2033 None 2.9% Guarantees Maple Grove Hospital 135,721 Fixed Rate 2037 None 4.9% (guarantee 75%) 1- $60 Million private placement issue with Siemens. 15 year amortization, 7 year balloon. 2- $15 Million private placement issue with GE. 15 year amortization, 7 year put option. Long Term Asset Allocation Target Allocation 12/31/14 Actual Large Cap Equity 25% 28.1% Small-Mid Cap Equity 10% 10.8% International Equity 25% 22.9% Fixed Income 30% 29.0% Private Real Estate 10% 9.2%