University of Vermont Medical Center Obligated Group

Transcription

1 - --THE - - University of Vermont MEDICAL CENTER - --THE--- University of Vermont HEALTH NETWORK Central Vermont Medical Center University of Vermont Medical Center Obligated Group University of Vermont Medical Center, Inc. Central Vermont Medical Center Bond Disclosure Report Covering the Fiscal Year Ended September 30, 2016

2 Table of Contents Officer's Certificate and Bond Covenant Calculations Auditor's Report Hospital Data & Information Adequacy of Insurance and Consultant's Letter Approved Budget for Fiscal Year 2017

3 - --THE - - University of Vermont MEDICAL CENTER - --THE--- University of Vermont HEALTH NETWORK Central Vermont Medical Center University of Vermont Medical Center Obligated Group University of Vermont Medical Center, Inc. Central Vermont Medical Center Bond Disclosure Report Covering the Fiscal Year Ended September 30, 2016 Officer's Certificate Bond Covenant Calculations

4 University of Vermont Medical Center Obligated Group University of Vermont Medical Center, Inc. Central Vermont Medical Center I, Todd Keating, do hereby certify that: Officer's Certificate Pursuant to the Amended and Restated Master Trust Indenture dated as of March 1, 2004 Fiscal Year Ended September 30, I am the Chief Financial Officer of University of Vermont Health Network (UVMHN) and an Obligated Group Representative, under the Amended and Restated Master Trust Indenture, dated as of March 1, 2004, by and in between UVM MC and People's United Bank (f/k/a Chittenden Trust Company), as Master Trustee as amended by the Supplemental Indentures for Obligations 2-4 and 8-10 all amended or dated as of March 1, 2004 (the "Master Indenture"). 2. Attached as Exhibit A is a true, correct and complete copy of UVMHN's Audited Financial Statements for the fiscal year ended September 30, As of September 30, 2016, the Long Term Debt Service Coverage Ratio of the Obligated Group was Accordingly, the Obligated Group is in compliance with Section 3.07(a) of the Master Trust Indenture. 4. As of September 30, 2016, the Obligated Group had Unrestricted Cash and Investments of $654,663,000 which is equal to 193 days of operating expense. 5. As of September 30, 2016, the Total Debt to Capitalization Ratio of the Obligated Group was 37.25% 6. To the best of my knowledge, the Obligated Group is not in default in the performance of any covenant contained in the Master Trust Indenture. 7. Included herein, as a supplement to the Audited Financial Statements ofuvmhn (Exhibit A), is the report of the UVMHN independent certified public accountants as to the Long-Term Debt Service Coverage Ratio and whether, to the best of their knowledge, UVM MC Obligated Group is in default in the performance of any covenant contained in the Master Trust Indenture. All terms used herein and not otherwise defined are used as defined in the Master Trust Indenture. Witness my hand this _Jj! day of January, 2017

5 UVM MC OBLIGATED GROUP For the Period Ended September 30, 2016 Covenant - Debt Service Coverage Ratio ($in OOO's) UVMC CVMC UVMC Obligated Group- Net Income from Operations $74,047 Nono eratin Revenue' $15,205 EXCESS (DEFICIENCY) of REVENUES OVER EXPENSES $89,252 $2,051 $1,763 $3,814 $ $16,597 $93,066 Depreciation Interest Expense Income Available for Debt Service $47,852 $13,218 $ $9,715 $753 $14,282 $57,567 $13,971 $164,604 Maximum Annual Debt Service (MADS) $34,122 $3.965 $34,122 Debt Service Coverage Ratio 4.41x 3.60x 4.82x Consultant Call: <1.1 Ox Event of Default: <1.00x Compliance: YES YES YES Represents "lnveslment Income & Losses on lnveslment" and "Other" (excludes unrealized gain/loss on swaps. and extinguishment of debt) Includes Eliminalions

6 UVM MC OBLIGATED GROUP For the Period Ended September 30, 2016 Liquidity Covenant - Days of Operating Expense ($in OOO's) UVMC CVMC UVMC OBLIGATED GROUP* Cash and Cash Equivalents Board Designated Assets Total Cash Available Total Expenses Depreciation Adjusted Operating Expenses Days in Period Daily Operating Expenses Days Cash on Hand Ratio Consultant Call: <90 days Event of Default: <55 days $198,208 $404,595 $602,803 $1, 107,675 ($47,852) $1,059, $2, days $6,742 $204,950 $45,118 $449,713 $51,860 $654,663 $192,292 $1,298,004 ($9,715) ($57,567) $182,577 $1,240, $500 $3, days 193 days Compliance: YES YES YES "Includes Eliminations

7 UVM MC OBLIGATED GROUP For the Period Ended September 30, 2016 Covenant- Total Debt to Capitalization Ratio ($in OOO's) UVMC CVMC UVMC OBLIGATED GROUP Current Installment of Long Term Debt Long Term Debt, excluding current installments Total Debt Net Assets (Unrestricted)!Debt to Capitalization Ratio Consultant Call: >70% Event of Default: > 75% $11,646 $2,889 $444,944 $14,899 $456,590 $17,788 $733,632 $65, % 21.34% $14,535 $ $474,378 $799, % Compliance: YES YES YES

8 - --THE - - University of Vermont MEDICAL CENTER - --THE-- University of Vermont HEALTH NETWORK Central Vermont Medical Center University of Vermont Medical Center Obligated Group University of Vermont Medical Center, Inc. Central Vermont Medical Center Bond Disclosure Report Covering the Fiscal Year Ended September 30, 2016 Auditor's Report (Audited Financial Statements Attached as Exhibit A)

9 pwc Report of Independent Auditors To the Board of Trustees of The University of Vermont Health Network Inc. and its Subsidiaries: We have audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated financial statements of The University of Vermont Health Network Inc. and its Subsidiaries (the "Network"), which comprise the consolidated balance sheets as of September 30, 2016 and 2015 and the related consolidated statements of operations, changes in net assets and of cash flows for the years then ended, and have issued our report thereon dated December 9, In connection with our audit, nothing came to our attention that caused us to believe that the Network failed to comply with the terms, covenants, provisions, or conditions of Section 10 of the Supplemental Master Trust Indenture, dated July 1, 2016, by and among the University of Vermont Medical Center, Central Vermont Medical Center, Inc. and People's United Bank as Master Trustee (the "Agreement"), insofar as they relate to accounting matters. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the Network's noncompliance with the abovereferenced terms, covenants, provisions, or conditions of the Agreement, insofar as they relate to accounting matters. This report is intended solely for the information and use of the Board of Trustees and management of the Network and the Master Trustee and is not intended to be and should not be used by anyone other than these specified parties. December 12, 2016 PricewaterhouseCoopers LLP, 101 Seaport Blvd, Suite 500, Boston, MA T: (617) , F: (617) , us

10 University of Vermont Medical Center and Subsidiaries CONSOLIDATING BALANCE SHEETS($ in OOO's) UNIVERSITY OF VERMONT MEDICAL CENTER OBLIGATED GROUP September 30, 2016 BALANCE SHEETS($ in OOO's) September 30, 2016 Unaudited Total UVMMc CVMC Eliminations UVMMCOG ASSETS Current Assets: Cash and Cash Equivalents Patient and Other Trade Accounts Receivable, Net Due from Related Parties Short Term Investments Inventory (at Lower of Cost or Market) Current portion of restricted assets Estimated Receivables from Third Party Payors Prepaids and Other Current Assets Total Current Assets $ 198,208 $ 6,743 $ 204, ,503 22, ,090 3,783 - (4,921) (1,138) 2,303-2,303 24,941 4,065 29,006 52,333 52,333 5,900-5,900 18,503 2,661-21, ,474 36,056 (4,921) 483,609 Assets whose use is limited or restricted: Board Designated Assets Funds Held by Trustee Restricted Assets Donor Restricted Assets for Specific Purposes Donor Restricted Assets for Permanent Endowment Total Assets Whose Use is Limited or restricted 404,595 45, ,717 40,791-40, ,072 5,805 33,877 28,731 3,437 32, ,848 54, ,212 Property and Equipment, Net 453,298 74, ,922 Other Assets: Long Term Investments Notes & Other Receivables Swap Valuation Investment in Affiliated Companies Pledges Receivable (net) Total Other Assets ,734 1,901 18, , ,619 4,140-4,140 54,493 1,901-56,394 TOTAL ASSETS $ 1,463,113 $ 166,945 $ {4,921) $ 1,625,137 LIABILITIES AND NET ASSETS Current Liabilities: Current Installment of Long Term Debt Accounts Payable Accrued Expenses Accrued Payroll and Related Benefits Estimated Third Party Payor Settlements Due to Related Parties Est. Incurred but Unreported Medical Claims Total Current Liabilities $ 11,646 $ 2,889 $ 14,535 32,240 2,607 34,847 46,551 6,090 52,641 70,593 10,726-81,319 17,598 3,837 21,435-4,921 (4,921) - 11,413-11, ,041 31,070 (4,921) 216,190 Long Term Debt, excluding current installments Malpractice and Workers Compensation Claims, Net Pension and Other Postretirement Benefit Obligations Other Long-Term Liabilities Total Liabilities 444,944 14, ,843-1,865 1,865 11,369 42,903 54,272 19,900 1,417 21, ,254 92, 154 (4,921) 753,487 Commitments and Contingent Liabilities Net Assets: Unrestricted Temporarily Restricted Permanently Restricted Retained Earnings Total Net Assets 733,632 65, ,181 34,496 5,805 40,301 28,731 3,437 32, ,859 74, ,650 TOTAL LIABILITIES AND NET ASSETS $ 1,463,113 $ 166,945 $ (4,921) $ 1,625,137

11 University of Vermont Medical Center and Subsidiaries CONSOLIDATING STATEMENT OF OPERATIONS($ in OOO's).. September 30, 2016 UNIVERSITY OF VERMONT MEDICAL CENTER OBLIGATED GROUP CONSOLIDATING STATEMENT OF OPERATIONS($ in OOO's) September 30, 2016 Unaudited Total FAHC* CVMC Eliminations UVMMCOG UNRESTRICTED REVENUE & OTHER SUPPORT NET PATIENT SERVICE REVENUE Less: Provision for Bad Debt $ 1,085,026 $ 187,055 $ (307) $ 1,271,774 (22,610) (5,191) (27,801) Net Patient service revenue after provision for bad debts 1,062, ,864 (307) 1,243,973 Hospital enhanced Medicaid Graduate Medical Education revenue Professional enhanced M edicaid Graduate Medical Education revenue 10,714-10,714 19,286-19,286 Net Patient service revenue after provision for bad debts and enhanced Medicaid Graduate Medical Education revenue Premium Revenue and Payer Incentives Outpatient Pharmacy Revenue OTHER REVENUE 1,092, ,864 (307) 1,273,973 8,334 1,562 9,896 47,910 4,886 52,796 33,062 6,033 (1,285) 37,810 TOTAL UNRESTRICTED REVENUE & OTHER 1,181, ,34S (1,592) 1,374,475 EXPENSES: SALARY, PYRL TAXES & FRINGES SUPPLIES AND OTHER Purchased Services Depreciation Interest Expense Provision for Bad Debt Underwriting Expenses Medical Claims TOTAL EXPENSES 676, , , ,711 40,421 (893) 356,239-53,613 9,378 (1,070) 61,921 47,852 9,716 57,568 13, ,971 (28) - (28) ,107, ,292 (1,963) 1,298,004 NET INCOME (LOSS) FROM OPERATIONS 74,047 2, ,471 NON-OPERATING REVENUE (EXPENSES): Investment Income & Losses on Investment Assets Released from Restrictions - Non Op Unreal Gain in Interest Rate Swap Contract Contribution revenue from acquisition Loss on Extinguishment of Debt Other TOTAL NONOPERATING REVENUE (EXPENSE) 8, , (3,060) - (3,060) (22,320) (376) (22,696) 6,075 1,450 (371) 7,154 (10,175) 1,387 (371) (9,159) EXCESS (DEFICIENCY) of REVENUES OVER EXPENSES 63,872 3,440-67,312 Net Unrealized Gain/(Loss) on Investments Assets Released from Restrictions - Capital Adjustment Asset Retirement Obligation Pension and other postretirement benefit related adjustments Transfer of Net Assets Equity Transfer Capital Contribution INCREASE/(DECREASE) UNRESTRICTED NET ASSETS $ 29,603 2,826 32, (5,129) (10,762) (15,891) (3,977) (3,809) ,109 $ (3,898) $ - $ 81,211

12 - --THE--- University of Vermont MEDICAL CENTER - --THE--- University of Vermont HEALTH NETWORK Central Vermont Medical Center University of Vermont Medical Center Obligated Group University of Vermont Medical Center, Inc. Central Vermont Medical Center Bond Disclosure Report Covering the Fiscal Year Ended September 30, 2016 Hospital Data & Information

13 The University of Vermont Health Network The University of Vermont Medical Center Report: BR400 Total Volume Stats UVM MC Account Account Description FY15 FY16 FY17 Actual I Actual I Budget HOSPITAL Inpatient Discharges 21,240 22,211 21,500 Inpatient Admissions 21,221 22,226 21,500 Total ED Visits 60,162 61,179 60,162 Admissions Per ED Visit 35.3% 36.3% 35.7% Hospital Outpatient Billed Visits 455, , ,178 Days Total Patient Days 152, , ,508 Inpatient Patient Days 119, , ,240 Outpatient Patient Days 32,624 33,514 33,268 Inpatient Discharge Days 123, , ,240 ALOS - Discharge Days PROFESSIONAL MG Professional Worked RVUs (including Anes) 2,605,665 2,663,050 2,698,178 MG Professional Total RVUs (including Anes) 4,143,658 4,224,138 4,558,349 MG Professional Arrived Visits (including Anes) 687, , ,866 ANC ILLARY Operating I Minor Rooms Total OR Cases 16,464 17,029 17,010 Total OR Hours 37,504 38,963 38,539 Hours Per OR Case Total Minor Cases 3,215 3,212 3,064 Total Minor Hours 4,095 4,052 3,886 Hours Per Minor Case Procedures Total Cath Lab 4,648 4,683 4,461 Total EP 1,366 1,511 1,511 Total GI/Endoscopy 13,016 13,160 13,113 Total lnterventional Radiology 11,485 11,411 12,576 Total Radiation Oncology 38,255 37,193 37,412 Major Imaging Total MRI 18,785 19,279 19,766 Total CT Scan 46,004 47,065 45,577 Total Nuc Med + PET 6,497 6,340 6,330 Minor Imaging Total Rad Diagnostic 111, , ,232 Total Ultrasound 23,772 26,147 24,729 Total Mammography 49,621 49,540 49,835 Lab Total Billed Lab Test 2,595,008 2,610,664 2,605,757 Pharmacy Total Pharmacy Doses 2,496,268 2,541,275 2,494,469 Total Prescriptions 166, , ,550 File: Book2 1/6/2017 3:35 PM Page 1of1

14 The University of Vermont Health Network UVMHN Central Vermont Medical Center Report: BR400 Total Volume Stats CVMC Account Account Description FY15 FY16 FY17 Actual I Actual I Budget HOSPITAL Inpatient Discharges - 4,551 4,483 Inpatient Admissions 3,878 4,222 4,131 Total ED Visits 24,784 25,244 24,939 Admissions Per ED Visit 15.6% 16.7% 16.6% Days Total Patient Days 20,477 20,971 21,115 Inpatient Patient Days 19,216 19,541 19,759 Outpatient Patient Days 1,261 1,430 1,356 ALOS - Discharge Days PROFESSIONAL MG Professional Worked RVUs (including Anes) 263, , ,954 MG Professional Arrived Visits (including Anes) 192, , ,829 ANCILLARY Operating I Minor Rooms Total OR Cases 3,305 3,778 3,796 Total OR Hours 4,746 5,756 5,639 Hours Per OR Case Total Minor Cases 2,923 3,303 2,988 Hours Per Minor Case - - Procedures Total GI/Endoscopy 2,921 2,938 3,070 Total Radiation Oncology 4,838 4,236 4,737 Major Imaging Total MRI 3,956 4,095 4,244 Total CT Scan 11,070 12,321 11,399 Total Nuc Med+ PET 1,812 2,129 1,948 Minor Imaging Total Rad Diagnostic 30,338 36,079 30,834 Total Ultrasound 8,291 8,869 8,436 Total Mammography 10,010 8,332 9,956 Lab Total Billed Lab Test 480, , ,982 Pharmacy File: 8ook2 1/6/2017 3:36 PM Paae 1 of l

15 HE:--- - University of Vermont MEDICAL CENTER MEDICAL STAFF PROFILE As of December 13, 2016 The University of Vermont Medical Center Medical Staff consisted of 904 Doctors of Medicine. Doctors of Osteopathy. Podiatrists. Psychologists. Oral and Maxillofacial Suraeons. and Dentists. The following table presents the composite Medical Staff categorized by specialty, employment status, board certification and average age: Board-Certified Total Attending& Employed by Snecialtv Consultant Staff UVMMC Number Percenta2e AveraJte A2e Anesthesia % DDS 0 11 NIA 52.0 Dental/ 17DMD 2 7 NIA 49.6 Oral Surgery 1 DMD, MD % 37.0 Family Medicine % 48.7 Medicine - Allergy % 59.0 Medicine - Cardiology % 52.6 Medicine - Dermatology % 49.2 Medicine - Endocrinology % 56.8 Medicine - Gastroenterology % 53.7 Medicine - Generalists % 53.5 Medicine - Hematology/Oncology % 50.9 Medicine - Hospitalists % 38.0 Medicine - Infectious Diseases % 51.3 Medicine - Nephrology % 53.8 Medicine - Pulmonary/CC % 46.4 Medicine - Rheumatology % 54.0 Neurology % 50.5 Orthopedics and Rehabilitation % 52.0 Pathology % 49.0 Pediatrics % MD/DO 32 MD/DO % 54.8 Psychiatry 21 PhD 17PhD NIA NIA 54.l 4PSYD 3PSYD NIA NIA 43.7 Radiation Oncology % 54.7 Radiology % 49.4 Research 1 MD % PhD 4 NIA NIA 41.3 Surgery - Cardiothoracic % 57.7 Surgery - Emergency Medicine % 45.3 Surgery - General % 50.6 Surgery - Neurosurgery % 51.5 Surgery - Oncology % 54.6 Surgery - Ophthalmology % 49.2 Surgery - Otolaryngology % 56.2 Surgery - Pediatrics % 50.5 Surgery - Plastics % 48.2 Surgery - Transplant % 51.5 Surgery - Trauma % 47.0 Surgery - Urology % 46.6 Surgery - Vascular % 47.2 Women's % 47.9 Total - MD/DO/DPM/DMD/DDS Total - PhD/PSYD 25PhD 4PSYD 21PhD 3PSYD 01.66% 50.0 N/A N/A 50.9

16 - --- THE:--- - University of Vermont MEDICAL CENTER * All Pediatric providers arc under the Pediatrics Specialty regardless of Department. (Excluding Surgery - Pediatrics & Dental/ Oral Surgery) **Surgery - Pediatrics Specialty includes: Pediatric Neurosurgery, Pediatric Urology & Pediatric Surgery. Statistics The following table demonstrates net change in physician members of the medical staff for the fiscal years ended September 30, 2011 to Net Additions to the Medical Staff Fiscal Year Ending September 30, 2016: l'l l'l l'l016 New Appointments to Staff Resignations from Staff; extended 64 :j: so* LOA; Deceased; Moved to Affiliate no clinical privileges). * Net Gain/Loss to Staff Medical Staff Age Dis tribution as of December 12, 2016: Age Group Number of Percentage of Total Physicians Physicians Under % 40 to % so to % 6oand Over % Total

17 CENTRAL VERMONT MEDICAL CENTER MEDICAL STAFF Medical Staff Profile As of September 30, 2016, the CVMC Medical Staff consisted of 243 physicians, oral surgeons, podiatrists, psychologists (Active, Affiliate, Consulting, Moonlighting Resident, Independent Associate). The following table presents the composite Medical Staff categorized by specialty, employment status, board certification an d average age. Specialty Total Medical Employed by Board Certified Average Staff CVMC Number % Age Anesthesia % 46 Cardiology % 46 Dentistry 1 1 NA 57 Oral Surgery % 48 Dermatology % 67 Emergency Medicine % 48 Endocrinology % 47 Gastroenterology % 59 General Surgery % 58 Medicine (Critical Care) % 42 Medicine (Hospitalist) (b) 23 3LT % 39 Nephrology % 54 Neurology % 50 Neurosurgery % 55 Occupational Medicine % 44 Oncology % 44 Oncology (GYN) Surgery % 52 Ophthalmology % 37 Orthopedics % 52 Osteopathic Manipulation % 68 Otolaryngology % 58 Pallative Medicine % 63 Pathology % 56 Pediatrics % 51 Plastic Surgery % 57 Podiatry % 42 Primary Care/Fam Med-Int. Med % 53 Psychiatry - MD % 47 Psychiatry - Moonlight Res % 33 Psychiatry - PHO 4 2 NA 59 Pulmonology % 75 Radiology % 44 Radiation Oncology % 54 Rheumatology % 52 Sleep Medicine % 47 Urology % 55 Women's Health % 48 Total % 52

18 CENTRAL VERMONT MEDICAL CENTER MEDICAL STAFF Central Vermont Medical Center Medical Staff Age Distribution as of 09/30/16 Age Group Number of Physicians Percentage of Total Physicians Ages 29 & Under 1 0% Ages % Ages 40 to % Ages 50 to % Ages % Ages 70 and ove 10 3% Total % Fiscal Year Ended September 30, 2016 New Aooointments to Staff 37 Resignations from Staff 26 Net Additions to Staff 11

19 UVM MC OBLIGATED GROUP PERCENTAGES OF REVENUE BY PAYER Below are the percentages of gross patient revenue, by payor, for fiscal years end September 30, 2015 and September 30, 2016: UVM MC OBLIGATED GROUP PAYER SUMMARY D:: en A. (!) GPSR Medicare Medicaid_ VT Medicaid_ Other Major Commercial Commerical Other Self Pay PublicAgency I WorkComp Other GPSR Total FY15 Actual FY16 Actual 40.49% 41.07% 15.07% 15.16% 0.61 % 1.35% 25.46% 24.59% 14.22% 13.05% 0.94% 1.21 % 2.41 % 2.43% 0.80% 1.15% 100% 100% Below are the percentages of net patient revenue, by payor, for fiscal years end September 30, 2015 and September 30, 2016: w :> z ~ Ill:... z w ~ Q.... w z Net Revenue Medicare Medicaid_ VT Medicaid_ Other Major Commercial Commerical Other Self Pay PublicAgency I WorkComp Other Net Revenue Total 29.42% 29.62% 7.53% 7.41% 0.17% 0.44% 37.75% 37.62% 19.46% 18.72% 1.60% 2.1 7% 2.30% 2.19% 1.78% 1.84% 100% 100% f1lt. Pavtr Moc Summary Report Tot IR~ 1/6/2017 3:40 PM 1of 1

20 Service Area SERVICE AREA CHARACTERISTICS AND MARKET POSITION System hospitals serve all of Vermont and six counties in northeastern New York (the "Service Area"). According to Woods and Poole Economics, Inc., during the next fifteen years, the total population of the Service Area is expected to grow by 4.7% (from 1,033,306 in 2015 to 1,081,582 in 2030), but the population of those 65 and older is expected to grow by 62% (from 183,436 in 2015 to 297,149 in 2030), off-setting a slight decline in younger age groups. System Inpatient Market Share Calendar Year 2014 University of Vermont Health Network Inpatient Market Share CY14 St..Joseph' ee::-oouoe u...,. UVMHeafth * Network Hospitals e AllOll>erw BMarketSh re 0%to1 4% 1 4% to9.7% - 97'1.to 39.7% - 397% to628% % to 94 7% Source: System records. As the map above indicates, inpatient market share is higher in the counties closest to where the affiliated hospitals are located, namely: Chittenden, VT (94-95%); Clinton, NY (91-92%); Washington, VT (77-80%); Grand Isle, VT (70-74%); and Essex, NY (47-50%). The UVM Medical Center has maintained approximately 60% market share of inpatients discharged from tertiary care hospitals. Overall; Affiliate inpatient market share has consistently been 32-33% across the entire Service Area. The System monitors market share with data obtained from the Vermont Association of Hospitals and Health Systems ("V AHHS") and the Hospital Association of New York ("HANYS"). Both of these organizations obtain data from surrounding states such as New Hampshire to assess the portion of patients traveling to neighboring states for care, but New

21 Hampshire data have not been available since Dartmouth-Hitchcock, a New Hampshire hospital along the Vermont border, has long served portions of eastern and southern Vermont. Since the New Hampshire data became unavailable, management has assumed that inpatient volume attributable to Vermont patients seeking care at Dartmouth-Hitchcock has remained the same in order to extrapolate market share for years after Management notes, however, that 2009 was Dartmouth-Hitchcock's highest volume in many years and that in intervening years most hospitals, including those within the System, have transitioned many patients to the outpatient setting. Hospitals Serving the Region The region is served by a number of local hospitals, including some critical access hospitals ("CAH"), as well as tertiary referral centers in New Hampshire and New York. The following table shows discharges for regional hospitals as reported by the American Hospital Directory, which may vary slightly from records of the System as to Affiliate hospitals. Annual IP Hos~ital State Discharges Designation UVM Medical Center VT 19,843 Tertiary Care CVPH NY 9,049 Gen Acute CVMC VT 3,092 Gen Acute AHMC NY 2,128 Gen Acute ECH NY 280 CAH Total of System 34,392 Albany Medical Center NY 30,802 Tertiary Care Upstate University Hospital NY 26,046 Tertiary Care St. Joseph's NY 25,748 Tertiary Care St. Peters Hospital NY 23,331 Tertiary Care Crouse NY 19,690 Tertiary Care Dartmouth Hitchcock NH 18,202 Tertiary Care Glens Falls Hospital NY 12,248 Gen Acute Rutland Regional Medical VT 5,396 Gen Acute Center Canton-Potsdam Hospital NY 4,543 Gen Acute Southwestern VT Medical VT 3,538 Gen Acute Center Northwestern Medical Center VT 2,383 Gen Acute Adirondack Medical Center NY 2,368 Gen Acute Claxton-Hepburn Medical NY 2,254 Gen Acute Center Massena Memorial Hospital NY 2,209 Gen Acute Springfield Hospital VT 1,681 CAH Brattleboro Memorial Hospital VT 1,638 Gen Acute Porter Hospital VT 1,581 CAH Copley Hospital VT 1,523 CAH Northeastern VT Regional VT 1,519 CAH Hospital North Country Hospital VT 1,178 CAH Gifford Medical Center VT 1,153 CAH Mt. Ascutney Hospital VT 320 CAH Inter-Lakes Health VT 196 CAH Grace Cottage Hospital NY 177 CAH Source: AHO.com

22 Market Regulation and Health Reform Initiatives Health care providers and facilities in Vermont are highly regulated. Vermont has a CON Jaw that requires review and approval of capital expenditures by hospitals in excess of $3 million, new equipment purchases in excess of$ I million, and any new health care service with annual operating costs in excess of $500,000. Vermont also requires annual review and approval of hospital budgets. The primary regulatory body since 2011 has been the Green Mountain Care Board, a five-member independent body appointed by the Governor. The Green Mountain Care Board was established in part to help implement the "unified and universal" health system for Vermont envisioned by Act 48, adopted by the Vermont Legislature in While the "singlepayer" system that the framers of Act 48 contemplated did not come to fruition, other aspects of that reform legislation remain intact, including a focus on containing costs. The Green Mountain Care Board has used its hospital budget approval authority as one of its key tools to contain the growth of health care costs, including capping the growth in hospitals' net patient revenues at 3.7 percent in The Green Mountain Care Board has an enforcement review policy for any hospital in the State of Vermont whose actual net patient service revenue exceeds the approved budget by more than 0.5%. Hospitals are asked to explain the driving factors for the increases above budget. The Green Mountain Care Board may pennit the hospital to use a portion of the excess to make investment(s) for the benefit of the community. They will also ask hospitals to explain the impact the excess revenues will have on the commercial rate request in the following year's budget during their annual budget review process. A majority of hospitals in the State of Vermont, including UVM Medical Center and CVMC, are above the 0.5% for During 2015, UVM Medical Center and CVMC's combined revenues were approximately $29 million above the approved budget. As a result of negotiations with the Green Mountain Care Board, UVM Medical Center and CVMC reduced the rate of increase in its 2017 budget and invested approximately $12 million into community health initiatives. Management believes that the cap on revenues creates financial management challenges because UVM Medical Center and CVMC' s revenues are affected by increases in volume as well as changes in rates. In response to the number of hospitals that exceeded the budget cap, the Green Mountain Care Board is exploring possible options to develop guidelines for hospitals to rebase their budgets for allowable revenue excesses from prior year actual to budget performance during their annual budget review process. The Green Mountain Care Board is currently in discussions with the U.S. Centers for Medicare and Medicaid Services ("CMS") for an "all-payer waiver" that would create an all-payer system in Vermont. An all-payer system in Vermont would provide the Green Mountain Care Board with oversight over all payers, including Medicare, Medicaid and insurance companies. Although the discussions with CMS are on-going and the Green Mountain Care Board would like to implement an all-payer system by January 1, 2017, the status of discussions has not been publicized, and whether the Green Mountain Care Board will be able to obtain agreement with CMS or implement an all-payer system and how such a system would impact the System cannot be determined at this time.

23 The Green Mountain Care Board is also responsible under Act 48 and succeeding legislation for coordinating and implementing payment and delivery system reform. That work has been supported by a State Innovation Model ("SIM") grant of $45 million awarded to Vermont in 2013 by the Center for Medicare and Medicaid Innovation within CMS (now known as the CMS Innovation Center) to test payment reform models, with a particular focus on moving the majority of Vermonters' health care away from fee-for-service payments to value-based payments. Three ACOs were formed in Vermont to part1c1pate in the MSSP created by the federal Affordable Care Act. The Green Mountain Care Board and the Department of Vermont Health Access, (Vermont's Medicaid agency), have also sponsored a shared savings program ("SSP") for Medicaid patients (the "Medicaid SSP") in which two of the three ACOs participate, and Vermont's primary commercial payer is also participating in a Commercial SSP under the aegis of the Green Mountain Care Board. UVM Medical Center is participating in these efforts, most notably through OneCare Vermont, a statewide ACO formed in 2012 by UVM Medical Center and Dartmouth-Hitchcock Health that includes most Vermont hospitals and a large number of physicians and community-based providers. (See "STRATEGIC INITIATIVES".) Health care providers and facilities are also highly regulated in New York. Although New York does not require review or approval of hospital operating budgets, it has a CON law that requires review and approval by the New York State Department of Health of new hospital projects and services. The Department of Health also has broad regulatory oversight of hospital operations and services. Currently, New York is implementing a health reform initiative under a waiver agreement with CMS that will allow the state to reinvest $8 billion of savings generated by the state's Medicaid program with the objectives of preserving access to essential safety-net providers and reducing avoidable hospital admissions through the DSRIP program. The goal of DSRIP funding is to reduce avoidable hospital admissions by 25% over a five-year period. To qualify for DSRIP funding, New York hospitals must meet certain eligibility criteria. The System's New York affiliated hospitals, CVPH, AHMC and ECH, meet these eligibility criteria and are seeking to participate in the DSRIP programs through Adirondacks ACO and Adirondack Health Institute, a non-profit organization established by CVPH and other New York providers to engage in population health management initiatives.

24 UVM Health Network Obligated Group - Summary of Investments Investment Portfolios As of September 30, 2016 lnvestable Assets (in OOOs) Unrestricted Board - designated assets Restricted Permanent endowment Specific purpose Total Obligated Group $449,713 $32,168 $33,877 $515,758 Unrestricted Board Designated Assets Asset Allocation as of September 30, 2016 Hedge Funds 1% REITs~ \ 7% ~ \ Commodities 22% High Yi eld Fixed Income 9% Income 2% Non U.S. Developed Market Equity 4% Emerging M arket Equity 1%

25 UVM Health Network Obligated Group - Summary of Swap Agreements Notional Notional Fair Value Fair Value 09/30/16 09/30/15 09/30/16 09/30/15 Obligated Group Swaps Bond Series (in OOO's) (in OOO's) (in OOO's) (in OOO's) Counterparty Expiration Date Pay Fixed Receive Floating LIBOR Swap (Series B-1) 2008A $27,595 $27,595 ($8,039) ($6,603) Citibank, N.A. 10/28/ % 66.5% of 1 Mo. LIBOR +32bps LIBOR Swap (Series B-2) 2008A $27,595 $27,595 ($8,039) ($6,606) Citiban k, N.A. 11/04/ % 66.5% of 1 Mo. LIBOR +32bps LIBOR Swap Holly Court $8,392 $8,928 ($762) ($571) Peoples United Bank 10/02/ % 100% of 1 Mo. LIBOR

26 - --THE - -- University of Vermont MEDICAL CENTER - --THE--- University of Vermont HEALTH NETWORK Central Vermont Medical Center University of Vermont Medical Center Obligated Group University of Vermont Medical Center, Inc. Central Vermont Medical Center Bond Disclosure Report Covering the Fiscal Year Ended September 30, 2016 Adequacy of Insurance Consultant's Letter

27 ntegro Debra Goddeau Principal pl1or1e (617) mobile: (617) October 25, 2016 Mr. Michael Hawkins Director, Risk Management The University of Vermont Medical Center I 1 I Colchester A venue Burlington, VT Re: Insurance Program Dear Michael: I am writing this letter to advise that it is my opinion that the limits of insurance in the current property & casualty insurance program for The University of Vermont Medical Center, including all lines of coverage, is adequate to address existing exposures as compared to industry standards for Not For Profit Health Care Institutions. However, please be aware that we cannot state or warrant that the current limits are adequate to cover any loss that The University of Vermont Medical Center may incur. Higher limits are available for all lines of coverage and should be considered. Please let us know of any questions. Thank you. Sincerely, }.c (;/ t -orl ~ Debra Goddeau

28 University ojverrnont fv! D CAL Cl.:N i R University of Vermont 1fAl.,.. 1 N-~V'./ORK Centrdl Vermont Medical Center University of Vermont Medical Center Obligated Group University of Vermont Medical Center, Inc. Central Vermont Medical Center Bond Disclosure Report Covering the Fiscal Year Ended September 30, 2016 Approved Budget for Fiscal Year 2017

29 FY17 BUDGET \ UVM MC OBLIGATED GROUP Revenue Gross Patient Service Revenue Total Deductions Net Patient Service Revenue % Collected Other Revenue Premium Revenue and Payer Incentives Outpatient Pharmacy Revenue Other Revenue Total Other Revenue TOTAL UNRESTRICTED REVENUE & OTHER Total Physician FTEs Total Staff FTEs (Incl Travelers) I FY17 Budget 2,875, 196,503 1,583,530' 172 1,291,666, % 10,042,891 56,596,439 36,879, ,519,218 1,395, 185, ,250 Operating Expenses Salaries & Fringe Benefits Salaries: Physicians Salaries: Staff, Res, Travelers, & MLPs Total Salaries Payroll Tax & Fringe Salaries, Payroll Taxes, and Fringe Benefits 176,249, ,923, , 173, ,148, ,321,531 Non-Salary Expense Medical & Surgical Supplies Pharmaceuticals Other Supplies Purchased Services Maintenance/Lease/Utilities Other Expenses Insurance Depreciation and Amortization Interest Expense Provision for Bad Debts Total Non-Salary Expense TOTAL EXPENSES INCOME (LOSS) FROM OPERATIONS Income (Loss) Margin Non-Operating Revenue lnc/(dec) in Unrestricted Net Assets 91,729,030 92,774,788 13,882,146 57,001,186 79,857,857 78,492,291 14, 112,297 62,255,861 14,042, ,147,628 1,343,469, ,716, % 17,127,205 68,843,594 Book3 GMCB_P&L 1/ 6/ 2017 Page 1 of1