BARNABAS HEALTH, INC. Secondary Market Disclosure Information

Transcription

1 BARNABAS HEALTH, INC. Secondary Market Disclosure Information June 30, 2014 Filed August 14, 2014

2 BARNABAS HEALTH, INC. Secondary Market Disclosure Information June 30, 2014 Summary of Barnabas Health Inc.'s. Obligations Under the Master Trust Indenture and Credit Arrangements Barnabas Health, Inc. Overview Selected Utilization Statistics for the Years Ended December 31, 2011, 2012, and 2013 and the Six Months Ended June 30, 2013 and 2014 Selected Utilization Statistics by Affiliated Hospital for the Six Months Ended June 30, 2013 and 2014 Schedule of Payor-Mix by Hospital Affiliate for the Six Months Ended June 30, 2014 Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013 Consolidated Statements of Operations and Changes in Net Assets for the Six Months Ended June 30, 2014 and 2013 Consolidated Operating Results and Changes in Net Assets by Affiliate for the Six Months Ended June 30, 2014 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013 Notes to Consolidated Financial Statements Note to Obligated Group Financial Statements Obligated Group Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013 Obligated Group Consolidated Statements of Operations and Changes in Net Assets for the Six Months Ended June 30, 2014 and

3 BARNABAS HEALTH, INC. Secondary Market Disclosure Information June 30, 2014 Summary of Barnabas Health, Inc. Obligations Under the Master Trust Indenture and Credit Arrangements Issuer: New Jersey Health Care Facilities Financing Authority: Barnabas Health Issue, Series 1998B Barnabas Health Issue, Series 2006A Barnabas Health Issue, Series 2006B Barnabas Health Issue, Series 2011 A Barnabas Health Issue, Series 2011 B Barnabas Health Issue, Series 2011 C Barnabas Health Issue, Series 20 12A Barnabas Health Issue, Taxable Revenue Bonds, Series 2012 Issuer: New Jersey Economic Development Authority: Saint Barnabas Project, Series 1997 A Credit Arrangements with a consortium of banks, including JP Morgan Chase Bank, N.A: Credit Agreement related to term loan dated of August 1, 2013 Irrevocable direct pay letters of credit, dated as of October 1, 2013, related to the 2011B and 2011C bonds Irrevocable Standby Letter of Credit supporting self insured worker's compensation program dated as of October 1, 2013

4 Barnabas Health, Inc. Secondary Market Disclosure Information June 30, 2014 System Overview Facility Acute Care Hospitals: Newark Beth Israel Medical Center Saint Barnabas Medical Center Community Medical Center Monmouth Medical Center Clara Maass Medical Center Monmouth Medical Center, Southern Campus Total Acute Care Beds Transitional Care Beds: The Clara Maass Transitional Care Unit Community Medical Center Transitional Care Unit Total Transitional Care Beds Location Newark Livingston Toms River LongBranch Belleville Lakewood Licensed Beds 665 (I) (3) (2) 3, (4) 25 (4) 45 Specialty Hospitals: Saint Barnabas Behavioral Health Center The Children's Hospital ofnj at Newark Beth Israel Medical Center The Children's Hospital at Monmouth Medical Center Total Specialty Hospital Beds Toms River Newark Long Branch 100 (2) 156 (I) 62 (3) 318 Inpatient Hospice Care Beds: Newark Beth Israel Medical Center Hospice Total Hospice Beds Newark 9 (5) 19 (I) Newark Beth Israel Medical Center is licensed for 665 beds, I 56 of which are licensed for The Children's Hospital of New Jersey at Newark Beth Israel Medical Center. For presentation purposes, these 156 beds are included in the licensed bed compliment for both Newark Beth Israel Medical Center and The Children's Hospital of New Jersey at Newark Beth Israel Medical Center. (2) Monmouth Medical Center, Southern Campus is licensed for 330 beds, 60 of which are psychiatric beds located at Saint Barnabas Behavioral Health Center (formerly Shoreline Behavioral Health Center). For presentation purposes, these 60 beds are included in the licensed bed compliment for both Monmouth Medical Center, Southern Campus and Saint Barnabas Behavioral Health Center. (3) Monmouth Medical Center is licensed for 521 beds, 62 of which are licensed for The Children's Hospital at Monmouth Medical Center. For presentation purposes, these 62 beds are included in the licensed bed compliment for both Monmouth Medical Center and its designated Children's Hospital. (4) For presentation purposes, these 45 beds are included in the licensed bed compliments for both Clara Maass Medical Center and Community Medical Center. (5) The Saint Barnabas Hospice and Palliative Care Center operates an inpatient hospice unit at Newark Beth Israel Medical Center. For presentation purposes, these beds are included in the bed compliment of Newark Beth Israel Medical Center. 2

5 Barnabas Health, Inc. Secondary Market Disclosure Information June 30, 2014 Utilization Statistics The table below sets forth selected utilization statistics for Barnabas Health for the years ended December 31, 2011, 2012, 2013 and the six months ended June 30, 2013 and 2014 Utilization Statistics Year Ended December 31, Six Months Ended June 30, Acute care licensed beds 3,142 3,172 3,173 3,173 Average acute care beds in service 2,539 2,475 2,320 2,534 Acute care admissions 141, , ,466 68,061 Acute care length of stay Acute care occupancy based on beds in service 76.5% 75.6% 77.20% 73.92% Maternity and Obstetric cases 18,147 18,214 18,034 8,904 Psychiatric Hospital inpatient admissions 1,423 1,119 1, Same day surgery cases (1) 46,839 44,893 45,343 23,234 Emergency Room visits (2) 355, , , , ,173 2,332 63, % 8, , ,292 (1) Includes cases from Barnabas Health's six acute care hospitals and the Saint Barnabas Ambulatory Care Center. (2) Treat and release only (does not include Saint Barnabas Behavioral Health Center). 3

6 Barnabas Health, Inc. Secondary Market Disclosure Information June 30,2014 Selected Utilization Statistics by Affiliated Hospital for the Six Months Ended June and 2014 :Observation Total 7 4

7 ' Inpatient Surgical Cases: Inpatient cases with OR UB codes 360 and 490 in a Surgery related Department 2 Same Day Surgery Cases: Outpatient cases with OR UB codes 360 and 490 in a Surgery related Department 'Emergency Room Gross Visits includes ALL Cases registered through the ED [includes LWOBS] Emergency LWOBS Cases include LWOBS and LWOT cases ' ER Observations include all observation cases registered through the ED; included in GrossER Visits 'OP Observation includes all other observation cases not registered through ED, includes OB Monitoring; not included in Gross ER Visits 7 Observation Total volume includes both ER Observation and OP Observation Service Codes for all facilities 8 TA VR volume is included in Cardiac Surgeries volume for NBI

8 Barnabas Health, Inc. Secondary Market Disclosure Information June 30, 2014 Schedule of Payor Mix Year to Date June 30, 2014 Barnabas Health, Inc. DISCHARGES THROUGH: 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS Medicare Medicaid Managed care Medicare Managed care Medicaid Managed care Other NJ Blue Cross Commercial insurers Self-pay Charity care Employees All Others Total ACTUAL %to TOTAL BUDGET %to TOTAL 19, % I9, I% 4, % 3, % 3, % 3, % 10, % 9, % 8, % 9, % 11, % 11, % % % I,I69 1.8% % I, % 3, % % % 2, % 2, % 63,947 IOO.O% 64, % Discharges % Difference % % % % (580) -0.7% (338) 0.3% (23) 0.0% % (1,981) -3.0% (2) 0.0% % (834) 0.0% PATIENT DAYS THRQIJGH: 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS Medicare Medicaid Managed care Medicare Managed care Medicaid Managed care Other NJ Blue Cross Commercial insurers Self-pay Charity care Employees All Others Total ACTUAL %to TOTAL BUDGET %to TOTAL 120, % 118, % 25, % 21, % 21, % 20, % 39, % 38, % 35, % 36, % 47, % 48, % 1, % 1, % 4, % 3, % 7, % 17, % 3, % 3, % 14, % 10, % 321, % 320, % PATIENT DAYS % Difference 2, % 3, % 1, % % (835) -0.3% (899) -0.3% % % (9,845) -3.1% % 3, % 1, % 6

9 Barnabas Health, Inc. Secondary Market Disclosure Information June 30, 2014 Schedule of Payor Mix Year to Date June 30, 2014 CLARA MAASS MEDICAL CENTER DISCHARGES THROUGH: 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS Medicare Medicaid Managed care - Medicare Managed care - Medicaid Managed care - Other NJ Blue Cross Conunercial insurers Self-pay Charity care Employees All Others Total ACTUAL %to TOTAL BUDGET %to TOTAL 2, % 3, % % % % % 1, % 1, % % % 1, % 1, % % % % % % % % % % % 9, % 9, % Discharges % Difference (206) -0.5% % (38) 0.0% (48) 0.5% (80) -0.3% (69) 0.0% (20) -0.2% % (267) -2.7% 4 0.1% 9 0.5% (511) 0.0% PATIENT DAYS THROUGH: 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS Medicare Medicaid Managed care - Medicare Managed care - Medicaid Managed care - Other NJ Blue Cross Commercial insurers Self-pay Charity care Employees All Others Total ACTUAL %to TOTAL BUDGET %to TOTAL 16, % 18, % 3, % 2, % 4, % 4, % 5, % 5,721 I2.2% 3, % 3, % 5, % 5, % % % % % % 2, % % % 4, % 4, % 44, % 46, % PATIENT DAYS % Difference (1,089) -0.7% 1, % (73) 0.2% (457) -0.5% (92) 0.1% (101) 0.3% 4 0.0% (48) 0.0% (1,366) -2.8% % (15) 0.4% (1,970) 0.0% 7

10 Barnabas Health, Inc. Secondary Market Disclosure Information June 30, 2014 Schedule of Payor Mix Year to Date June 30, 2014 COMMUNITY MEDICAL CENTER DISCHARGES THROUGH: 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS Medicare Medicaid Managed care - Medicare Managed care - Medicaid Managed care - Other NJ Blue Cross Commercial insurers Self-pay Charity care Employees All Others Total ACTUAL %to TOTAL BUDGET %to TOTAL 6, % 6, % % % 1, % % % % % % 1, % 1, % % % % % 200!.5% % 182!.4% 182!.5% % % 12, % 12,! % Discharges % Difference % % 301!.9% % (56) -0.9% (6) -!.0% 3 0.0% % (308) -2.6% -0.1% % % PATIENT DAYS THRQ!JGH: 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS Medicare Medicaid Managed care - Medicare Managed care - Medicaid Managed care - Other NJ Blue Cross Commercial insurers Self-pay Charity care Employees All Others Total ACTUAL %to TOTAL BUDGET %to TOTAL 37, % 35, % 1, % 1, % 6, % 4, % 2, % 2,405 4.!% 3, % 3, % 7,472 1!.8% 7, % % % % % 749!.2% 2, % % 564!.0% 1, % % 63, % 58, % PATIENT DAYS % Difference 2, % % 1, % % (205) -0.7% (269) -1.4% % % (1,324) -2.3% % 1,063!.6% 4, % 8

11 MONMOUTH MEDICAL CENTER, SOUTHERN CAMPUS DISCHARGES THROUGH: 6/30/14 Barnabas Health, Inc. Secondary Market Disclosure Information June 30, 2014 Schedule of Payor Mix Year to Date June 30, 2014 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS ACTUAL %to TOTAL BUDGET %to TOTAL Medicare 1, % 1, % Medicaid % % Managed care - Medicare % % Managed care - Medicaid % % Managed care - Other % % NJ Blue Cross % % Commercial insurers % % Self-pay % % Charity care % % Employees % % All Others % % Total 3, % 3, % Discharges % Difference % % % (96) -1.8% (78) -1.5% (112) -2.0% II 0.3% (4) 0.1% (416) -10.2% 0.3% % (345) 0.0% PATIENT DAYS THRQ!JGH: 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS ACTUAL %to TOTAL BUDGET %to TOTAL Medicare 8, % 9, % Medicaid 3, % 2, % Managed care - Medicare 1, % % Managed care - Medicaid % 1, % Managed care - Other % 1, % NJ Blue Cross 1, % 2, % Commercial insurers % % Self-pay % % Charity care 1, % 3, % Employees % % All Others 1, % % Total 20, % 21, % PATIENT DAYS % Difference (560) 0.6% % % (249) -0.8% (373) -1.4% (584) -2.1% % (52) -0.1% (2,361) -10.5% % 1, % (1,637) 0.0% 9

12 Barnabas Health, Inc. Secondary Market Disclosure Information June 30, 2014 Schedule of Payor Mix Year to Date June 30, 2014 MONMOUTH MEDICAL CENTER DISCHARGES THROUGH: 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS Medicare Medicaid Managed care - Medicare Managed care - Medicaid Managed care - Other NJ Blue Cross Commercial insurers Self-pay Charity care Employees All Others Total ACTUAL %to TOTAL BUDGET %to TOTAL 2, % 2, % % % % % 2, % 2, % 1, % 1, % 2, % 2, % % % % !% % % % % % % 10, % 11, % Discharges % Difference (129) -0.1% % % (2) 1.1% (97) 0.0% (153) -0.3% (I) 0.0% % (372) -3.1% (41) -0.3%!53 1.6% (574) 0.0% PATIENT DAYS THRQ!JQH: 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS Medicare Medicaid Managed care - Medicare Managed care - Medicaid Managed care - Other NJ Blue Cross Commercial insurers Self-pay Charity care Employees All Others Total ACTUAL %to TOTAL BUDGET %to TOTAL 11, % 13, % 6, % 5, % 1, % 1, % 6, % 7, % 7, % 6, % 7, % 8, % % % % % 1, % 3, % % % 2, % 1, % 45, % 49, % PATIENT DAYS % Difference (1,757) -1.6% 1, % % (632) -0.1% % (1,204) -1.1% (II) 0.0% % (1,872) -3.6% (213) -0.3% % (3,789) 0.0% 10

13 Barnabas Health, Inc. Secondary Market Disclosure Information June 30, 2014 Schedule of Payor Mix Year to Date June NEW ARK BETH ISRAEL MEDICAL CENTER DISCHARGES THROUGH: 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS ACTUAL %to TOTAL BUDGET %to TOTAL Medicare 2, % 2, % Medicaid 1, % 1, % Managed care - Medicare % % Managed care - Medicaid 3, % 3, % Managed care - Other % % NJ Blue Cross 1, % % Commercial insurers % % Self-pay % % Charity care % % Employees % % All Others % % Total 11, % 10, % Discharges % Difference % % (148) -1.6% % (14) -0.4% % (10) -0.1% % (408) -3.9% (6) -0.1% % % PATIENT DAYS THROU!l;H: 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS ACTUAL %to TOTAL BUDGET %to TOTAL Medicare 19, % 14, % Medicaid 7, % 8, % Managed care - Medicare 4, % 5, % Managed care - Medicaid 16, % 15, % Managed care - Other 5, % 4, % NJ Blue Cross 6, % 5, % Commercial insurers % % Self-pay I, % % Charity care 2, % 4, % Employees % % All Others 1, % 1, % Total 67, % 61, % PATIENT DAYS % Difference 4, % (41) -1.3% (1,040) -2.4% 1, % % 1, % % % (1,525) -2.9% (53) -0.2% % 6, % II

14 Barnabas Health, Inc. Secondary Market Disclosure Information June 30, 2014 Schedule of Payor Mix Year to Date June 30, 2014 SAINT BARNABAS MEDICAL CENTER DISCHARGES THROUGH: 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS Medicare Medicaid Managed care - Medicare Managed care - Medicaid Managed care - Other NJ Blue Cross Commercial insurers Self-pay Charity care Employees All Others Total ACTUAL %to TOTAL BUDGET %to TOTAL 4, % 4, % % % % % 1, % 1, % 4, % 4, % 4, % 4, % % % % % % % % % % % 16, % 16, % Discharges % Difference (129) 0.1% % (47) -0.1% (19) 0.2% (255) -0.6% (93) 0.4% (6) 0.0% % (210) -1.2% % % (594) 0.0% PATIENT DAYS THRQ!l!;!H; 6/30/14 ACTUAL BUDGET DIFFERENCE-CHANGE FINANCIAL CLASS Medicare Medicaid Managed care - Medicare Managed care - Medicaid Managed care - Other NJ Blue Cross Commercial insurers Self-pay Charity care Employees All Others Total ACTUAL %to TOTAL BUDGET %to TOTAL 27, % 28, % 2, % 1, % 4, % 4, % 6, % 5, % 15, % 16, % 18, % 18, % % % % % % 2, % 1, % 1, % 2, % 1, % 80, % 82, % PATIENT DAYS % Difference (1,153) -0.6% % % % (1,145) -0.9% (59) 0.5% % % (1,397) -1.7% % % (1,897) 0.0% 12

15 BARNABAS HEALTH, INC. Condensed Consolidated Balance Sheets (in thousands) Assets June 30, December 31, (unaudited) (audited) Current assets: Cash and cash equivalents $ 106, ,516 Investments 21,976 38,362 Assets limited or restricted as to use 76,849 61,367 Patient accounts receivable, net of allowance for doubtful accounts of$72,868 and $82, , ,415 Estimated amounts due from third-party payors, net 7,407 Other current assets 98,380 86,870 Total current assets 596, ,530 Assets limited or restricted as to use, non-current portion: Under bond indenture agreements 72,181 72,617 Externally designated or restricted 224, ,886 Total noncurrent assets limited or restricted as to use 296, ,503 Investments 936, ,469 Property, plant and equipment, net 684, ,349 Net pension asset 5,326 5,326 Other assets, net 43,202 43,108 Liabilities and Net Assets $ 2,562,461 2,393,285 Current liabilities: Accounts payable $ 197, ,449 Accrued expenses and other current liabilities 280, ,740 Estimated amounts due to third-party payors 13,416 Long-term debt and notes payable 56,824 57,703 Self-insurance liabilities 48,513 48,513 Total current liabilities 583, ,821 Estimated amounts due to third-party payors, net of current portion 30,404 28,690 Long-term debt, less current portion 934, ,852 Self insurance claims liabilities, net of current portion 152, ,419 Other-long term liabilities 62,164 65,111 Total liabilities 1,763,095 1,741,893 Net assets: Unrestricted 681, ,413 Temporarily restricted 103,896 88,284 Permanently restricted 13,702 13,695 Total net assets 799, ,392 Total liabilities and net assets $ 2,562,461 2,393,285 See accompanying notes to condensed consolidated financial statements. 13

16 BARNABAS HEALTH, INC. Condensed Consolidated Statements of Operations and Changes in Net Assets (in thousands) (unaudited) Six months ended June 30, 2014 June 30, 2013 Revenue: Net patient service revenue (net of contractual allowances and discounts) $ 1,245,001 1,203,280 Provision for bad debts (50,770) (35,672) Net patient service revenue, net of bad debts 1,194,231 1,167,608 Other revenue, net 148, ,141 Total revenue 1,342,834 1,278,749 Expenses: Salaries and wages 465, ,853 Physician fees and salaries 116,582 98,773 Employee benefits 129, ,026 Supplies 240, ,982 Other expenses 246, ,994 Interest 21,631 22,289 Depreciation 47,657 46,180 Total expenses 1,267,032 1,207,097 Income from operations 75,802 71,652 Nonoperating revenue (expenses): Investment income 84,494 13,077 Interest expense on settlement with U.S. Dept. of Justice ( 411) Other, net 12, Total nonoperating revenue, net 97,276 13,344 Excess of revenue over expenses 173,078 84,996 Net change in unrealized losses on available for sale investments (48,581) (5,505) Gain on curtailment of pension plan 35,285 Pension changes other than net periodic benefit cost 2,279 44,882 Net assets released from restriction for purchase of property and equipment 6,060 5,840 Other 15,137 (4,720) Total other changes in net assets (25, 105) 75,782 Increase in net assets $ 147, ,778 See accompanying notes to condensed consolidated financial statements. 14

17 BARNABAS HEALTH, INC. Condensed Consolidated Statements of Operations and Changes in Net Assets June30,20!4 YTD (in thousands) (unaudited) Total Revenue Income (Loss) Interest Excess from Operations Income and Otber Non- (Deficiency) of Total Before Income (Loss) Realized Gains Operating Incom~ Total Non- Revenue Over Unrealized Gains Other Equity Expenses Manag~ml?!l.t~e~s Management Fees ~~-Dl_Q~t:!l_tfons (Losses) (Exp~ns_es) Operating Income Expenses (Losses) Transactions Total Cbange in Net Assets ~ Clara Maass 136, ,955 24,047 (13,081) 10,966 1,328 (65) 1,263 12,228 (1,081) 5 11,152 Community 172, ,964 29,809 (15,387) 14,422 21,454 (367) 21,087 35,509 (17,682) (250) 17,576 Kimball 57,106 54,154 2,952 (4,962) (2,009) 3, ,945 1,936 (3,443) 273 (1,234) Monmouth 187, ,360 33,908 (17,301) 16, , ,174 Newark Beth 291, ,423 38,628 (21,910) 16, (2) ,129 Saint Barnabas ,40')' 65,580 (33,1Hl !9,921 _ (621) 19,300 51,764 (15,120) 24,576 61,220 HOSPITALS 1,195,186 1,000, ,914 (105,757) 89,166 47,416 (113) 47, ,370 (36,618) 16, ,019 FOR PROFITS: Livingston Services Corporation Livingston Services Division 30,842 29,582 1,260 {736) Premium Health Services Division 419 1,035 (616) (616) 0 6,490 6,490 5,873 5,873 Center State Health Services Division (29) (29) (0) (0) (29} (29) Total Livingston Services Corporation 31,356 30, {736) (121) 0 6,490 6,490 6,369 6,369 Kimball Health Care Affiliates (24) (24) (24) (24) (24) Ocean Gynecological 1,493 2,302 (809) (809) (809) (809) Barnabas Health ACO (North) (848) (848) (848) (848) BarnabasHealthACO(South) (716) (716) (716) (716) Innovative Purchasing Concepts {1,298) 1,298 I,298 I,298 1,298 SBC Mgmt 110, , Saint Barnabas Mgt. Svcs (46} (46) (46) (46) FOR PROFIT 143, ,011 (189) (736) (915) 0 6,490 6,490 5,565 5,565 NOT FOR PROFITS: Saint Barnabas Behavioral Health 5,266 4, (441) Saint Barnabas Outpatient Center 35,945 27,958 7,986 (2,539) 5,447 5,447 (16) 5,432 System Business Office Centmll"""J' Behavioml Health 1,967 2,283 (316) (43) (359) (359) (359) Barnabas Health Medical Group 71,132 71,133 (I} (I) 1 I (0) 3 3 Medical Center Staffing Svcs. 1,583 1,583 (0) (0) (0) (0) NOT FOR PROFITS 116, ,430 8,693 (3,013) 5,670 I I 5,671 (13) 5,658 HOME CARE and HOSPICE Barnabas Hospice and Palliative Care 13,611 13,814 (203) (998) (1,201) 281 (5) 276 (925) (222) (1,148) Me acarelnc HOME CARE and HOSPICE 19,053 18, (1,924) (931) 181 (5) 176 (655) (111) (878) REA!. EST ATE DIVISION SB Realty Development Corp: SB Realty Development 2,390 2,843 (453) (453) (13) (13) (466) (227) Clara Maas Health Systems Division (160) (160) 5,516 5,516 5,356 5,356 Total SB Realty In~lopment Corp 3,036 3,648 (613) (613) (13) 5,516 5,503 4, ,129 SBCmp 2,030 11,579 (9,548) (9,548) 27,549 9,131 36,680 27,132 (13,558) 2,274 15,847 Proqual Insurance Co Employee Health Plan 67,687 75,732 (8,045) (8,045) (8,045) (8,045) CPIC ,618 1,003 I 003 I A A DI lsi I ClaraMaass (126) (126) 16 (2) 14 (113) 49 (94) Community 759 1,084 (325) (325) 44 (I) 43 (282) 303 (925) hvington I 2 (I) (I) (I) 7 Kimball (141) (141) (109) 17 Monmouth 1,440 1,772 (332) (332) 23 (3) 20 (312) 348 Beth Care Foundation 1,305 1, (2) SB Development 2,871 2, , S temfoundation FOUNDATIONS 7,359 7, ,114 1,144 1,884 Income from Operations Before Eliminating Entries 1,581,957 1,395, ,242 (111,440) 75,802 76,128 21,148 97, ,078 (48,581) 38, ,310 Eliminating/Consolidating Entries {240,124) (128,684) 111,440 (15,347) (15,347) Income from Operations S 1,341,834 S 1,167,031 S 187,141 S - S 75,801 S 76, ,148 S 97,176 S 173,078 (S (48,581) S 23,477 S 147,973 See accompanying notes to condensed consolidated financial statements. 15

18 BARNABAS HEALTH, INC. Condensed Consolidated Statements of Cash Flows (In thousands) (unaudited) Six Months Ended June 30, 2014 June 30, 2013 Unrestricted Cash, Cash Equivalents and Investments, beginning of period $ 973, ,878 Unrestricted Cash, Cash Equivalents and Investments, end of period 1,065, ,679 Change in Unrestricted Cash, Cash Equivalents and Investments $ 92,346 (45,199) Change in Unrestricted Cash, Cash Equivalents and Investments consists of: Cash flows from operating activities: Income from operations Depreciation and amortization Interest expense Earnings before interest, taxes, depreciation and amortization (EBITDA) $ 75,802 47,657 21, ,090 71,652 46,180 22, ,121 Adjustments to reconcile EBITDA to net cash provided by operating activities: Pension-related changes other than net periodic benefit costs Gain on curtailment of pension plan Interest expense on current interest bonds Gain on sale of assets Self-insured incurred but not reported reserves and claims payable Change in patient accounts receivable Change in other assets Change in account payable Change in accrued expenses and other current liabilities Change in estimated amounts with third party payors Pension expense payable Assets limited as to use under bond indenture agreements Assets limited as to use for Self-insurance funds Other changes in working capital 2,279 (15,990) (12,000) 10,020 (23,021) (11,511) 11,062 18,923 (19,109) (15,046) (20,285) 16,652 44,882 35,285 (16,745) (10,932) (10,313) (18,549) 1,984 7,044 (6,723) (140,565) (20,324) (531) (4,078) Net adjustments to reconcile EBITDA to net cash provided by operating activities (58,026) (139,565) Net cash provided by operating activities 87, Cash flows from investing activities: Purchases of property, plant and equipment, net Acquisition of imaging facility Investment income and realized gains, net Unrealized losses on investment portfolio Proceeds from the sale of assets (35,880) 76,127 (40,215) 14,750 (30,924) (3,954) 9,681 (2,107) Net cash provided by (used in) investing activities 14,782 (27,304) Cash flows from financing activities: Principal payments on long-term debt, notes payable, and capital lease obligations, net Proceeds from capital lease obligations Settlement payments Net cash used in financing activities (14,297) 4,504 (9,793) (6,327) 1,685 (16,000) (20,642) Nonoperating income, net Other 775 (482) 681 1,510 Change in Unrestricted Cash, Cash Equivalents and Investments $ 92,346 (45,199) See accompanying notes to condensed consolidated financial statements. 16

19 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30,2014 and December 31, 2013 (In thousands) 1. Organization and Basis ofpresentation Barnabas Health, Inc. (the Corporation or Barnabas Health) is a not-for-profit holding company located in West Orange, New Jersey. Barnabas Health is the sole corporate member or sole shareholder ofthe Corporation's affiliated organizations and subsidiaries. The Corporation was organized to develop and operate a multi-hospital healthcare system providing a comprehensive spectrum of healthcare services, principally to the residents of New Jersey and the surrounding area. The services and facilities of Barnabas Health include: acute care hospitals, ambulatory care facilities, home care and hospice services, geriatric services, a freestanding inpatient psychiatric facility and state wide behavioral health network; a burn treatment facility; comprehensive cardiac care services, including a heart transplant center; a lung transplant center; kidney transplant centers; comprehensive cancer services; comprehensive breast centers; and the Children's Hospital of New Jersey at Newark Beth Israel Medical Center and the Children's Hospital at Monmouth Medical Center. On May 16, 2013, Barnabas Health, Liberty HealthCare System, Inc. (Liberty) and Jersey City Medical Center (JCMC) entered into an Agreement and Plan of Merger and Acquisition (the Transaction). Effective June 1, 2014, Liberty and its (former) wholly-owned subsidiary JCMC, a nonprofit New Jersey Corporation, have become part of Barnabas Health. These parties have closed a transaction whereby Barnabas Health has become the sole member of each of Liberty and JCMC. To consummate this member-substitution transaction, the pm1ies obtained requisite approvals from various state and federal regulatory authorities, including the U.S. Department of Housing and Urban Development with respect to JCMC's existing FHA-insured mortgage financing. No cash consideration was exchanged at the closing of the transaction. The accompanying unaudited condensed consolidated financial statements are prepared on the accrual basis of accounting in accordance with the U.S. generally accepted accounting principles (GAAP). Therefore, they do not include all of the information and notes required by GAAP for complete financial statements of the Corporation. Eliminations and reporting adjustments have been made to present the information in accordance with GAAP. The data should be read in conjunction with the audited consolidated financial statements for the years ended December 31, and 2012 and related notes. Information for the six months ended June 30, 2014 and 2013 is not based upon audited information but, in the opinion of management, is presented on a basis consistent with the audited consolidated financial statements and includes adjustments consisting of normal recurring adjustments necessary for a fair presentation therein. Adjustments to these financial statements, while not expected by management, may occur as a result of the more comprehensive review undertaken as part of the audit process for the year ending December 31, The results of operations for the six months ended June 30, 2014 are not necessarily indicative of the operating results to be expected for the entire year ending December 3 1, The condensed consolidated balance sheet at December 31, 2013 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements. 17

20 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30,2014 and December 31, 2013 (In thousands) The condensed consolidated financial statements include the accounts of the Corporation and its controlled affiliates and subsidiaries, except for Liberty (see Transaction as noted above). Affiliates and subsidiaries of the Corporation include all entities that the Corporation directly or indirectly controls. Investments in entities where the Corporation has 50% or less of an entity's operations and does not have operational control are accounted for under the equity or cost method of accounting. The Corporation has included its equity share of income or losses from investments related to its unconsolidated affiliates in nonoperating revenue and expenses. The unadjusted accounts of Liberty, as of and for the period ended June 30, 2014, are not reflected in the accompanying condensed consolidated financial statements, but are separately attached hereto for informational purposes only. 2. Summary of Significant Accounting Policies A summary of the Corporation's significant accounting policies are as follows: (a) Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities, at the date of the condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. (b) Cash and Cash Equivalents Cash and cash equivalents include highly-liquid money market funds and highly liquid debt instruments with maturities of three months or less at time of purchase, excluding assets limited or restricted as to use. The Corporation maintains cash on deposit with major banks and invests in money market securities with multiple financial institutions. The Corporation generally limits the credit exposure to any one financial institution; however, such deposits exceed federally insured limits. (c) Patient Accounts Receivable The Corporation has agreements with third-party payors that provide for payment at amounts different from its established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, and per diem payments. Management regularly reviews accounts and contracts and provides appropriate contractual allowances and discounts that are netted against patient accounts receivable in the condensed consolidated balance sheets. Patient accounts receivable are further reduced by an allowance for doubtful accounts. The Corporation regularly reviews its past collection history and payment trends for each of its major payor sources of patient service revenue to estimate the appropriate allowance for doubtful accounts and provision for bad debts. For patient accounts receivable associated with self-pay patients, which includes those patients without 18

21 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30,2014 and December 31, 2013 (In thousands) insurance coverage and patients with deductibles and copayment balances for which third party coverage exists for a portion of the bill, the Corporation records a significant provision for bad debts for patients that are unable or unwilling to pay for the portion of the bill representing their financial responsibility. Account balances are charged off against the allowance for doubtful accounts after all means of collection have been exhausted. (d) Supplies Supplies, principally medical supplies, are carried at the lower of cost (first-in, first-out method) or market. (e) Assets Limited or Restricted as to Use Assets limited or restricted as to use include assets held by trustees under bond indenture agreements; assets restricted for self-insurance; assets held for supplemental retirement benefits; and assets restricted by donors for specific purposes or endowment. Current assets limited or restricted as to use include debt service principal and interest funds held by bond trustee and self-insurance funds that will be utilized to settle current obligations. (f) Investments and Investment Income Investments include cash, cash equivalents, and investments designated by the Board of Trustees (the Board), over which the Board retains control. The Board may, at its discretion, direct the use of such assets for other purposes. A significant portion of the Corporation's investments are held in an investment portfolio maintained for the benefit of the Corporation and its affiliates and subsidiaries. Investments are classified as investments available for sale except for certain investments held in a Barnabas Healthowned investment account being actively managed by one of its previous alternative investment managers, which are classified as trading investments (note 5). Investments in equity securities with readily detenninable fair values and all investments in debt securities are measured at fair value, based on quoted market prices. Donated investments are recorded at their fair value, based on quoted market prices, at the date of receipt. Alternative investments (nontraditional, not readily marketable asset classes) within the investment portfolio at December 31, 2012 were structured such that the Corporation held limited partnership interests and other forms of ownership, which were stated at fair value, based on net asset value of the fund as estimated in an unquoted market and recorded using the equity method of accounting. Individual investment holdings included investments in both nonmarketable and market-traded securities. Valuation of the nonmarketable securities were determined by the investment manager or general partner and reviewed by management. The carrying value of the Corporation's holdings reflected net contributions to the investee and an ownership share of realized and unrealized investment income and expenses. The investments indirectly exposed the Corporation to securities lending, short sales and trading in futures, and forward contract 19

22 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30, 2014 and December 31, 2013 (In thousands) options and other derivative products. The Corporation's risk was limited to its carrying value. These alternative investments were sold during Investment income and realized gains and losses on investment transactions, other than investment income earned on assets limited as to use under bond indenture agreements, assets designated by the Board to support the operations of pediatric cardiac surgery at the Children's Hospital of New Jersey at Newark Beth Israel Medical Center (CHONJ), and assets held by the Corporation's captive insurance companies, are included in other revenue and nonoperating revenue (expenses) as a component of excess of revenue over expenses in the condensed consolidated statements of operations. Unrealized gains and losses on investments, except for investments designated as trading securities, are excluded from excess of revenue over expenses and included as other changes in net assets, unless the unrealized losses are deemed to be other-than-temporary declines in fair value. A decline in the fair value that is deemed to be other than temporary results in a reduction in carrying amount and the related loss is included in nonoperating revenue (expenses). Unrealized gains and losses on trading securities are included in nonoperating revenue (expenses). (g) Property, Plant, and Equipment Property, plant, and equipment expenditures are recorded at cost. Donated assets are recorded at fair value at the date of donation. Capitalized leases are recorded at present value at the inception of the lease and included in property, plant, and equipment. Depreciation expense is computed on a straight-line basis using estimated useful lives in accordance with American Hospital Association guidelines: Land improvements Buildings and leasehold improvements Fixed equipment Major moveable equipment 2 to 25 years 1 0 to 40 years 5 to 25 years 3 to 20 years Amortization of equipment held under capital leases is computed using the straight-line method over the shorter of the estimated useful life of the asset or the related lease term and is included in depreciation expense. Gifts of long-lived assets such as land, buildings, or equipment are reported as unrestricted net assets and are excluded from the excess of revenue over expenses in the condensed consolidated statements of operations, unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted net assets. Absent explicit stipulations about how long those long-lived assets must be maintained, expirations of donor restrictions are reported when the donated or acquired long-lived assets are placed in service. 20

23 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30, 2014 and December 31,2013 (In thousands) (h) Deferred Financing Costs Deferred financing costs represent costs incurred to obtain debt financing arrangements. Amortization of these costs is provided on the effective interest method over the terms of the applicable indebtedness. (i) Deferred Revenue Deferred revenue represents the proceeds of investment rights of the Corporation's required debt service payments and debt service reserve funds sold by the Corporation related to the Saint Barnabas Realty Development Corporation's Series 1997 A revenue bonds and the Saint Barnabas Corporation's Series 2006A and 2006B revenue bonds. The proceeds from the sale of the investment rights have been deferred and are being amortized as investment income in other operating revenue in the condensed consolidated statements of operations over the life of the bonds in a manner that approximates the interest method. Under the terms of the agreements, the Corporation retains the ability to redeem the bonds as provided in the bond indenture agreements. However, in the event of redemption, the Corporation may be required to pay a termination value. U) Donor-Restricted Gifts Conditional promises to give and indications of intentions to give are reported at fair value at the date the gift is received. The gifts are reported as either temporarily restricted or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends and/or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the condensed consolidated statements of changes in net assets as net assets released from restriction. Donor-restricted contributions whose restrictions are met within the same year as received are reported as unrestricted contributions. (k) Performance Indicator The condensed consolidated statements of operations include a performance indicator, which is the excess of revenues over expenses. Changes in unrestricted net assets, which are excluded from excess of revenue over expenses, consistent with industry practice, include net unrealized gains and losses on investments that are classified as other than trading, pension-related changes other than net periodic cost, contributed capital, and other. The Corporation differentiates its ongoing operating activities through income from operations as a subperformance indicator. Investment income, other than investment income earned on assets limited as to use under bond indenture agreements, assets designated by the Board to support the operations of pediatric cardiac surgery at CHONJ, and assets held by the Corporation's captive insurance companies, unrealized gains and 21

24 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30,2014 and December 31,2013 (In thousands) losses on investments that are designated as trading securities, and other transactions, which are not considered to be components of the Corporation's ongoing activities are excluded from income from operations and reported as nonoperating revenue (expenses) in the condensed consolidated statements of operations. Investment income earned on assets limited as to use under bond indenture agreements, assets designated by the Board to support the CHONJ, and assets held by the Corporation's captive insurance companies are included in other revenue in the condensed consolidated statements of operations. (I) Patient Service Revenue Patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered, including estimated settlements under payment agreements with third-party payors. Settlements with third-party payors are accrued on an estimated basis in the period in which the related services are rendered and adjusted in future periods as final settlements are determined. (m) Charity Care and Community Benefit The Corporation provides care to patients who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Since the Corporation does not pursue collection of amounts determined to qualify as charity care, such amounts are not reported as net patient service revenue. In accordance with its mission and philosophy, the Corporation's hospitals and affiliates commit substantial resources to both the indigent population and the broader community. The Corporation's charity care policy is to provide care without regard to the patient's ability to pay for services rendered. To the extent that patients do not have the ability to pay, services rendered to those patients are reported as charity care. The Corporation's hospitals and affiliates also provide other benefits through a broad range of community service programs and charitable activities. The State of New Jersey's regulations provide for the distribution of funds from a Charity Care Fund, which is intended to partially offset the cost of services provided to the uninsured, as well as a Hospital Relief Fund, which is intended to partially offset the cost of services provided for certain diagnosis, including mental health, substance abuse, maternity and complex neonatal cases, tuberculosis, and AIDS. The funds are distributed to the Corporation's hospitals based upon the level of charity care and units of service in relation to all other New Jersey hospitals. For the six months ended June 30, 2014 and 2013, Barnabas Health's hospitals received distributions from both funds totaling $45,470 and $45,512, respectively. (n) Other Revenue Other revenue primarily includes income from physician revenue, gains on the sale of assets, grant revenue, cafeteria, parking lot and investment income on funds held under 22

25 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30,2014 and December 31, 2013 (In thousands) bond indenture agreements, and assets held by the Corporation's captive msurance companies. During the six months ended June 30, 2014 and 2013, the Corporation recorded $14,360 and $8,180 respectively, of grant revenue related to Medicare and Medicaid Incentive Health Information payments for meeting criteria for electronic health records. (o) Income Taxes The Corporation and all affiliates, excluding its for-profit subsidiaries, are not-for-profit corporations and are exempt from federal and state income taxes on related income under existing provisions of the Internal Revenue Code and State of New Jersey statutes. (p) Self-Insurance Under the Corporation's self-insurance programs (professional/general liability, directors and officers liability, workers' compensation, and employee health benefits), claims are recorded based upon actuarial estimation, including both reported and incurred but not reported claims, taking into consideration the severity of incidents and the expected timing of claim payments. ( q) Asset Impairment Management routinely evaluates the carrying value of its long-lived assets for impairment or whenever events or changes in circumstances indicate that the carrying amount of assets, or related group of assets, may not be recoverable from estimated undiscounted cash flows generated by the underlying tangible assets. When the carrying value of an asset exceeds the estimated recoverability, an asset impairment is recognized. No impairment charges were recorded during the six months ended June 30, 2014 and (r) Goodwill Goodwill represents the excess of the aggregate purchase price over the fair value of assets acquired in a business combination. Accounting Standards Codification 350, Intangible - Goodwill and Other (ASC 350), requires that tangible and indefinite-lived assets, as well as goodwill, must be analyzed to determine whether the value has been impaired. Pursuant to ASC 350, the Corporation has determined that it has one reporting unit, which is the aggregate of all of the Corporation's affiliates and subsidiaries. At June 30, 2014 and December 31, 2013, other assets, net include $8,275 of goodwill related to business combinations entered into by the Corporation. 23

26 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30,2014 and December 31, 2013 (In thousands) 3. Healthcare Reimbursement (a) Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. As a result, there is a possibility that recorded estimates could change by a material amount. In accounting for Medicare and Medicaid cost reports, the Corporation records all third-party receivables and liabilities at their estimated realizable values. Management periodically reviews recorded amounts receivable from or payable to third-party payors and adjusts these balances as new information becomes available. In addition, revenue received under ce11ain third-party agreements is subject to audit. Certain prior year third-party cost reports were audited and settled, or tentatively settled by third-party payors during Adjustments resulting from such audits, settlements, and management reviews are reflected as adjustments to patient service revenue in the period they become known. The effect of the cost report settlements and other adjustments increased net patient service revenue by approximately $6,464 and $7,890 for the six month period ended June 30, 2014 and 2013, respectively. Although certain other prior-year cost reports submitted to third-party payors remain subject to audit and retroactive adjustments, management does not anticipate any material adverse settlements. (b) On December 30, 2009, the Corporation entered into an Agreement (the Agreement) with the United States Department of Justice (USDOJ) to restructure the repayment terms related to its Original Settlement Agreement dated June 14, Under the terms of the Settlement Agreement, the Corporation agreed to pay $265 million to the U.S. Department of Justice over a period of approximately six years, with an initial $45 million payment on or about July 1, 2006, and 21 quarterly payments thereafter, commencing on or about July 1, Each of the first two quarterly payments were $40 million; each of the next four payments were $6 million; each of the next four payments were $7 million; and each of the last eleven payments were $8 million. The scheduled payments included interest at a rate of 4.625% per annum. Upon settlement, the U.S. Attorney's Office closed its investigation of the Corporation and its related affiliates, trustees, officers, and employees. During the six months ended June 30, 2013, the Corporation made payments of $16,000 under the restructured payment terms. In addition, the Corporation recorded $411 of nonoperating interest expense related to the Settlement Agreement in the condensed consolidated statements of operations for that period. 24

27 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30,2014 and December 31,2013 (In thousands) 4. Long-term Debt and Notes Payable Long-term debt and notes payable consists of the following at June 30, 2014 and December 31, 2013: June 30, December 31, Revenue and refunding bonds $ 874, ,228 Note payable- term loan 58,143 62,857 Capital lease obligations 37,064 40,309 Other 4,031 4,869 Total long-term debt 973, ,263 Plus unamortized bond premium Less: Unamortized bond discount 20,459 3,035 21,457 3,165 Current portion 56,824 57,703 Long-term portion $ 934, ,852 Under the terms of the Master Trust Indenture (MTI), Clara Maass Medical Center, Community Medical Center, Kimball Medical Center, Mega Care Inc., Monmouth Medical Center, Newark Beth Israel Medical Center, Union Hospital, Saint Barnabas Corporation, and Saint Barnabas Medical Center are members of an Obligated Group (collectively, the Obligated Group). Saint Barnabas Outpatient Centers and Saint Barnabas Behavioral Health Center are Restricted Affiliates (collectively, the Restricted Affiliates). Collectively, the members of the Obligated Group and the Restricted Affiliates comprise the Combined Group. The Corporation's Obligated Group and Combined Group (collectively, the Obligated and Combined Group) are required to maintain certain financial covenants in connection with the New Jersey Health Care Facilities Financing Authority (NJHCFF A) debt, New Jersey Economical Development Authority (NJEDA) debt, and Credit Arrangements with a consortium of banks, including JPMorgan Chase Bank, N.A. (JPMorgan). The Corporation has the following credit arrangements outstanding: (a) An Irrevocable Standby Letter of Credit with a consortium of banks, and JPMorgan, as Administrative Agent, supporting the Corporation's self-insured workers' compensation program. The Standby Letter of Credit has an available amount of $22,517. At June 30, 2014 and December 31, 2013, no amounts have been drawn against the Standby Letter of Credit. The Standby Letter of Credit expires five business days prior to its maturity date ofnovember 15,2014. (b) A Credit Agreement with JPMorgan to provide for an Irrevocable Standby Letter of Credit in the amount of $4,750 that provides additional liquidity support for the 25

28 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30, 2014 and December 31, 2013 (In thousands) Corporation's self-insured workers' compensation program. At December 31, 2013, no amounts were drawn against the Irrevocable Standby Letter of Credit. The Irrevocable Standby Letter of Credit was terminated on February 7, (c) A Revolving Credit Agreement between the Corporation, a consortium of banks, and JPMorgan, as Administrative Agent, with an available amount of $50,000. At December 31, 2013, no amounts had been drawn against the Revolving Credit Agreement. The Revolving Credit Agreement was terminated on March 26,2014. (d) Irrevocable direct pay letters of credit with JPMorgan that provide liquidity support for the Series 2011 B and C bonds. The 2011 Series B and C bonds, while subject to long-term amortization periods, may be put at the option of the bondholders. At such point, JPMorgan would advance funds on behalf of the Corporation to the bondholders under the two issued irrevocable direct pay letters of credit, which each expire on November 16, On August 15, 2013, the Corporation entered into a Credit Agreement dated August 1, 2013, between a consortium of banks and JPMorgan (collectively, the Lenders), whereby the Lenders made a term loan pursuant to the Credit Agreement in the amount of $66,000. The term loan was secured by a note issued under the MTI. The proceeds of the term loan were used to make a $66,000 contribution to the defined benefit pension plan (note 6). The term loan requires monthly payments of principal and interest based upon a seven-year, level-principal amortization schedule. The term loan bears interest at a fixed-rate of 2.75% per annum. 5. Fair Value Measurements ASC 820, Fair Value Measurement, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include cash and cash equivalents, debt, and equity securities that are traded in an active exchange market, as well as U.S. Treasury securities. Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted market prices that are traded less frequently than exchange-traded instruments. This category generally includes certain U.S. government and agency mortgage-backed debt securities, and corporate debt securities. Level3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the 26

29 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30, 2014 and December 31, 2013 (In thousands) determination of fair value requires significant management judgment or estimation. This category generally includes certain private debt and equity instruments and alternative investments. The following tables present the Corporation's fair value hierarchy for those assets measured at fair value on a recurring basis, excluding alternative investments, pledges receivable, net, other investments, and accrued interest receivable, as of June 30, 2014 and December 31, 2013: June 30, 2014 Fair value Level 1 Level2 Level3 Investment categories: Cash and cash equivalents and money market funds $ 225, ,794 Common stock 72,750 72,751 Preferred stock- domestic 1,216 1,216 U.S. government obligations/ municipal bonds Commercial Mortgage-Backed Securities - domestic Collateralized loan obligations - domestic 9,103 9,103 Corporate bonds 23,869 23,869 Corporate bank debt - domestic Equity mutual funds 48,492 48,492 Fixed income mutual funds 263, ,780 Fixed income exchange-traded funds 403, ,718 Equity exchange-traded funds 249, ,838 Common stock sold short (364) (364) Call and put options written - domestic (409) (409) Forward foreign currency (59) (59) Total trading investments $ 1,299,003 1,265,180 33,824 27

30 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30,2014 and December 31,2013 (In thousands) December 31, 2013 Fair value Levell Level2 Level3 Investment categories: Cash and cash equivalents $ 162, ,033 U.S. government obligations/ municipal bonds 2,674 2,674 Commercial mortgage-backed securities 19,711 19,711 Corporate bonds 24,185 24,185 Equity mutual funds 178, ,443 Fixed income mutual funds: 638, ,310 Total investments available for sale $ 1,025, ,786 46,570 Investment categories: Cash and cash equivalents (2,277) (2,277) Common Stock 65,111 65,111 Preferred stock Corporate bonds 2,598 2,598 Collateralized loan obligations 11,378 11,378 Commercial mortgage-backed securities Corporate bank debt Common stock sold short (67) (67) Call and put options written (473) (473) Forward foreign currency contracts Total investments trading 77,564 63,276 14,288 Total $ 1,102,920 1,042,062 60,858 There were no significant transfers between Levels 1, 2, and 3 during the six months ended June 30,2014 and the year ended December 31, During January 2013, the Corporation sold its entire ownership interest in the two alternative investment partnerships. These alternative investments were being recorded at fair value based on net asset value (NA V) of the fund as estimated in an unquoted market and accounted for under the equity method of accounting. The proceeds from the sales of the 28

31 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30, 2014 and December 31,2013 (In thousands) alternative investments totaled approximately $56,000, representing the net asset values at the date of the sales. During March 2013, the Corporation invested approximately $63,000 (inclusive of the $56,000 of proceeds from the sales of the alternative investments), in a Barnabas Health-owned investment account which is being actively managed by an alternative investment manager. The portfolio's investment objective is to achieve above-average capital growth through investments in securities and other instruments including equities, equity-related securities, bonds and other fixed income securities, securities sold short, future contracts, forward currency contracts, and other derivative financial instruments. The investment manager intends to hold a diversified portfolio in order to maximize returns, while seeking to minimize risk. The Corporation has designated this portfolio as trading investments, which results in all realized and unrealized gains and losses being recorded as nonoperating activity. During March 2014, the Corporation adopted a new Unrestricted Cash and Investment (UCI) Policy. The objective of the new policy is to protect the consolidated balance sheet from excess volatility while maximizing the return on unrestricted cash and investments held by the Corporation, in addition to maintaining sufficient liquidity. All investments held by the Corporation are now classified as trading investments in accordance with policy. During May 2014, the Corporation liquidated its entire unrestricted investment interest in mutual funds held with one of the Corporation's money managers. These mutual funds were being recorded at fair value based on NAY of the fund based on published market quotations on active markets. The liquidation of the mutual funds resulted in a net realized gain of approximately $64,000. The proceeds from liquidation were reinvested in accordance with the Corporation's UCI Policy. Also, during May 2014, the Board released the designation of $77,000 of assets used to support the operations of pediatric cardiac surgery at CHONJ to be in accordance with the Corporation's UCI policy. There are no financial liabilities reported at fair value. The following discussion describes the valuation methodologies used for financial assets measured at fair value. The techniques utilized in estimating the fair values are affected by the assumptions used, including discount rates and estimates of the amount and timing of future cash flows. Care should be exercised in deriving conclusions about the Corporation's business, its value, or financial position based on the fair value information of financial assets presented. Fair value estimates are made at a specific point in time, based on available market information and judgments about the financial asset, including estimates of timing, amount of expected future cash flows, and the credit standing of the issuer. In some cases, the fair value estimates cannot be substantiated by comparison to independent markets. The disclosed fair value may not be realized in the immediate settlement of the financial asset. In addition, the disclosed fair values do not reflect any premium or discount that could result from offering for sale at one time an entire holding of a particular financial asset. Potential taxes and other expenses that would be incurred in an actual sale or settlement are not reflected in amounts disclosed. 29

32 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30,2014 and December 31, 2013 (In thousands) Fair values for the Corporation's fixed maturity securities are based on prices provided by its investment managers and its custodian bank. Both the investment managers and the custodian bank use a variety of pricing sources to determine market valuations. Inputs include direct or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities in inactive markets; other inputs that may be considered in fair value determination include interest rates and yield curves, volatilities, and credit risk. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit rating, duration and yields. Each designate specific pricing services or indexes for each sector of the market based upon the provider's expertise. The Corporation's fixed maturity securities portfolio is highly liquid, which allows for a high percentage of the portfolio to be priced through pricing services. Fair values of equity securities and call and put options have been determined by the Corporation from observable market quotations, when available. Because of the nature of these assets, carrying amounts approximate fair values, which have been determined from public quotations, when available. Mutual funds are valued at the NA V of shares held at year-end, based on published market quotations on active markets. The NA V is classified within Level 1 ofthe fair value hierarchy as the unit price is quoted in an active market. Short-term investments comprise short-term fixed income securities. Because of the nature of these assets, carrying amounts approximate fair values, which have been determined from public quotations, when available. Fair values of collateralized loan obligations, corporate debt obligations and commercial mortgage backed securities have been determined by the Corporation based on a discounted future cash flows methodology, using current market interest rate data adjusted for inherent credit risk or quoted market prices and recent transactions, when available. Fair values of U.S. government obligations/municipal bonds and corporate bonds have been determined by the Corporation from observable market quotations, when available. Because of the nature of these assets, carrying amounts approximate fair values, which have been determined from public quotations, when available. The fair value of the foreign currency forward exchange contracts is measured as the total amount of currency to be purchased, multiplied by the difference between (i) the forward rate as of the period end and (ii) the settlement rate specified in each contract. 6. Employee Benefit Plan Prior to May 31, 2013, the Corporation maintained the Saint Barnabas Retirement Income Plan (Pension Plan), a noncontributory defined benefit plan covering substantially all employees of the Corporation. During April2013, the Corporation's Board approved a plan to freeze the Pension Plan, effective December 31, The Pension Plan's documents were amended on May 31, 2013 to effectuate the Board's actions. Accordingly, the Corporation recorded a gain on the curtailment of the pension plan of $35,285 in the condensed 30

33 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30, 2014 and December 31,2013 (In thousands) consolidated statement of operations. In addition, the Corporation recorded a reduction of net periodic pension costs of approximately $4,820 at May 31, 2013, representing the recognition of the prior service credit at May 3 1, The Corporation also maintains a defined contribution plan, the Saint Barnabas Health Care System 401(k) Savings Plan (401(k) Plan). The Corporation's Board approved a plan, effective January 1, 2014, which enhances the 401 (k) Plan to include automatic retirement contributions based on an employee's eligible pay and years of service, as well as an increased matching contribution based upon eligible pay and an accelerated vesting period. Total contributions to the 401(k) Plan under the enhanced plan were approximately $25,600 for the six month period ended June 30, ASC 715, Compensation -Retirement Benefits, requires recognition on the balance sheet of the funded status of defined benefit pension plan and the recognition in unrestricted net assets of unrecognized actuarial gains and losses, prior service costs and credits, and transitional assets and liabilities existing at the time of adoption. The funded status is measured as the difference between the fair value of the plan's assets and the projected benefit obligation of the plan. At June 30, 2014 and December 31, 2013, the funded status of the Pension Plan was a net pension asset of $5,326. Net periodic pension cost for the six months ended June 30, 2014 and 2013 was $3,196 and $14,799. The Corporation's funding policy was to contribute amounts to the Pension Plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, plus such additional amounts as the Corporation may determine to be appropriate from time to time. During the six months ended June 30, 2013, the Corporation contributed $75,000 to the Pension Plan. Effective May 1, 2013, Pacific Investment Management Company, LLC (PIMCO) was appointed to manage 93.4% of the Pension Plan's investments, with the remaining assets invested in an alternative investment hedge fund. The Pension Plan's assets managed by PIMCO have been transitioned from a long-term return strategy to a liability-driven investment (LDI) strategy. Under the LDI strategy, PIMCO will invest primarily in fixed income and related securities based on their ability to perform similarly to the characteristics of the Pension Plan's liabilities over time. 7. Affiliations The Corporation has entered into several business arrangements with RadNet, Inc, a publicly traded company, to provide diagnostic imaging services to residents of New Jersey and the surrounding areas. These arrangements include joint ventures, of which the Corporation owns a majority ownership interest. The joint ventures are managed by RadNet, Inc. Additionally, on April 1, 2013, the Corporation purchased a diagnostic imaging facility from RadNet, Inc for $3,954. This practice is also managed by RadNet, Inc. On June 6, 2013, the Corporation was informed that Barnabas Health had been selected by the University of Medicine and Dentistry ofnew Jersey (UMDNJ) and University Hospital to 31

34 BARNABAS HEALTH, INC. Notes to Condensed Consolidated Financial Statements June 30, 2014 and December 31, 2013 (In thousands) provide consulting to University Hospital, headquartered in Newark, New Jersey. Until July 1, 2013, University Hospital was affiliated with UMDNJ; thereafter, University Hospital became an independent entity pursuant to the New Jersey Medical and Health Sciences and Restructuring Act. The consulting arrangement will assist University Hospital in (i) ensuring that it remains a financially sustainable, high quality academic medical center and Level 1 Trauma Center; (ii) an important provider of health care services to the Greater Newark area; and (iii) the principal teaching hospital of the Newark based schools of Rutgers Biomedical and Health Sciences. The Corporation expects to bill University Hospital for consulting services rendered on an hourly basis not to exceed approximately $1.1 million annually. On January 21, 2014, the Board of Trustees of Monmouth Medical Center and Kimball Medical Center approved a plan to merge Kimball Medical Center with Monmouth Medical Center to create an integrated, regionalized, two-campus partnership. As such, and effective with the approved merger on May 1, 2014, Kimball Medical Center was renamed Monmouth Medical Center, Southern Campus. Both hospitals have retained their individual licenses with separate medical staffs and a single Board of Trustees oversees both campuses. Representatives from Kimball Medical Center's board have joined Monmouth Medical Center's board. The merger has no financial statement impact. 8. Subsequent Events Management evaluated all events and transactions that occurred after June 30, 2014 and through August 14, The Corporation did not have any material recognizable subsequent events during this period, except as previously disclosed. 32

35 BARNABAS HEALTH, INC. Secondary Market Disclosure Information June 30, 2014 Note to Obligated Group Unaudited Condensed Consolidated Financial Statements The following unaudited condensed consolidated financial statements on pages 34 and 35 of Barnabas Health, Inc.'s Obligated Group (Balance Sheets as of June 30, 2014 and December 31, 2013 and Statements of Operations and Changes in Net Assets for the six months ended June 30, 2014 and 2013) were prepared for purposes of accommodating a certain group of bondholders and reflect the financial position and results of operations and changes in net assets of the Obligated Group and not the entire Barnabas Health, Inc. Pursuant to the Transaction with Liberty (as noted on page 17), neither Liberty nor JCMC has become a member of the Barnabas Health "Obligated Group" with respect to the Barnabas Health bond and bank obligations. Conversely, no member of Barnabas Health will become liable for the current Liberty or JCMC obligations under their bond or mortgage financings. These financial statements are unaudited and not intended to be presented in conformity with U.S. generally accepted accounting principles. 33

36 BARNABAS HEALTH, INC. Obligated Group Condensed Consolidated Balance Sheets (in thousands) Assets Current assets: Cash and cash equivalents $ Investments Assets limited or restricted as to use Patient accounts receivable, net of allowance for doubtful accounts of $63,621 and $72,638 Due from affiliates Estimated amounts due from third-party payors, net Other current assets Total current assets Assets limited or restricted as to use, non-current portion: Under bond indenture agreements Externally designated or restricted Total noncurrent assets limited or restricted as to use June 30, 2014 (unaudtted) 98,009 21,976 41, ,343 1,157,022 7,324 77,603 1,658,306 61,282 42, ,568 December 31, 2013 (audited) 166,008 33,713 29, , ,578 83,116 1,467,390 61,746 44, ,611 Investments Property, plant and equipment, net Interest in net assets of Foundation Due from affiliates, long term Net pension asset Other assets, net $ 898, , , ,183 5,326 70,236 3,700, , ,568 92, ,080 5,326 70,593 3,329,750 Liabilities and Net Assets Current liabilities: Accounts payable Accrued expenses and other current liabilities Estimated amounts due to third-party payors Long-term debt and notes payable Due to affiliates Self-insurance liabilities Total current liabilities $ 146, ,196 49,309 1,285,518 20,795 1,738, , ,088 13,342 48,992 1,050,716 20,795 1,495,388 Estimated amounts due to third-party payors, net of current portion Long-term debt, less current portion Self insurance claims liabilities, net of current portion Due to affiliates, long term Other-long term liabilities Total liabilities 30, ,230 53, ,485 40,134 2,991,294 28, ,420 48, ,293 43,243 2,754,915 Net assets 708, ,835 Total liabilities and net assets $ 3,700,221 3,329,750 See note to obligated group condensed consolidated financial statements. 34

37 BARNABAS HEALTH, INC. Obligated Group Condensed Consolidated Statements of Operations and Changes in Net Assets (in thousands) (unaudited) Six months ended June 30, 2014 June 30, 2013 Revenue: Net patient service revenue $ 1,174,297 1,133,296 Provision for bad debts, net (47,469) (33,713) Net patient service revenue, net of bad debts 1,126,828 1,099,583 Other revenue, net 97,204 83,870 Total revenue 1,224,032 1,183,453 Expenses: Salaries and wages 382, ,988 Physician fees and salaries 108,886 94,553 Employee benefits 119, ,597 Supplies 214, ,550 Other expenses 264, ,182 Interest 18,707 18,899 Depreciation 43,939 39,570 Total expenses 1,152,189 1,121,339 Income from operations 71,843 62,114 Nonoperating revenue (expenses): Investment income 83,106 11,531 Interest expense on settlement with U.S. Dept. of Justice (411) Other, net Total nonoperating revenue, net 83,883 11,703 Excess of revenue over expenses 155,726 73,817 Net change in unrealized losses on available for sale investments (50,186) (4,561) Gain on curtailment of pension plan 35,285 Pension changes other than net periodic benefit cost 2,277 44,882 Net assets released from restriction for purchase of property and equipment 5,989 5,807 Other 20,286 (2,867) Total other changes in net assets (21,635) 78,546 Increase in net assets $ 134, ,363 See note to obligated condensed consolidated financial statements. 35

38 Attachment LIBERTY HEALTHCARE SYSTEM, INC. Consolidated Financial Statements For The Six Month Period Ended June 30, 2014 (Unaudited)

39 Liberty HealthCare System, Inc. Table of Contents Title Pages Statistical Operating Results Summary - Hospitals 1-3 Financial Indicators 4 Consolidated Statements of Operations 5 Consolidated Quality of Earnings 6 Summary of Operating Results 7 Month to Date Statement of Operations by Entity 8 Year to Date Statement of Operations by Entity 9 Statements of Operating Revenue and Expenses- Jersey City Medical Center 10 Consolidated Quality of Earnings- Jersey City Medical Center 11 Statements of Operating Revenue and Expenses- Liberty HealthCare Management, L.L.C.. 12 Statements of Operating Revenue and Expenses - Liberty Health Care System, Inc. 13 Statements of Operating Revenue and Expenses- Liberty HealthCare Foundation 14 Consolidated Balance Sheets 15 Consolidated Balance Sheets by Entity 16 Long Term Debt Summary 17 Consolidated Statements of Cash Flows 18 Key Operating Statistics Jersey City Medical Center Unusual Items 21

40 Jersey City Medical Center Statistical Operating Results Summary Month to Date I Key 0Eerating Statistics- HosEital Onl~ I I Actual I Budget I Variance I Variance% I Last Year I Variance I Variance% I Admissions 1,488 1,531 (43) -3% 1, % Admissions Per Day (I) -3% % Adjusted Admissions 2,143 2,189 (46) -2% 2, % Adjusted Admissions Per Day (2) -2% % Patient Days (Census) 7,437 7,551 (114) -2% 6, % Average Daily Census (4) -2% % Observation Cases (81) -25% 424 (176) -42% Deliveries % 166 (3) -2% Average Length of Stay (Census days) (0.1) -I% 4.9 (0.2) -3% Inpatient Discharges 1,475 1,540 (65) -4% I, % Inpatient Discharges Per Day (2) -4% % Inpatient Surgeries (34) -10% % Outpatient Surgeries % % Outpatient Registrations 18,320 20,746 (2,426) -12% 17, % Gross Emergency Room Visits 7,392 6, % 7, % ER Admissions 1, % % Net Emergency Room Visits 6,359 6, % 6, % Net Emergency Room Visits Per Day % % ER Conversion Percentage 14.0% 12.4% 1.5% 12% 12.3% 1.7% 14% Elective Admissions Percentage 30.6% 43.3% -12.7% -29% 37.8% -7.2% -19% ER Admissions Percentage 69.4% 56.7% 12.7% 22% 62.2% 7.2% 12% Paid Full-Time Equivalents ("FTE's") 1,989 2, % 1,921 (68) -4% FTE's/Adjusted Occupied Bed Direct (0.2) -4% 5.5 (0.1) -2% FTE's/Per Adjusted Admission (0.01) -I% 0.90 (0.03) -3% Case Mix Index (all cases) (0.09) -7% % Total Net Patient Revenue/Adjusted Admission 10,869 10,956 (87) -I% 9,864 1,005 10% Salaries and Benefits as a% of Net Patient Revenue 52.46% 53.20% 1% 1% 54.75% 2% 4% Salaries and Benefits I Adjusted Admission 6,947 6, % 6,644 (303) -5% Supplies/Adjusted Admission 5,423 5, % 5,136 (287) -6% Total Expenses/ Adjusted Admission 13,847 14, % 13,213 (634) -5% Page I

41 Jersey City Medical Center Statistical Operating Results Summary Year to Date IKe~ O[!erating Statistics- Hos[!ital Only I I Actual I Budget I Variance I Variance% I Last Year I Variance I Variance% I Admissions 8,746 9,254 (508) -5% 8, % Admissions Per Day (3) -5% % Adjusted Admissions 12,594 13,233 (639) -5% 12, % Adjusted Admissions Per Day (4) -5% % Patient Days (Census) 45,045 45,687 (642) -I% 40,549 4,496 II% Average Daily Census (3) -1% % Observation Cases 1,650 1,984 (334) -17% 2,664 (1,014) -38% Deliveries % 992 ( 16) -2% Average Length of Stay (Census days) (0.2) -4% 4.8 (0.3) -7% Inpatient Discharges 8,691 9,251 (560) -6% 8, % Inpatient Discharges Per Day (3) -6% % Inpatient Surgeries I,635 1,796 (161) -9% 1, % Outpatient Surgeries 1,304 1, % 1, % Outpatient Registrations 105, ,670 (5,741) -5% 107,371 (I,442) -1% Gross Emergency Room Visits 42,341 42, % 42,473 (132) 0% ER Admissions 5,733 5, % 5, II% Net Emergency Room Visits 36,608 36,913 (305) -1% 37,306 (698) -2% Net Emergency Room Visits Per Day (2) -1% 205 (3) -1% ER Conversion Percentage 13.5% 12.4% 1.1% 9% 12.2% 1.4% II% Elective Admissions Percentage 34.5% 43.4% -9.0% -21% 38.8% -4.4% -II% ER Admissions Percentage 65.5% 56.6% 9.0% 16% 61.2% 4.4% 7% Paid Full-Time Equivalents ("FTE's") 1,955 1, % 1,896 (59) -3% FTE's/Adjusted Occupied Bed Direct (0.2) -4% % FTE's/Per Adjusted Admission (0.00) -3% 0.15 (0.00) -3o/o Case Mix Index (all cases) (0.08) -6% 1.29 (0.00) 0% Total Net Patient Revenue/Adjusted Admission 10,909 10, % 10, % Salaries and Benefits as a% of Net Patient Revenue 53.90% 53.57% 0% -I% 54.33% 0% 1% Salaries and Benefits I Adjusted Admission 7,136 6,985 ( 151) -2% 6,723 (413) -6% Supplies/Adjusted Admission 5,563 5,472 (91) -2% 5,134 (429) -8% Total Expenses/Adjusted Admission 14,182 14,014 (168) -1% 13,330 (852) -6% Page 2

42 Jersey City Medical Center Statistical Operating Results Summary LOS adjusted for Observation and CMI Actual LOS Actual Observation Cases Actual Observation Hours Actual Observation "Days" Actual LOS as above (from Fin,~~a~et~~:4~~;~~::~~~v~. Actual Observation LOS Actual Blended LOS with Observation Days Actual CMI Actual LOS as above Actual LOS adjusted to reflect budgeted CMI Increase in LOS due to CMI ,767 4,583 5, <$:08. 4,$ ,650 1 '984 ','.;);~;~,::,':,:>'; 4,734 5,727 4,506 30, , ~'42$: t.3o1~. : : ~ -1~:~~:C11@J;\t~1~~; ~.;.31St9.. ;.. ' ;{:Zqj Actual LOS w observation cases as above LOS w. obs cases adjusted to reflect budgeted CMI Increase in Adjusted LOS due to CMI Hours in OBS- Average Page 3