For the Period Ended December 31, 2015 Unaudited Quarterly Disclosure. For the Period Ended March 31, 2018 Unaudited Quarterly Disclosure

Transcription

1 For the Period Ended December 31, 2015 Unaudited Quarterly Disclosure For the Period Ended March 31, 2018 Unaudited Quarterly Disclosure

2 Quarterly Disclosure Report for March 31, 2018 The following discussion and analysis provides a narrative explanation of the results of operations and financial position of Health System Inc. and its subsidiaries (collectively ) for the three months ended March 31, The analysis should be read in conjunction with Health System and Healthcare Obligated Group s financial statements for the three-month periods ending March 31, 2018, and March 31, Beginning with the disclosure information presented for the second quarter of 2016, the discussion and analysis is made with respect to consolidated Health System and does not include a separate discussion or presentation of the results of operations and financial position for the members of the Obligated Group except in those instances where management of believes that discussion of the results of the members of the Obligated Group is relevant to understanding the discussion and analysis. The Obligated Group accounted for approximately 47% of total operating revenues for the three months ended March 31, Bond Cusips Bond Series 2011A CUSIP UC UD UE UK4 2011E 52601PBL PBM PBN PBP2 2011B 52601PBD PBC1 2015A AA5 2011D 2015B UT VF VlL UU VG UV VH UW VV UX VW VD VX VE VY WB WA VZ0

3 TABLE OF CONTENTS PROMEDICA OVERVIEW... 1 Who is... 1 Service Area... 2 Community Benefit Awards and Accreditations... 3 ORGANIZATIONAL OVERVIEW... 6 Structure... 6 Obligated Group Members... 7 Non-Obligated Group Members... 8 Executive Leadership & Governance Strategic Plan RECENT SIGNIFICANT DEVELOPMENTS Recent Significant Developments Leadership Changes Community Advocacy HCR Manor Care Acquisition MANAGEMENT DISCUSSION AND ANALYSIS Operational Performance Income Statement Net Operating income Sources of Revenue Acute Care Payor Mix Non-Operating Income Balance Sheet Balance Sheet and Cash Flow Debt Interest Rate Swaps Recent Debt Activity Ratings Investments Valuations Liquidity Pension Plans Quarterly Disclosure

4 Health System Financial Indicators Profitability Liquidity/Leverage UTILIZATION STATISTICS SYSTEM FINANCIAL STATEMENTS DEBT COVENANT CALCULATIONS Quarterly Disclosure

5 PROMEDICA OVERVIEW Formed in 1986, is a mission-driven, community-based, notfor-profit health and well-being organization that serves 24 northwest Ohio and 4 southeast Michigan counties. operates acute-care hospital facilities, integrated continuing-care facilities and services, a health insurance company with several health plans, and a physician organization. also has numerous joint ventures, comanagement and other affiliations, including a long-term academic affiliation with The University of Toledo College of Medicine and Life Sciences. Since its inception in 1986, has maintained a steadfast commitment to operating as a fully integrated health system. Its legacy hospital, Toledo Hospital, opened in 1874 and now serves as the health system s tertiary care facility. In 1988, formed Paramount, its health insurance company; in 1992, Physicians; and, in 1993, Toledo Children s Hospital. The nationally recognized organization has grown to be the region s largest health system with 12-owned and one affiliated health system (Lima Memorial). Mission Our Mission is to improve your health and well-being. Values Compassion We treat our patients and each other with respect, integrity and dignity. Innovation We continually search to find a better way forward. Teamwork We collaborate with others because we are better together than apart. Who is (Data from fiscal year 2017) 360 Continuum Service beds 2,169 licensed inpatient beds 412,000+ rehabilitation therapy encounters 13 hospitals 7,800+ deliveries 62,000+ surgeries 76,000+ inpatient discharges 344,000+ ER visits 17,900+ employees 273,000+ home care visits 920+ Physicians and providers Excellence We strive to be the best in all we do. 595,000+ lives covered by Paramount insurance 2,600+ Physicians with privileges 1,400+ Health Network members 1.8 million 77,000+ Physicians Group encounters urgent care visits Note: Data includes s Obligated Group and its affiliated and managed hospitals. Quarterly Disclosure 1

6 Service Area is headquartered in Toledo, Ohio, and serves a 27-county area in northwest Ohio and southeast Michigan. The graph below denotes the location of facilities across the service area: 2STATES Ohio and Michigan LEGEND Hospital Clinical Health Centers Hospice Home Care Rehab/Skilled Nursing Pharmacy Behavioral Health Center Radiology Laboratories Urgent Care Paramount: Health Plan Options across the Region Paramount serves more than 345,000 members throughout Ohio and several southeast counties of Michigan. Paramount is the largest provider-sponsored health plan in Ohio. In 2013, Paramount, through its statewide Paramount Advantage subsidiary, was selected as one of five Medicaid insurers in Ohio to provide statewide-managed care services. Paramount Advantage is now offered in all 88 Ohio counties. At the end of 2017, Paramount purchased Dental Health Options by Health Resources, Inc. This subsidiary offers commercial dental insurance in Indiana and Kentucky; and has over 250,000 members and over 3,600 employers groups. Paramount s workers compensation product (HMS) is offered throughout Ohio. In the 4 th quarter, 2017, HMS acquired another Ohio worker s compensation managed care organization and a third party administrator from The Health Plan. This acquisition expanded the HMS worker s compensation footprint into West Virginia. Paramount also offers commercial (Paramount Care) and Medicare (Paramount Elite) products in various counties in Ohio and Michigan as well as individual coverage through the federally facilitated marketplace. Quarterly Disclosure 2

7 Community Benefit As an anchor institution with a vision for health individuals and communities, is committed to the long-term welfare of the City of Toledo and surrounding region. We go beyond our clinical walls to achieve clinical excellence, address social determinants of health, advance education, and drive economic development and innovation. In 2016, contributed $181.3 million in community benefit through community benefit expenditures, financial assistance and government-sponsored, means-tested health care. These numbers represent s long-standing commitment to the community, fulfilling our not-for-profit status and Mission to improve the health and well-being of the residents in the communities we serve. goes beyond industry standards in meeting the goal of providing care to everyone, regardless of their ability to pay. We provide hospital care free of charge to all families without insurance with incomes at or below 200% of the federal poverty level. Additionally, hospitals provide significant discounts to families with incomes of up to 400% of the federal poverty level. As a leading advocate for the health and well-being of others, provides and promotes community wellness, collaborating with more than 350 local nonprofit agencies and organizations in Awards and Accreditations FIRST QUARTER ACCOLADES Health Grades America s 50 Best Hospitals Toledo Hospital Becker s Hospital Review 100 Hospital & Health System CMOs to Know Lee Hammerling, chief physician executive and chief medical officer Heart Failure Certification Flower Hospital Ohio Hospital Association and Ohio Department of Health recognition from Ohio First Steps for Healthy Babies Review Committee Memorial Hospital ISO re-accreditation Toledo Hospital laboratory 2018 HEALTH GRADES CLINICAL ACHIEVMENTS Toledo Hospital 47 awards including: o America s 50 Best Hospitals (2018) o America s 100 Best Hospitals for Cardiac Care ( ) o America s 100 Best Hospitals for Joint Replacement ( ) o America s 100 Best Hospitals for Orthopaedic Surgery in 2018 o America s 100 Best Hospitals for Stroke Care ( ) o America s 100 Best Hospitals for Pulmonary Care ( ) o America s 100 Best Hospitals for Gastrointestinal Care ( ) Bay Park Hospital 7 awards including o Five-Star Recipient for Total Hip Replacement ( ) o Five-Star Recipient for Hip Fracture Treatment ( ) o Five-Star Recipient for Treatment of Stroke ( ) Flower Hospital 24 awards including: o America s 100 Best Hospitals for Stroke Care ( ) o America s 100 Best Hospitals for Pulmonary Care ( ) o America s 100 Best Hospitals for Gastrointestinal Care ( ) Monroe Regional Hospital 32 awards including: o America s 100 Best Hospitals for Stroke Care (2018) o America s 100 Best Hospitals for Pulmonary Care (2018) o America s 100 Best Hospitals for Gastrointestinal Care (2018) o America s 100 Best Hospitals for General Surgery (2018) OTHERS OF NOTE Toledo Hospital o American Heart Association Get with the Guidelines Gold Plus Stroke o American Heart Association Mission: Lifeline Silver Quality Achievement Award STEMI Quarterly Disclosure 3

8 o o o o o o Becker s Hospital Review Top 100 Hospitals with Great Heart Programs Toledo CMS 5-Star Rating Comprehensive Stroke Center, The Joint Commission and American Heart Association/American Stroke Association Get with The Guidelines Stroke Gold Plus, American Heart Association/American Stroke Association ISO re-accreditation Toledo Hospital laboratory Metabolic and Bariatric Surgery Accreditations and Quality Improvement Program, recertified Bay Park Hospital o American Academy of Sleep Medicine Accreditation o Leapfrog Group of Hospital Safety Grade A o Ohio Society for Respiratory Care Center of Excellence Award o Joint Commission and American Heart Association/American Stroke Association, Primary Stroke Center o U.S. Environmental Protection Agency s (EPA) ENERGY STAR Certification for Superior Energy Efficiency Bixby Hospital o American Heart Association Get with the Guidelines Gold Plus Stroke o CMS 3-Star Rating o Healthcare Facilities Accreditation Program Primary Stroke Center Certification o Joint Commission and American Heart Association/American Stroke Association, Primary Stroke Center o Leapfrog Group of Hospital Safety Grade B Defiance Hospital o CMS 4-Star Rating o Press Ganey Guardian of Excellence Award for physician engagement Flower Hospital o American Heart Association Get with the Guidelines Gold Plus Stroke o Becker s Hospital Review 100 Great Community Hospitals o CMS 4-Star Rating o Heart Failure Certification o Joint Commission and American Heart Association/American Stroke Association, Primary Stroke Center o Leapfrog Group of Hospital Safety Grade A Fostoria Community Hospital o American Academy of Sleep Medicine Accreditation o Chartis Center for Rural Health/iVantage Health Analytics and National Organization of State Office of Rural Health top quartile of performance among all rural hospital in the nation o CMS 3-Star Rating Herrick Hospital o American Heart Association Get with the Guidelines Silver Plus Stroke o CMS 3-Star Rating o Healthcare Facilities Accreditation Program Primary Stroke Center Certification o Joint Commission and American Heart Association/American Stroke Association, Primary Stroke Center Memorial Hospital o American Academy of Sleep Medicine Accreditation o Chartis Center for Rural Health/iVantage Health Analytics and the National Organization of State Office of Rural Health top quartile for overall excellence in quality and outcomes among rural hospitals o CMS 5-Star Rating Quarterly Disclosure 4

9 o Joint Commission and American Heart Association/American Stroke Association Acute Stroke Ready Certification o Leapfrog Group of Hospital Safety Grade A o Ohio Hospital Association and Ohio Department of Health recognition from Ohio First Steps for Healthy Babies Review Committee o Partnership for Gold Achievement of Excellence Award Monroe Regional Hospital o CMS 3-Star Rating o Joint Commission and American Heart Association/American Stroke Association, Primary Stroke Center o Leapfrog Group of Hospital Safety Grade A Toledo Children s Hospital o Joint Commission dual disease-specific care for both inpatient and outpatient pediatric asthma care certification Wildwood Orthopaedic And Spine Hospital o Joint Commission Certified Total Hip Surgery o Joint Commission Certified Total Knee Surgery o Press Gainey Guardian of Excellence Award for patient engagement o American College of Radiology Accreditation, Cancer Institute o American College of Surgeons Commission on Cancer accreditation with commendation and the Outstanding Achievement Award Cancer Institute o Becker s Hospital Review 58 Hospitals with Innovation Programs Innovations o Becker s Hospital Review 150 Great Places to Work in Healthcare o Becker s Hospital Review 100 Hospital & Health System CMOs to Know Lee Hammerling, chief physician executive and chief medical officer o CMS Four Star Rating for Paramount s Medicare product (Paramount Elite) o Modern Healthcare 100 Most Influential People in Healthcare Randy Oostra, President and CEO o National Accreditation Program for Breast Centers Accreditation Cancer Institute o Radiation Therapy Oncology Group certified Cancer Institute o Quality Assurance Review Center certified Cancer Institute Quarterly Disclosure 5

10 ORGANIZATIONAL OVERVIEW Structure has established an Obligated Group structure. The entities included in the Obligated Group are highlighted in green in the chart below. is the sole member or exercises control over the sole member of each of the members of the Obligated Group. However, is not a member of the Obligated Group. Only those entities defined as Obligated Group members are obligated to make payments under the Master Trust Indenture. Health System, Inc. (1) Bay Park Community Hospital Defiance Regional Hospital Foundation Continuum Insurance Corporation Flower Hospital Fostoria Hospital Association Physician Group Indemnity Corporation Herrick Hospital Memorial Hospital Toledo Hospital Mercy Memorial Hospital Continuing Care Services Emma L. Bixby Medical Center Coldwater Hospital Corporation LEGEND = Obligated Group Member = Non-Obligated Group Member Lenawee Long Term Care (1) Some of the Obligated Group Members and Non-Obligated Group Members included in the chart above control one or more subsidiary organizations. Those subsidiary organizations, none of which is an Obligated Group Member, are excluded from the above chart. Quarterly Disclosure 6

11 Obligated Group Members s Obligated Group facilities operate solely within the ambulatory, acute and continuum care business lines. It is comprised of 11 acute care facilities (1,793 licensed beds) and several long-term, skilled nursing and hospice business lines. A summary of the members of the Obligated Group Acute Care Hospitals as of March 31, 2018, is as follows: Bay Park Hospital Oregon, Ohio Licensed Beds: 91 Year Established: 2001 Memorial Hospital Fremont, Ohio Licensed Beds: 100 Year Affiliated: 2014 Bixby Hospital Adrian, Michigan Licensed Beds: 101 Year Affiliated: 1999 Defiance Regional Hospital Defiance, Ohio Licensed Beds: 51 Year Affiliated: 1999 Flower Hospital Sylvania, Ohio Licensed Beds: 315 Year Affiliated: 1996 Fostoria Hospital Fostoria, Ohio Licensed Beds: 25 Year Affiliated: 2000 Monroe Regional Hospital Monroe, Michigan Licensed Beds: 251 Year Affiliated: 2015 Toledo Hospital Toledo, Ohio Licensed Beds: 641 Year Affiliated: Legacy Toledo Children's Hospital Toledo, Ohio Licensed Beds: 151 Year Established: 1994 Herrick Hospital Tecumseh, Michigan Licensed Beds: 25 Year Affiliated: 1999 Wildwood Orthopaedic & Spine Toledo, Ohio Licensed Beds: 42 Year Established: 2011 Corporation Licensed Beds Location Long-Term Care/Assisted Living/Other Goerlich Center for Alzheimer's Care 60 Sylvania, Ohio Ebeid Hospice 12 Sylvania, Ohio Caring Home Health Services * Sylvania, Ohio Provincial House of Adrian 117 Adrian, Michigan Charlotte Stephenson Manor 60 Adrian, Michigan Monroe Nursing Center 89 Monroe, Michigan Total Long-Term Care Beds 338 *236,000 Home Health Visits in 2017 Quarterly Disclosure 7

12 Non-Obligated Group Members Paramount Insurance Paramount is key to the integrated delivery system of and is a wholly owned subsidiary. As the largest provider-sponsored health plan in Ohio, Paramount provides almost 30 years of experience in managing risk and population health. Neither Paramount, nor any of its subsidiaries, are Members of the Obligated Group. Paramount and its subsidiaries offer the following insurance products in Ohio and Michigan: Commercial (Paramount Care): Our commercial products include fully funded insurance products (Ohio and Michigan) and self-funded administrative services-only ( ASO ) plans. It also offers gold, silver, bronze plans in the health insurance marketplace. Paramount serves more than 78,000 commercial members and 5,860 marketplace consumers. Medicaid (Paramount Advantage): Paramount Advantage has been contracted with the Ohio Department of Medicaid since Paramount Advantage services Covered Families and Children, Adult and Pediatric Aged Blind and Disabled, and Adult Extension members. The provider contract with ODM does not have a specific termination date. Paramount Advantage served over 245,000 Medicaid members at the end of first quarter of Medicare (Paramount Elite): This Medicare product is offered in 14 counties in Ohio and 2 counties in Michigan. Paramount Elite has been contracted with Centers for Medicare/Medicaid Services (CMS) since Paramount Elite has 16,000 members. Managed Care Workers Compensation (HMS): This Ohio statewide product is the fifth (out of 16) largest worker s compensation managed care organization in Ohio. Other entities provide workers compensation third-party administration services, life care planning, and expert witness testimony services. As of March 31, 2018, there were approximately 345,000 members in the various health plans offered by Paramount and its subsidiaries, with the largest segment in Paramount Advantage. Over the last four years, the overall plan mix of Paramount product offerings has shifted to 75% enrollment in the government sector (245,000 Medicaid and 16,000 Medicare enrollees) as of March 31, With the acquisition of Dental Health Options, Paramount will add 250,000 commercial, dental members in Indiana and Kentucky. Physician Group Physician Group, Inc. and its subsidiary limited liability companies (collectively, PPG ) is a comprehensive provider network consisting of 928 employed providers, including 509 primary care and specialty physicians, as well as 419 advanced practice providers. PPG handled approximately 474,000 patient encounters in the first quarter of An additional 96 providers have been recruited in 2018 as part of s continued focus on expanding patient access within its provider network. PPG providers are engaged in achieving quality outcomes by targeting preventative healthcare, with special emphasis on cardiovascular diseases and cancer. Members of the physician network provide leadership to through participation on boards, councils and membership in co-management companies. Continuum Services Continuum Services (formerly known as Physicians and Continuum Services, or PCS ) is an Ohio nonprofit corporation that includes Continuing Care Services Corporation, an Ohio nonprofit corporation that provides and manages specialty pharmacy, durable medical equipment, home health, palliative care, hospice, and inpatient and outpatient rehabilitation services. Quarterly Disclosure 8

13 Executive Leadership & Governance Executive Leadership The 14-member Executive System Team (listed below) plans and administers the strategic plans of and its subsidiary entities, subject to the policies and authority of the Board of Trustees. Name Title Years with Years in Health Care Randy Oostra President & Chief Executive Officer Michael Browning Chief Financial Officer 2 27 Holly Bristoll Chief Integration Officer, Academic Affiliation Dan Cassavar, MD President & Chief Medical Officer, PPG Gary Cates Chief Philanthropy Officer Lee Hammerling, MD Chief Physician Executive & Chief Medical Officer Lori Johnston President, Insurance Corp Jeff Kuhn Chief Legal Officer/General Counsel and Chief Construction & Property Management Officer Barb Petee Chief Government Relations & Advocacy Officer John Pigott, MD Chief Innovations Officer/Strategic Business Development Arturo Polizzi President, Metro Region Jack Randolph Chief Information Officer Karen Strauss Chief Strategy, Marketing & HR Officer 5 5 Kevin Webb Chief Acute & Post-Acute Care Officer Governance has 444 volunteer board members serving on 44 boards, committees, councils and foundations. The Board is comprised of 32 members, four of which are members of various Hospital Subsidiary Boards while the remainder are members of s standing committees or represent business units, physicians or areas requiring special expertise. A majority of the members on the Board of Trustees serve for two 3-year terms. Each Board member may serve up to two terms. In addition, the Board has established standing committees. Members appointed to these committees may serve for a term of up to six years, except for the Investment Committee, which requires specific expertise. The Subsidiary Boards exercise the powers delegated to them in their respective Code of Regulations or Bylaws and granted to them by statutory authority. The Board appoints or approves all members to the Subsidiary Boards. Committees Audit/Compliance Center of Nursing Excellence Compensation Executive Finance Governance Insurance/Risk Investment Mission Development Physician Leadership Quarterly Disclosure 9

14 Strategic Plan has adopted and implemented, and continues to execute, various strategic initiatives to advance key components of its integrated healthcare delivery system in the fulfillment of its mission. remains committed to the integrated delivery system structure first implemented in the 1990 s. High Reliability: Safety Quality Experience Baldrige Deliver great healthcare outcomes and preferred healthcare experiences. High Performance: Growth Performance Targets Cost Transformation Philanthropy Achieve financial targets through strategic growth and cost transformation. Strategic Innovation: Innovations I Telemedicine Continuously pursue innovative solutions to support care management and improved experiences, while growing the business. Community Advocate: Social Determinants Economic Development Opioid and Substance Abuse Ebeid Promise Lead partnering relationships and healthcare advocacy efforts in our communities and nationally to improve the social determinants of health. Workplace of Choice: Talent Management Talent Attraction Total Rewards Create an inclusive workplace environment that attracts and retains top talent. Research & Education: Faculty, Resident, Student Transition Space Planning I New Program Development Enhance the education of the next generation of healthcare providers and engage in targeted cutting-edge research. Quarterly Disclosure 10

15 RECENT SIGNIFICANT DEVELOPMENTS Recent Significant Developments Community Health Center of Branch County (Michigan) officially joined on Jan. 1. Located in Coldwater, Mich., and now called Coldwater Regional Hospital, the 87-bed hospital with more than 600 employees and 190 physicians and advanced practice providers on its medical staff, became s 13 th hospital. The member substitution transaction closed on Jan. 1, and the University of Toledo College of Medicine and Life Sciences scheduled to open joint neurosciences center on April 9. The three-story, 122,000-square-foot center is located on the campus of Toledo Hospital. Physicians neurologists and neurosurgeons, as well as UT neurologists and neurosurgeons will relocate to this one collaborative space, providing the most advanced and comprehensive neurosciences care in the area. New heart rhythm center opened at Toledo Hospital. Dedicated to caring for patients with heart rhythm conditions and disorders, the brand-new center is 6,500 square-foot. It features three dedicated electrophysiology labs and three types of 3D-cardiac mapping. With the largest team of cardiac electrophysiologists in the region, the center positions Toledo Hospital to increase the number of sessions for heart rhythm patients by 20% over the next several years. Cancer Institute (PCI) announced it is expanding cancer care to the Maumee community starting in September The new site on the campus of St. Luke s Hospital will provide both medical and radiation oncology services as well as care navigation and a wide range of support programs such as social work and nutrition counseling. Toledo Hospital topped off its new 13-story Generations Tower with the last structural beam. The 302-bed tower will replace the hospital s 86-year-old existing tower, significantly transforming the hospital campus. It is expected to open by the end of Cardiothoracic surgeon at Toledo Hospital performed the first commercial implant of the Medtroinic Avaulus pericardial aortic surgical valve in the Unites States. Michael Moront, MD, a cardiovascular surgeon employed by Physicians Group, performed the surgery on a 78-yearold Toledo-area woman. The valve earned U.S. Food and Drug Administration approval in The Health Network (PHN) entered its third year of its three-year Track 1 ACO agreement in the Medicare Share Savings Program (MSSP). PHN has more than 1,200 providers and just under 34,000 beneficiaries. PHN also became a group in a Value Based Contract with Paramount Elite. Paramount now covers Regenexx stem cell and platelet rich procedures for employees. Regenexx may be used to treat chronic knee pain caused by osteoarthritis, overuse, injury, tendonitis and other degenerative joint conditions. Physicians and Continuum Services began to implement a new medical management model to improve transitions of care between acute care and skilled nursing facilities. Physician led, the program will develop and implement clinical pathways to improve patient care with community skilled nursing partners. This will enhance the coordination of services and allow an active participation in the management of patient care as well as unnecessary returns to the hospital. Toledo Hospital named among Top 50 in country. Healthgrades named the hospital one of America s 50 Best Hospitals in 2018, putting it in the Top 1% of hospitals for clinical outcomes. Quarterly Disclosure 11

16 named again to Becker s 150 Top Places to Work in Healthcare. The list highlights hospitals, health systems and healthcare companies that promote diversity within the workforce, employee engagement and professional growth. Oostra named to Local Initiatives Support Corporation (LISC) national board of directors. President and CEO Randy Oostra was selected for the board as a national thought-leader of the issue of social determinants of health and their impact on an individual s health and well-being. Hammerling makes Becker s list of 100 Hospital & Health System CMOs to know. Lee Hammerling, MD, s chief physician executive and chief medical officer, provides oversight for the development and growth of s service lines, population health strategies and academic programs and affiliations. Baldrige examiners visited March to learn more about its systems and processes and their deployment across the system. The Partnership of Excellence (TPE), which conducts the Baldrige examinations in Ohio, evaluated the system in seven areas defined by the Baldrige Excellence Framework Leadership Changes On March 1, 2018, Jack Randolph, former president of Paramount Health Insurance, Inc., transitioned to the role of chief information technology officer for. Randolph has been with for 36 years, 25 years of that at Paramount and has been critical to the success of Paramount. Under his leadership, Paramount established its Medicare, Medicaid and Workers Compensation product lines, acquired numerous companies including Toledo Health Plan, Medical Value Plan, HMS, Advocare, BalaCare, ProComp, and Health Resources Inc.; grew its services into Michigan, West Virginia, Indiana, and other states; and expanded its Medicaid offering to more than 590,000 members and $1.5 billion in annual revenues. Simultaneously, Lori Johnston, former chief information technology officer for, became president of Insurance Corporation and Paramount Health Care Inc. Johnston has been with for 21 years holding several key leadership roles in finance, acute, post-acute and physician group operations. She was instrumental in the integration (and divestiture) of St Luke s Hospital. Most recently, she was instrumental in implementing Epic system-wide and improving s technical educational efforts around cybersecurity. Community Advocacy announced that it is teaming up with the national non-profit Local Initiatives Support Corporation (LISC). The $45-million joint venture will establish a loan pool and grant program for neighborhood-based economic development in s 28-county footprint in northwest Ohio and southeast Michigan. LISC will also help implement the 10-year, $50-million Ebeid Neighborhood Promise announced last fall to benefit Toledo s UpTown neighborhood. and LISC already work together to operate a financial opportunity center (FOC) housed at the Ebeid Institute. The FOC offers employment and career services, plus a variety of programs to help individuals with low to moderate incomes establish credit, savings and other assets. Credit Adjustment Inc. opened a call center at Ebeid Institute in Toledo s UpTown neighborhood. The Defiance, Ohio, based debt-collection company plans to add 500 jobs over the next three years. Last year, 44 Physicians primary care practices began to screen for expanded screening of social determinants of health. With 2,905 patients completing the screening for 10 different social domains, 59% triggered positive on at least one domain and 35% triggered positive on three or more domains. Screenings will continue in 2018 and focus on their implementation in acute care facilities. Quarterly Disclosure 12

17 HCR Manor Care Acquisition SUBSEQUENT EVENT On April 25, 2018, entered into a definitive agreement to acquire the operations of HCR ManorCare and Arden Courts, the nation s second largest provider of post-acute services and long-term care. also announced that it had agreed to form an 80/20 joint venture with Welltower, Inc. to acquire the real estate of the principal tenants of Quality Care Properties, Inc., HCR ManorCare and Arden Courts. HCR ManorCare, based in Toledo, Ohio, has more than 50,000 employees providing services in 450 locations that include assisted living facilities, skilled nursing and rehabilitation centers, memory care communities, outpatient rehabilitation clinics, and hospice and home health agencies. The current estimated cost of the acquisition of the operations of HCR ManorCare and Arden Courts is approximately $1.1 billion. Conditions to closing this acquisition include receiving certain federal and state regulatory approvals, approval of the transaction by the United States Bankruptcy Court, District of Delaware, and satisfaction of various other closing conditions. Quarterly Disclosure 13

18 MANAGEMENT DISCUSSION AND ANALYSIS Operational Performance s operating performance for the three months ending March 31, 2018 saw an improvement in operating income compared to 2017 due to increased revenue from the Acute Care division and Insurance Company. The increase in Net Unrestricted Assets was less than the same period in 2017 due to less favorable market performance. Income Statement (Detailed Financial Statements are presented in the Appendix) ($000's omitted) Health System Three Months Ended March 31 Obligated Group Three Months Ended March Revenues Net patient service revenue $415,197 $374,300 $389,447 $364,023 Member revenue 422, , Other 14,525 17,415 8,316 10,830 Total operating revenue 852, , , ,853 Expenses Salaries and benefits 288, , , ,381 Supplies 54,732 52,610 46,158 46,641 Contracted fees 79,961 75,374 38,175 34,922 Other 396, , , ,836 Total operating expenses 819, , , ,780 Operating income before depreciation and amortization 32,088 26,244 34,257 27,073 Depreciation and amortization 34,807 33,971 22,592 22,713 Net income from operations (2,719) (7,727) 11,665 4,360 Other income 10,737 61,927 (2,072) 45,754 Excess (deficiency) of revenue over expenses before unusual items 8,018 54,200 9,593 50,114 Unusual items restructuring and severance costs (150) Excess (deficiency) of revenue over expenses $7,868 $54,243 $9,593 $50,114 For the three months ending March 31, 2018, s total operating revenue was $0.85 billion, an increase of $97.5 million over the comparable period in Membership revenue increased $59.5 million due to increased membership in the Medicaid product line and rate increases in Medicaid, HIX and Commercial product lines. Insurance Company also acquired a dental insurance company at the end of 2017 that contributed $16.3 million in membership revenue. Total operating expenses increased $91.6 million due to salaries and benefits as well as medical expense related to the additional membership in Medicaid, an increase in per member per month costs and $12.1 million from the acquired dental insurance company. Quarterly Disclosure 14

19 Net Operating income For the three months of fiscal 2018, s operating income was ($2.7) million, an increase of $5.0 million when compared to the prior period in Based on expanded Medicaid membership and acquiring HRI, Paramount has incurred increased membership revenue and medical expense. Sources of Revenue As Paramount has experienced continued growth in Medicaid products from the statewide expansion of coverage, the health plan now accounts for approximately 50% of Health System s total operating revenue. The Obligated Group accounted for approximately 47% of the total system revenue for the three months ending March 31, Physician 6% Continuum 3% Philanthropy & Other 2% Acute Care 39% Health Plan 50% Total system revenue as of March 31, 2018, was $852 million. Quarterly Disclosure 15

20 Uncompensated Care Bad debt and charity care, as a percentage of operating revenue for the three months ending March 31, 2018, is comparable to the prior period. Health System (000's omitted) Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 Charity care $16,158 $15,660 Bad debt 28,771 24,754 Total uncompensated care $44,928 $40,414 % of Total operating revenue 5.0% 5.0% Acute Care Payor Mix Year-to-Date Calendar Year March 31, Medicare (1) 44.6% 44.1% 43.8% 43.2% Medicaid (1) 20.9% 21.3% 21.1% 19.9% Blue Cross 11.9% 11.8% 11.9% 12.1% Managed Care 21.3% 21.6% 22.0% 23.4% Self-Pay 1.3% 1.2% 1.2% 1.4% Totals 100% 100% 100.0% 100.0% (1) Includes Medicare and Medicaid HMOs. Non-Operating Income Total investment income for the three-month period ending March 31, 2018, was $(2.0) million. This amount included $21.1 million of unrealized loss as compared to prior year investment income of $71.4 million that included $20.9 million in unrealized gains. The year-to-date loss on interest rate swaps was $2.3 million through March. Quarterly Disclosure 16

21 Balance Sheet (Detailed Financial Statements are presented in the Appendix) Assets ($000's omitted) Health System As of Obligated Group As of March 31, 2018 December 31, 2017 March 31, 2018 December 31, 2017 *Unrestricted cash & investments $1,823,345 $1,700,612 $1,054,153 $1,227,202 Accounts receivable, net 273, , , ,633 Other current assets 103, ,651 51,184 53,598 Property, plant and equipment, net 1,409,600 1,345,046 1,053,330 1,017,055 Other assets 620, , ,444 80,224 Total assets 4,230,655 4,217,143 2,535,179 2,645,712 Liabilities & Net Assets Current liabilities 1,017,661 1,020, , ,483 Long-term debt 434, , , ,532 Other liabilities 172, ,838 59,547 62,643 Net assets 2,605,710 2,588,444 1,287,717 1,391,054 Total liabilities & net assets $4,230,655 $4,217,143 $2,535,179 $2,645,712 *Includes unrestricted foundation cash Balance Sheet and Cash Flow As of March 31, 2018, had $1.8 billion of unrestricted cash and investments to fund operations and capital expenditures. This equated to days cash on hand as of March 31, 2018, compared with days at December 31, Total debt was $989.0 million at March 31, 2018, and $982.8 million at December 31, The total debt to capitalization ratio as of March 31, 2018, was at 28.6% as compared to 28.5% as of December 31, The total cash to debt ratio for was 2.2 as of March 31, 2018, as compared to 1.9 as of December 31, capital expenditures were $67.7 million for the three months ending March 31, 2018, compared to $67.0 million for the prior year comparable period. Net cash provided by operating activities was $32.1 million in the three months ending March 31, 2018, compared to ($42.1) million provided by operating activities in the three months ended March 31, Quarterly Disclosure 17

22 Debt The composition of s current debt structure, as of March 31, 2018, is summarized below: Series Par Outstanding Product Final Maturity Average Coupon Tax Status Series 2011A $4,050,000 Fixed Rate 11/15/ % Tax-Exempt Series 2011B 155,000 Fixed Rate 11/15/ % Tax-Exempt Series 2011C 8,908,000 Direct Loan 11/15/2019 Variable Tax-Exempt Series 2011D 97,263,000 Fixed Rate 11/15/ % Tax-Exempt Series 2011E 2,184,000 Fixed Rate 11/15/ % Tax-Exempt Series 2015A 270,412,000 Fixed Rate 11/15/ % Taxable Series 2015B 45,179,000 Fixed Rate 11/15/ % Tax-Exempt Series 2015C 19,129,000 Direct Loan 11/15/2051 Variable Taxable Series 2015D 4,987,000 Direct Loan 11/15/2025 Variable Taxable Series 2015E 34,915,000 Direct Loan 11/15/2025 Variable Taxable Series 2017A 54,564,000 Direct Loan 11/15/ % Tax-Exempt Series 2017B 119,868,000 Direct Loan 11/15/ % Tax-Exempt Series 2017C 84,838,000 Direct Loan 11/15/ % Tax-Exempt Series 2017D 39,653,000 Direct Loan 11/15/ % Tax-Exempt Series 2017F 62,390,000 Direct Loan 11/15/2029 Variable Tax-Exempt Series 2017G 79,912,000 Direct Loan 11/15/2048 Variable Tax-Exempt Series 2017H 24,809,000 Direct Loan 11/15/ % Tax-Exempt Coldwater ,695,000 Qualified Low-Income Community Investment Loans 14,369,000 Direct Loan 12/15/ %-2.58% Tax-Exempt Sub Total $973,281,000 Other* 15,766,000 $989,047,000 *Other debt includes capital lease obligations, and other miscellaneous notes and loans Interest Rate Swaps utilizes interest-rate swaps as part of its risk management strategy to manage exposure to fluctuations in interest rates and the overall cost of its debt. Derivatives are used to manage identified and approved exposures and are not used for speculative purposes. The following is a summary of the outstanding interest rates swaps as of March 31, Debt Swapped Instrument Type Notional Amount Maturity Date YTD Gain(Loss) thru 3/31/2018 3/31/2018 Mark-to-Market Series 2017F Floating to Fixed Rate $62,500,000 11/15/2034 $2,302,000 ($15,030,000) $62,500,000 $2,302,000 ($15,030,000) Quarterly Disclosure 18

23 Fixed/Variable Debt Mix* ($000s omitted) maintains a conservative debt structure. Approximately 85% of outstanding debt is fixed rate as shown in the graph to the right. Total outstanding debt as of March 31, 2018, was $973.3 million. Synthetic Fixed includes swap on 2017F Bonds *Excludes capital leases, other misc. notes & loans of $15,766. Variable $148 15% Synthetic Fixed $62 7% Recent Debt Activity On December 29, 2017, the Obligated Group issued $80M in tax-exempt new money bonds with the proceeds used for project costs relating to the Toledo Hospital Generations of Care project. Fixed $763 78% On December 29, 2017, the Obligated Group also advance refunded the Series 2008D bonds ($53M) and refinanced the Series 2008A ($62.5M) bonds that were a bank direct placement with a new bank direct placement Series 2017F. A portion of the Series 2011A ($176.8M), 2011B ($17.2M), 2011D ($35.5M) & 2011E ($4.8M) bonds were also advance refunded via bank direct placements. Ratings In March 2017, Moody s Investor Services lowered their rating from Aa3 with a stable outlook to A1 with a stable outlook. Standard and Poor s lowered their rating from AA- with a stable outlook to A+ with a stable outlook in March of Quarterly Disclosure 19

24 Investments Total unrestricted cash and investments for as of March 31, 2018, and December 31, 2017, were as follows: Unrestricted Cash and Investments ($000s) March 31, 2018 Dcember 31, 2017 Cash and cash equivalents $286,538 16% $294,030 16% Marketable securities 299,399 16% 295,433 16% Internally designated investments for capital acquisitions* 1,237,408 68% 1,293,318 69% Total unrestricted assets $1,823,345 $1,882,781 *includes unrestricted foundation cash centralizes the management of cash and investments maximizing flexibility and allowing for efficiencies in managing liquidity. The majority of s investments are pooled in a master trust arrangement with custody provided by BNY Mellon. Investments held outside of the pooled trusts are done so due to regulatory requirements or other purposes. Governance of all investments is provided by the Investment Committee, who annually approves the investment policies. A summary of the investment portfolios is as follows: Segregated and Restricted Funds 25% Total investment pools as of March 31, 2018, of $1.8 billion Long-term Operating Pool 51% Health Plan 16% Short-term Operating Pool 8% s investment program is strategically structured to maintain adequate and appropriate liquidity levels, while maximizing long-term growth. utilizes ongoing cash forecasting to ensure proper allocations between operating, short-term, and long-term funds. Portfolios are monitored quarterly to ensure compliance against the policy along with detailed portfolio reviews. Quarterly Disclosure 20

25 Operating Pools Asset Allocation Total Assets of $1.4B as of March 31, 2018 ST Fixed 10% LT Fixed 27% US Large Cap 14% Large Cap Global 17% Real Return 5% Global Long/Short 11% Int'l/EM Equities 10% US Smid Cap 6% Valuations s investment portfolio is primarily composed of level-i and level-ll securities with limited exposure to level-iii investments. The value of level-iii investments as of March 31, 2018, is $52.5 million or 3% of the portfolio. It is comprised of land held for investment, the foundation s beneficial interests in funded perpetuities and a nominal allocation to private capital. Liquidity maintains a high level of liquidity within the investment portfolio. Approximately $95.8 million or 5% of investments have liquidity provisions that may restrict their ability to be liquidated in 30 days or less and approximately $20.6 million or 1% has liquidity provisions greater than one year. 1% 4% 9% 86% Illiquid Quarterly Monthly < 5 Days Quarterly Disclosure 21

26 Pension Plans Health System provides retirement plans covering a large portion of its employees. The Plans were froze in prior years for benefit accruals to all active plan participants. The System contributes to the plans annually based upon actuarially determined funding guidelines. As of March 31, 2018, the cash balance plan had a pension asset of $27.3 million and as of March 31, 2017, a pension liability of $14.1 million. As of March 31, 2018 and 2017, the defined benefit pension plan for Monroe employees had a pension liability of $19.9 million and $22.8 million, respectively. At December 31, 2017, the System recognized a pension asset of $25.3 million for the fair value of cash balance plan assets exceeding the plan s projected benefit obligation, and a pension liability of $20.6 million for the Monroe employee s retirement plan projected benefit obligation exceeding the fair value of plan assets. Quarterly Disclosure 22

27 Health System Financial Indicators Profitability Year-to-Date March 31, 2018 Year-to-Date March 31, 2017 Operating margin (.3)% (1.0)% Operating cash flow margin 3.8% 3.5% Liquidity/Leverage March 31, 2018 December 31, 2017 Days cash on hand Debt-to-capitalization 28.6% 28.5% Cash-to-debt Quarterly Disclosure 23

28 UTILIZATION STATISTICS SYSTEM The following table provides details on historical data on patient volumes and long-term care occupancy rates along with current and prior year comparisons: Year-to-Date March 31 Calendar Year (1) 2017(1) 2016(2) Acute discharges 14,533 15,873 59,739 66,234 Newborn discharges 1,608 1,622 6,646 7,268 Outpatient surgeries 9,620 9,248 38,327 40,286 Emergency room visits 69,824 73, , ,795 ALOS - acute % of Staffed beds (acute care) 57% 57% 54% 55% Home health admissions 3,273 3,233 12,863 12,929 Home care visits 58,304 59, , ,973 LTC patient/resident days 25,025 25, , ,927 Inpatient hospice days ,416 3,258 Occupancy rates as a percentage of beds: Lake Park(2) 0.0% 0.0% 0.0% 0.0% Goerlich Center 94.0% 95.8% 92.8% 93.1% Provincial House 96.9% 94.6% 93.4% 91.9% Charlotte Stephenson Manor 69.5% 92.4% 81.9% 94.6% Herrick Manor(3) 0.0% 0.0% 0.0% 64.6% Monroe Skilled Nursing Rehab 74.7% 74.8% 77.3% 87.6% (1) Includes results of Monroe Regional Hospital beginning January 1, 2015 (2) Lake Park ceased operations in December 2015 (3) Herrick Manor ceased operation in January 2017 *includes St. Luke s for all annual periods and through the second quarter of 2016 Quarterly Disclosure 24

29 FINANCIAL STATEMENTS PROMEDICA HEALTH SYSTEM Consolidating Balance Sheet (Unaudited and $000s omitted)) Obligated Group As of March 31, 2018 As of December 31, 2017 Other Other Obligated Entities Including Group Entities Including Eliminations Eliminations ASSETS CURRENT ASSETS Cash and cash equivalents $23,623 $262,915 $286,538 $137,916 $156,114 $294,030 Marketable securities 6, , ,399 6, , ,433 Accounts receivable, net 276,068 (2,529) 273, ,633 (12,161) 255,472 Assets limited as to use or restricted - 4,363 4,363-4,335 4,335 Inventories 19,174 9,234 28,408 18,921 7,326 26,247 Other current assets 51,184 52, ,334 53,598 78, ,651 TOTAL CURRENT ASSETS 376, , , , ,586 1,007,168 ASSETS WHOSE USE IS LIMITED Restricted funds 2, , ,805 2, , ,010 Bond indenture agreement funds Internally designated for capital acquisition 1,024,219 28,982 1,053,201 1,082,772 28,377 1,111,149 Other segregated investments 34, , ,460 31, , ,946 TOTAL ASSETS WHOSE USE IS LIMITED 1,060, ,560 1,512,480 1,116, ,621 1,566,117 Property, plant and equipment, net 1,053, ,270 1,409,600 1,017, ,991 1,345,046 OTHER ASSETS Pension - 25,326 25,326-25,326 25,326 Goodwill 18,019 47,895 65,914 18,019 52,058 70,077 Other intangible assets 1,233 52,924 54,157 1,255 53,826 55,081 Investments in affiliated companies 23,263 78, ,136 7,748 77,681 85,429 Other assets 2,054 63,407 65, ,342 62,899 TOTAL OTHER ASSETS 44, , ,994 27, , ,812 TOTAL ASSETS $ 2,535,179 $1,695,476 $4,230,655 $2,645,712 $1,571,431 $4,217,143 Quarterly Disclosure 25

30 LIABILITIES AND NET ASSETS Obligated Group As of March 31, 2018 As of December 31, 2017 Other Entities Including Eliminations Obligated Group Other Entities Including Eliminations CURRENT LIABILITIES Accounts payable and accrued liabilities $86,986 $127,745 $214,731 $102,072 $105,431 $207,503 Accrued compensation and benefits 46,666 65, ,692 49,790 88, ,624 Current installments of long-term debt 95,067 2,070 97,137 95,180 1,170 96,350 Contingent current installments of long-term debt 443,106 14, , ,044 14, ,409 Estimated third-party payor settlements 16,264 6,208 22,472 28, ,523 Professional liability and workers' compensation 422 7,036 7, ,000 7,353 Accrued post-retirement health care benefits Other 74,196 32, ,533 47,677 37,247 84,924 TOTAL CURRENT LIABILITIES 762, ,791 1,017, , ,366 1,020,849 OTHER LIABILITIES Accrued professional liabilities and workers' compensation, less current portion ,284 50, ,642 49,144 Deferred compensation 4,278 37,332 41,610 4,278 37,291 41,569 Pension 20,233 (2,026) 18,207 20,938-20,938 Accrued post- retirement health care benefits, less current portion ,285 1,014-1,014 Other 33,569 27,410 60,979 35,911 30,262 66,173 TOTAL OTHER LIABILITIES 59, , ,850 62, , ,838 Long-term debt, net of current installments 425,045 9, , ,532 3, ,012 TOTAL LIABILITIES 1,247, ,483 1,624,945 1,254, ,041 1,628,699 NET ASSETS Net assets without donor restrictions 1,285,243 1,183,662 2,468,905 1,388,985 1,064,449 2,453,434 Net assets with donor restrictions 2, , ,805 2, , ,010 TOTAL NET ASSETS 1,287,717 1,317,993 2,605,710 1,391,054 1,197,390 2,588,444 TOTAL LIABILITIES AND NET ASSETS $2,535,179 $1,695,476 $4,230,655 $2,645,712 $1,571,431 $4,217,143 Quarterly Disclosure 26

31 PROMEDICA HEALTH SYSTEM Consolidating Statement of Operations (Unaudited and $000s omitted) Unrestricted revenues, gains, and other support: Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 Obligated Group Other Entities Including Eliminations Obligated Group Other Entities Including Eliminations Net patient service revenue less bad debts $389,447 $25,750 $415,197 $364,023 $10,277 $374,300 Premiums earned - 422, , , ,852 Net assets released 1, ,958 2, ,231 Other 6,697 5,870 12,567 8,675 6,509 15,184 Total revenues, gains, and other support 397, , , , , ,567 Expenses: Salaries, wages, and employee benefits 143, , , , , ,108 Food and drugs 31,687 13,252 44,939 30,853 15,276 46,129 Medical expense - 288, , , ,709 Contracted fees 38,175 41,786 79,961 34,922 40,452 75,374 Supplies 46,158 8,574 54,732 46,641 5,969 52,610 Insurance 2,962 1,623 4,585 3,498 1,362 4,860 Utilities 4,441 2,479 6,920 4,479 2,312 6,791 Other 96,118 (43,775) 52,343 86,006 (47,264) 38,742 Total expenses 363, , , , , ,323 Operating income (loss) before depreciation and amortization 34,257 (2,169) 32,088 27,073 (829) 26,244 Depreciation and amortization 22,592 12,215 34,807 22,713 11,258 33,971 Net income from operations 11,665 (14,384) (2,719) 4,360 (12,087) (7,727) Other income: Interest (5,117) (1,521) (6,638) (7,858) (1,163) (9,021) Investment income 14,164 4,889 19,053 41,551 8,972 50,523 Net unrealized gains (losses) (13,680) (7,377) (21,057) 11,551 9,300 20,851 Change in fair value of interest rate swap 2,302 (1) 2, Inherent contribution of acquired assets - 19,432 19, Loss on extinguishment of long term debt Other 259 (2,613) (2,354) 34 (936) (902) Excess (deficiency) of revenues over expenses before unusual items 9,593 (1,575) 8,018 50,114 4,086 54,200 Unusual Items: Restructuring costs - (150) (150) Severance cost Total unusual items - (150) (150) Excess (deficiency) of revenues over expenses 9,593 (1,725) 7,868 50,114 4,129 54,243 Contributions and other: Net assets released from restrictions ,014 (4,528) 1,486 Transfers (to) from affiliated entities (113,793) 113,793 - (67,367) 67,367 - Other non-operating income - 6,452 6,452 - (141) (141) Increase (decrease) in unrestricted net assets $(103,742) $118,679 $14,937 $(11,239) $66,827 $55,588 Quarterly Disclosure 27