New York Society for the Relief of the Ruptured and Crippled, Maintaining the Hospital for Special Surgery

FINANCIAL STATEMENTS March 2015 HOSPITAL FOR SPECIAL SURGERY WHERE THE WORLD COMES T'OGET BACK IN THE GAME 535 East 70th Street New York, NY 10021 tel 212.606.1000

New York Society For the Relief of Financial Statements For the year ended March 31, 2015 Descriptions Page Statements of Financial Position.................. 1 Statements of Operations........................... 2 Statement of changes in Net Assets: -03/31 /2015................................ 3-03/31 /2014.................... 4 Statements of Cash Flows............................. 5 Notes to Interim Financial Statements................ 6-14

Statements of Financial Position Assets Current assets: Cash and cash equivalents Receivables: Patient care, less allowance for doubtful accounts (20 15 - $9, 939; 2014- $9,560) Insurance claims reveivable Other Total receivables Investments Inventories Prepaid expenses and other current assets Pledges receivable Assets limited to use Due from affiliates - net Total current assets Insurance claims receivable, net of current portion Other noncurrent assets Due from affiliates- net Pledges receivable Deferred financing costs, less accumulated am011ization (20 14 - $8, 744; 20 I 4- $8,594) Assets limited as to use Long-term investments Interest in The Hospital for Special Surgery Fund, Inc. Property, plant and equipment- net Total assets See accompanying notes. (Unaudited) (Audited) March 31 December 31 2015 2014 Liabilities and net assets Current liabilities: $ 79,356 $ 72,926 Accounts payable and accrued expenses Accrued salaries and related liabilities Current portion of long-term debt 92,785 86,147 Due to third-party payors - net 21,555 21,555 Insurance claims liabilities 12,383 17,633 Other current liabilities 126,723 125,335 Total current liabilities 358,401 353,699 6,680 7,133 6,721 5,153 Long-term debt 10,525 12,129 Insurance claims liabilities, net of current portic 4,597 10,504 Other noncurrent liabilities, including due to 10,123 11,624 third-party payors - net 603,126 598,503 Total liabilities Net assets: Unrestricted: 59,507 59,507 Unrestricted 9,268 8,810 Designated for quasi-endowment 11,071 11,072 Total unrestricted 24,925 21,510 Temporarily restricted: Specific purpose 6,226 6,376 Plant replacement and expansion 100,142 112,809 Research 101,872 98,735 Total temporarily restricted 30,502 30,240 Permanently restricted 452,619 411,349 Total net assets $ 1,399,258 $ 1,358,911 Total liabilities and net assets (Unaudited) (Audited) March 31 December 31 2015 2014 $ 63,299 $ 60,328 38,716 33,130 35,046 31,557 3,649 3,649 21,555 21,555 19,070 24,692 181,335 174,911 295,229 279,268 59,507 59,507 145,677 143,547 681,748 657,233 426,716 419,720 3,801 3,719 430,517 423,439 55,679 53,103 36,307 43,974 76,583 66,595 168,569 163,672 118,424 114,567 717,510 701,678 $ 1,399,258 $ 1,358,911 Page 1

Statements of Operations (Unaudited) Three Months ended March 31 2015 2014 Operating revenue Net patient service revenue $ 193,628 $ 177,938 Other operating revenue 31,766 28,81 2 Net assets released from restrictions for operations 4,203 4,224 Total operating revenue 229,597 210,974 Operating expenses Salaries and wages 94,006 86,364 Employee benefits 29,841 27,297 Supplies and other 80,211 75,330 Interest expense 2,355 2,437 Depreciation and amortization 13,782 12,526 Bad debt expense 2,224 1,701 Total operating expenses 222,419 205,655 Operating income before research operations and change in unrestricted interest in The Hospital for Special Surgery Fund, lnc. 7,178 5,319 Research operations: Net assets released from restrictions for research operations 7,515 6,541 Operating expenses, including depreciation (20 15 - $802; 2014- $505) 9,231 8,201 Net research operations (1,716) ( 1,660) Change in unrestricted interest in The Hospital for Special Surgery Fund, Inc. 262 526 Operating income 5,724 4,185 Other Changes in unrestricted net assets Net assets released from restrictions for capital expenditures 299 2,682 Change in net unrealized gains and losses on investments 973 475 Increase in urestricted net assets $ 6,996 $ 7,342 See accompany ing notes. Page 2

Statement of Changes in Net Assets Year Ended March 31, 2015 Unrestricted Temporarily Restricted Quasi- Total Specific Unrestricted Endowment Unrestricted Purpose Plant Research Total Temporarily Permanently Restricted Restricted Total Net assets at December 31, 2014 Increase in unrestricted net assets Contributions, including research grants Net asset reclassification Investment activity, including net investment income of $512, net realized gain $151 and change in net unrealized gains and losses and equity in earnings alternative investments of$3,543 Net assets released from restrictions for: Research operations Capital expenditures Operating expenses Total net assets released from restrictions Total change in net assets Net assets at March 31, 20 15 $ 419,720 $ 3,719 $ 423,439 $ 53,103 $ 43,974 $ 66,595 6,996 6,996 1,601 2,445 (3,273) (10,112) 10,112 82 82 975 3,149 (7,515) (286) (13) (4,203) (4,489) (7,528) 6,996 82 7,o78 2,576 (7,667) 9,988 $ 426,716 $ 3,801 $ 430,517 $ 55,679 $ 36,307 $ 76,583 $ 163,672 $ 114,567 $ 701,678 6,996 773 3,857 4,630 4,124 4,206 (7,515) (7,515) (299) (299) (4,203) (4,203) (12,017) (12,017) 4,897 3,857 15,832 $ 168,569 $ 118,424 $ 717,510 Page 3

Statement of Changes in Net Assets Year Ended March 31, 2014 Temporarily Restricted Specific Unrestricted Purpose Plant Research Total Temporarily Permanently Restricted Restricted Total Net assets at December 31, 20 13 Increase in unrestricted net assets Contributions, including research grants Investment activity, including net investment income of $470, net realized gain $724 and change in net unrealized gains and losses and equity in earnings alternative investments of $924 Net Asset reclassification Net assets released from restrictions for: Research operations Capital expenditures Operating expenses Total net assets released from restrictions Total change in net assets Net assets at March 3 I, 20 14 $ 376,479 $ 48,378 $ 42,260 $ 60,390 7,342 2,814 702 6,787 472 1,646 (6,541) (1 7) (2,323) (342) (4,224) (4,241) (2,323) (6,883) 7,342 (955) (1,62 1) 1,550 $ 383,821 $ 47,423 $ 40,639 $ 61,940 $ 151,028 $ 102,346 $ 629,853 7,342 10,303 2,967 13,270 2,118 2,1 18 (6,54 1) (6,541) (2,682) (2,682) (4,224) (4,224) (13,447) (13,447) (1,026) 2,967 9,283 $ 150,002 $ 105,313 $ 639,136 See accompanying notes. Page 4

Statements of Cash Flows (Unaudited) Three Months Ended March 31 2015 2014 Cash flows from operating activities Change in net assets $ 15,832 $ 9,283 Adjustments to reconcile change in net assets to net cash provided by operating activities: Change in unrestricted interest in The Hospital for Special Surgery Fund, Inc. (262) (526) Distribution from The Hospital for Special Surgery fund, Inc. - - Depreciation and amortization 14,584 13,031 Amortization of premium on debt (82) (90) Change in defined pension and other postretirement plan liability to be recognized in future periods Change in net unrealized gains and losses on investments and equity in earnings of alternative investments (5,068) (I,661) Realized gains on investments (282) (904) Contributions to permanently restricted net assets (3,857) (2,967) Contributions restricted to acquisition of plant assets - net (2,445) (702) Employer contributions to pension plan (5,500) (II,448) Changes in operating assets and liabilities: Receivables, net (1,388) (4,373) Net due from affiliates 1,956 213 Pledges receivable, net (1,811) (449) Accounts payable and accrued expenses and accrued salaries and related liabilities 8,557 21,826 Current amount due to third-party payors Other noncurrent liabilities, including due to third-party payors 7,630 7,070 Other assets and liabilities, net (7,196) (9,287) Net cash provided by operating activities 20,668 19,016 Cash flows from investing activities Additions to property, plant and equipment (55,703) (11,485) Net increase in investments (2,971) (780) Net increase in assets limited as to use 18,602 9,079 Net cash used in investing activities (40,072) (3, 186) Cash flows from financing activities Principal payments on long-term debt (7,029) (5,958) Proceeds from long-term borrowings 26,561 Contributions restricted to acquisition of plant assets - net 2,445 702 Contributions to permanently restricted net assets 3,857 2,967 Net cash provided by financing activities 25,834 (2,289) Net increase in cash and cash equivalents 6,430 13,541 Cash and cash equivalents at beginning of period 72,926 36,925 Cash and cash equivalents at end of period $ 79,356 $ 50,466 See accompanying notes. Page 5

Notes to Financial Statements 1. Organization and Basis of Presentation and Significant Accounting Policies Organization and Basis of Presentation The accompanying financial statements include the accounts of New York Society for the Relief of (the "Hospital"), but do not include the Hospital's separately incorporated affiliates: HSS Properties Corporation ("Properties"), The Hospital for Special Surgery Fund, Inc. ("Fund"), HSS Horizons, Inc. ("Horizons"), HSS Ventures, Inc. and Medical Indemnity Assurance Company, Ltd. ("MIAC"). The Hospital presumes that users of this financial information have read or have access to the Hospital's audited financial statements and that the adequacy of additional disclosures needed for a fair presentation may be determined in that context. The audited financial statements of the Hospital for the years ended December 31, 2014 and 2013 are on file, with a nationally recognized securities information repository, Digital Assurance Certification LLC, in accordance with the Hospital's financing agreement with the Dormitory Authority ofthe State ofnew York, and the information contained therein is incorporated herein. Accordingly, footnotes and other disclosures that would substantially duplicate the disclosures contained in the Hospital's most recent audited financial statements have been omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of the results have been included in the accompanying financial statements. All such adjustments are considered by management to be of a normal, recurring nature. Patient volumes and net operating revenues are subject to seasonal variations caused by a number of factors, including, but not necessarily limited to, climate and weather conditions, vacation patterns of hospital patients and admitting physicians and other factors relating to the timing of elective hospital procedures. Monthly operating results are not necessarily representative of operations for a full year for various reasons, including levels of occupancy and other patient volumes, interest rates, unusual or non-recurring items and other seasonal fluctuations. These same considerations apply to all year-to-year comparisons. Page 6

Notes to Financial Statements (continued) 1. Organization and Basis of Presentation and Significant Accounting Policies (continued) Use of Estimates The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, including estimated uncollectibles for accounts receivable for services to patients, and liabilities, including estimated payables to third-party payors, and the disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. The allowance for doubtful accounts and the estimated amounts due to third-party payors, among other accounts, require significant use of estimates. Actual results could differ from those estimates. Management believes that amounts recorded based on estimates and assumptions are reasonable and any differences between estimates and actual should not have a material impact on the Hospital's financial position. Tax Status The Hospital is a Section 501(c)(3) organization exempt from Federal income tax under Section 501(a) ofthe Internal Revenue Code and is exempt from New York state and local income taxes. Events Subsequent to March 31, 2015 Subsequent events have been evaluated through April 16, 2015, which is the date the financial statements were issued. No subsequent events have occurred that require disclosure in or adjustment to the financial statements. 2. Contingencies The Hospital is a defendant in certain legal actions arising out of the normal course of its operations. While Hospital management is of the opinion that the ultimate liability, if any, with respect to all of these matters will not have a material effect on the Hospital's financial position, the final outcome cannot presently be determined. Page 7

Notes to Financial Statements (continued) 3. Benefit Plans The Hospital contributed $5.5 million and $11.4 million, to its defined benefit pension plan for the periods ended and 2014, respectively. Pension expense pertaining to the defined benefit pension plan was approximately $6.1 million and $5.0 million, respectively, for the same periods. 4. Fair Value Measurements For assets and liabilities required to be measured at fair value, the Hospital measures fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are applied based on the unit of account from the Hospital's perspective. The unit of account determines what is being measured by reference to the level at which the asset or liability is aggregated (or disaggregated) for purposes of applying other accounting pronouncements. The Hospital follows a valuation hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: Level 1 -Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2 - Observable inputs that are based on inputs not quoted in active markets, but corroborated by market data. Level 3 - Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. In determining fair value, the Hospital uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers nonperformance risk in its assessment of fair value. Page 8

4. Fair Value Measurements (continued) New York Society for the Relief of Notes to Financial Statements (continued) Financial instruments, including the defined benefit plan assets, carried at fair value as of December 31, 2014 are classified in the table below in one of the three categories described above: Levell Level2 Level3 Total Cash and cash equivalents $ 145,615 $ $ $ 145,615 Marketable equity securities (a) 15,926-15,926 Money market mutual funds (b) 204,365 204,365 Equity mutual funds (c) 129,206-129,206 Fixed income mutual funds (d) 112,670 - - 112,670 U.S. government/agency obligations (e) 23,773 - - 23,773 Alternative investments: Hedge funds: US equity large/small Cap (t) - 13,405-13,405 International equity (g) - 12,978-12,978 Long/short equity (h) 20,353 20,353 Multi strategy (il - 16,65 1-16,65 1 Private equity Ul - - 3,529 3,529 $ 631,555 $ 63,387 $ 3,529 $ 698,471 (a) Includes large cap common stock of corporations primarily domiciled in the United States. (b) Includes investments in mutual funds that invest primarily in short-term debt securities, including U.S Treasury bills, commercial paper and certificates of deposit. (c) Includes investments in domestic and international equity mutual funds and exchange traded funds. (d) Investment in a fixed income mutual fund which maintains a diverse portfolio of shortterm high quality bonds, activity managed across the mortgage backed security, U.S. Treasury, corporate and international fixed income sectors. Page 10

Notes to Financial Statements (continued) 4. Fair Value Measurements (continued) (e) Includes units of U.S. Treasury notes and with maturities ranging from three months to five years. (f) Hedge funds and common collective trust funds of common stock of corporations primarily domiciled in the United States. (g) Hedge funds of common stock of corporations primarily domiciled outside of the United States, including emerging market countries. (h) Hedge fund investments consisting primarily of publicly traded equity holdings with both long and short positions. (i) Hedge fund investments which are designed to provide returns largely independent of overall market movement, with lower correlations to domestic stock and bond markets. Underlying strategies can include credit, event driven, relative value and various arbitrage strategies. (j) Venture capital, buyout, and distressed debt partnerships. The Hospital' s alternative investments, excluding alternative investments in the defined benefit plan, are reported using the equity method of accounting and, therefore, are not included in the table above. The following is a description of the Hospital valuation methodologies for assets measured at fair value. Fair value for Level 1 is based upon quoted market prices. Fair value for Level 2 is based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Inputs are obtained from various sources, including market participants, dealers and brokers. Level 3 assets consist of private equity investments held by the defined benefit plan, the valuation for which is described in the table Page 11

4. Fair Value Measurements (continued) New York Society for the Relief of Notes to Financial Statements (continued) above. The methods described above may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Hospital believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The following table is a roll forward for financial instruments, included in the defined benefit plan, classified by the Hospital in Level 3 of the valuation hierarchy defined above: Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Alternative Investments Total 03/31115 12/31114 Fair value at January I Actual return on plan assets held at end of period Purchases, sales, and settlements, net Fair value at end of period Change in unrealized gains and losses related to financial instruments held at end of period $ 3,250 293 (26) $ 3,517 $ 296 $ 3250 229 202 $ 3,681 $ 229 Page 12

Notes to Financial Statements (continued) 4. Fair Value Measurements (continued) The following is a summary of investments, including alternative investments reported using the equity method, and the nature of restrictions on the Hospital' s ability to redeem its investments at the measurement date, any unfunded capital commitments and investments strategies of the investees as of, including the defined benefit plan: Unfunded Redemption Fair Value Commitments Notice Period Funds A vailabilit~ U.S. equity large/small cap $ 45,987 n/a 0-30 days 30 days to 4 years International equity 35,178 n/a 14-120 days I week to 2.25 years Long/short equity 59,674 n/a 45-180 days 3 month to 2.5 years Multi- strategy 65,919 n/a 60-120 days 6 months to I year Real assets 2,909 n/a 0-45 days 3 months Private equity 11,050 6,208 n/a 6 months - 8 years $ 220,717 $ 6,208 Page 13

Notes to Financial Statements (continued) 4. Fair Value Measurements (continued) The carrying values and fair values of the Hospital's financial instruments that are not required to be carried at fair value are as follows: 03/31/15 12/31/14 Fair Carrying Fair Carrying Value Value Value Value Long-tem1 debt $ 342,279. $ 330,275 $ 323,823 $ 310,825 The fair value of the Hospital's long-term debt is based on discounted cash flow analysis, using current borrowing rates for similar types of debt and is classified as Level 2 within the valuation hierarchy. 5. Bequest The Hospital is a beneficiary of a charitable trust (the Trust) established by certain donors (the Donors) of the Hospital. Per the Trust agreement, the Hospital will receive distributions from the Trust upon the death of the Donors, and once the probate administration process is finalized. As of and December 31, 2014 portions of the estate included in the Trust remain in probate and the Trustee has established a reserve for potential liabilities. Payment of the amount included in the reserve is contingent upon the resolution of any potential liabilities against the estate or the Trust. The Hospital recorded revenue from the bequest of $33.4 million for the year ended December 31, 2014. No revenue was recorded for the periods ending March 31, 2015 and 2014. Page 14