Mercy Health Corporation (WI)

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1 Mercy Health Corporation (WI) 1 Illinois Finance Authority, Revenue Bonds (Mercy Health Corporation),, $475,020,000, Dated: May 18, Wisconsin Health and Educational Facilities Authority, Revenue Bonds (Mercy Alliance, Inc.), Series 2012, $169,475,000, Dated: May 24, Wisconsin Health and Educational Facilities Authority, Revenue Bonds (Mercy Alliance, Inc.), Series 2010A, $48,445,000, Dated: June 9, 2010 Facilities and Operations Fiscal Year ended June 30, 2017 Service MHTC Beds RMH Beds MWH Beds MHH Beds Medical-Surgical-Orthopedics ICU/SCU Obstetrics Pediatrics NICU Rehabilitation Psychiatry Sub-acute/SNF Total Staffed Beds Page 1 of 15

2 Medical Staff Fiscal year Ended June 30, 2017 Includes medical staff from RMH, MHTC, MWH, and MHH Specialty Total Number Board Certified Average Age Employed Primary Care: Family Medicine (incl. FM/OB, FM/Sports Med) Internal Medicine Occupational Medicine Pediatrics Urgent Care SUBTOTAL- Primary Care Specialty Care: Allergy & Immunology Cardiology Cardiology Electrophysiology Cardiology Interventional Clinical Genetics Dentistry Dermatology Endocrinology, Diabetes & Metabolism Gastroenterology Geriatrics Gynecology Oncology Infectious Diseases Maternal-Fetal Medicine Nephrology Neurology Obstetrics & Gynecology Oncology Ophthalmology Ophthalmology / Retina Specialist Orthopedics Otolaryngology Pain Management Pediatric Cardiology Pediatric Endocrinology Pediatric Gastroenterology Pediatric Neurology Pediatric Pulmonology Pediatric Surgery Physiatry (PM & R) Podiatry Podiatry Surgery Medical Psychiatry Psychiatry, Child and Adolescent Pulmonology Radiation Oncology Radiology - Nuclear Medicine Radiology Vascular Interventional Rheumatology Sports Medicine Surgery General Surgery Cardiothoracic / Vascular Surgery Neurological Surgery Oral Maxillofacial Surgery Orthopedic Surgery Plastic / Reconstructive Surgery Neurosurgery / Spine Surgery Thoracic Urology Vascular Neurology SUBTOTAL - Specialty Care Page 2 of 15

3 Medical Staff Fiscal year Ended June 30, 2017 Specialty Total Number Board Certified Average Age Employed Hospital-Based: Anesthesiology Critical Care Emergency Medicine Hospice and Palliative Care Hospitalist Internal Medicine Hospitalist Pediatrics Neonatal Medicine Pathology Pediatric Intensivist Radiology Surgery, Trauma SUBTOTAL - Hospital Based TOTAL Page 3 of 15

4 Series2016 Utilization of Patient Services Fiscal Year ended June 30, 2017 Total Discharges 2017 MHTC 7,891 MWH 1,264 MHH 407 RMH 12,879 Total 24,458 Newborn Discharges MHTC 835 MWH 166 RMH 1,593 Total 2,594 Observation Discharges MHTC 2,455 MWH 668 MHH 251 RMH 4,990 Total 8,364 Patient Days (Excluding Newborn,NICU, Maternal & Psych) MHTC 30,874 MWH 3,800 MHH 1,137 RMH 41,692 Total 77,503 Average Length of Stay MHTC, MWH & MHH 3.75 RMH 5.10 Emergency Department MHTC 34,564 MWH 11,230 MHH 5,613 RMH 50,042 Total 101,449 Inpatient Surgeries MHTC 2,418 MWH 562 MHH 161 RMH 3,044 Total 6,185 Page 4 of 15

5 Series2016 Utilization of Patient Services Fiscal Year ended June 30, 2017 Outpatient Surgeries MHTC 5,509 MWH 2,947 MHH 1,932 RMH 6,505 Total 16,893 Outpatient Visits MHTC 183,485 MHH 7,296 RMH 276,423 Total 467,204 Physician Encounter Visits MHTC, MWH, MHH 746,193 RMH 415,670 Total 1,161,863 Home Health Visits MAC 17,747 VNA 18,526 Total 36,273 Page 5 of 15

6 Sources of Patient Revenues MHTC and MWH Sources of Net Patient Revenue after Bad Debt 2017 Medicare 26.0% Medicaid 8.2% MercyCare 10.0% Commercial/Other 53.4% Self Pay 2.5% Total 100.0% RMH Sources of Net Patient Revenue after Bad Debt 2017 Medicare 25.7% Medicaid 27.9% Commercial 2.1% Managed Care/Blue Cross 43.7% Self Pay 0.6% Total 100.0% Page 6 of 15

7 FINANCIAL INFORMATION The last two sentences in the first paragraph under the heading "FINANCIAL INFORMATION Fiscal Year Ended June 30, 2017 The net assets of the Obligated Group constitute approximately 92.8% of Mercyhealth's consolidated net assets. The net patient service revenues of the Obligated Group constitute approximately 95.7% of Mercyhealth's consolidated net patient service revenues for the fiscal year ended June 30, Page 7 of 15

8 Summarized Consolidated Balance Sheets Fiscal Year Ended June 30, 2017 (in thousands) 2017 ASSETS Current Assets Cash, cash equivalents & short-term investments 129,653 Patient accounts receivable - net 181,740 Supplies 23,244 Prepaid expenses 9,536 Current portion of assets limited to use 8,000 Other receivables 13,647 Due from related party 4,634 Total current assets 370,454 Total assets limited as to use 916,003 Property & equipment - net 515,128 Other assets 46,624 Total Assets 1,848,209 LIABILITIES Current Liabilities Current maturities of long-term debt 7,017 Accounts payable 42,164 Due to third-party payors 15,839 Accrued salaries, wages, and payroll taxes 56,424 Other accrued expenses 30,827 Total current liabilities 152,271 Long-term debt, less current maturities 712,522 Accrued liabilities under self-ins program 71,404 Deferred compensation 50,676 Pension liability 28,036 Accrued post retirement medical benefits 3,365 Other 1,859 Total long-term liabilities 867,862 Total Liabilities 1,020,133 Net Assets Unrestricted 817,813 Temporarily restricted 7,638 Permanently restricted 2,625 Total net assets 828,076 Total Liabilities & Net Assets 1,848,209 Page 8 of 15

9 Summarized Consolidated Statements of Operations and Changes in Net Assets Fiscal Year Ended June 30, 2017 ( In Thousands) 2017 Revenue: Net Patient Service Revenue(net of contractual allowances and discounts) 1,014,887 Provision for Bad Debts (44,494) Net Patient Service Revenue 970,393 Other Operating Revenue 18,427 Total operating revenue 988,820 Operating Expenses Salaries and wages 486,691 Employee benefits 72,578 Professional fees and purchased services 109,169 Medical supplies, other supplies, and drugs 175,208 Insurance (496) Provider tax assessment 21,969 Interest Expense 11,260 Depreciation & Amortization 50,790 Other Operating Expenses 16,597 Total Operating Expenses 943,766 Total Income (Loss) From Operations 45,054 Non-Operating Gains (Losses) 55,718 Excess of Revenues Over Expenses 100,772 Other Changes in Unrestricted Net Assets 33,917 Change in Net Assets 134,689 Page 9 of 15

10 KEY FINANCIAL RATIOS Debt Service Coverage As of and for the Fiscal Year Ended June 30,2017 Excess of Revenue Over Expenses 100,772 Plus: Depreciation and Amortization 50,790 Plus: Interest 11,260 Income Available for Debt Service 162,822 Historical Maximum Annual Debt Service 42,795 Historical Debt Service Coverage Ratio 3.80 Debt to Capitalization As of June 30,2017 Long-Term Debt 719,539 Unrestricted Net Assets 817,813 Total Capitalization 1,537,352 Long-Term Debt as Percent of Capitalization 46.8% Days Cash On Hands As of and for the Fiscal Year Ended June 30, 2017 Cash & Cash Equivalents and Short-Term Investments 129,653 Assets Limited as to Use 553,189 Total Cash and Unrestricted Investments $ 682,842 Total Operating Expenses 943,766 Less: Depreciation& Amortization 50, ,976 Days Cash on Hand Page 10 of 15

11 Until the Project is placed in service, an annual summary statement of the status of construction of the Project, including construction budget and timing updates Fiscal Year Ended June 30, 2017 Concrete crews have completed the foundation walls and footings. The steel structure and miscellaneous secondary sub-framing have been completely installed. The slab on grade in the basement will be completed next month and all elevated slabs on the metal deck have been completed. Temporary roofing has been installed to allow for priority walls to be framed and drywall installed. Some permanent roofing has been started. Spray fireproofing has been applied to all floors of the hospital and clinic. The exterior enclosure prefabricated wall panels have been installed over 60% of the structure and 40% of the masonry has been completed. Exterior enclosure and masonry shall begin on the clinic in August. Mechanical, electrical and plumbing systems have been completely roughed-in on the first, second, and third floors of the hospital. Major equipment will be installed in July. Underground utility work is projected to be 100% complete and operational by September Manpower has steadily increased with over 350 tradesmen now onsite. Many weather days have been required due to rain. Of the approximately $475 million project budget, $56,321,058 has been utilized on engineering, professional fees and construction activities. The project is running on time compared to the forecasted timeline and final construction costs are expected to be at or below the approved capital cost. The projected completion date remains June Page 11 of 15

12 Series 2012,2010 Mercy Janesville - Primary Service Area Market Share Fiscal Year ended June 30, 2017 Inpatient Market Share Qtr 3, Qtr 1, 2017 Qtr 3, Qtr 1, 2017 Licensed Distance from Janesville Zip Codes Rock County Facility Beds Janesville Avg Census Mercy Janesville miles 49.4% 36.0% 81.5 St. Mary's Janesville Hospital 50 5 miles 22.5% 14.8% 23.8 Beloit Memorial miles 3.2% 19.4% 46.7 Edgerton Hospital 18 10miles 0.2% 1.1% 1.8 Fort Atkinson Memorial miles 0.6% 0.7% 14.7 Stoughton Hospital miles 0.3% 0.7% 13.8 Madison Hospitals (3) 1, miles 18.3% 21.2% All Other 5.5% 5.9% Hospital Outpatient Surgery Market Share Qtr 3, Qtr 1, 2017 Qtr 3, Qtr 1, 2017 Facility Janesville Zip Codes Rock County Mercy Janesville 0 miles 49.2% 34.1% St. Mary's Janesville Hospital 5 miles 19.7% 13.8% Beloit Memorial 10 miles 3.7% 17.0% Edgerton Hospital 10 miles 0.3% 0.5% Fort Atkinson Memorial 20 miles 0.8% 1.4% Stoughton Hospital 25 miles 0.5% 1.3% Madison Hospitals (3) 40 miles 22.3% 27.2% Madison Surgical Centers (9)* 40 miles 3.5% 4.7% All Other 100.0% 100.0% * Includes UW Hospital, Meriter Hospital, St. Mary s Hospital, Surgery and Care Center (Dean/St. Mary s), Madison Surgery Center (UW/UnityPoint-Meriter), Davis Duehr Dean Surgery Center (eye), Surgicenter of Greater Madison (pain), UW Health Transformation Surgery Center (UW/UnityPoint; plastic), and Novamed Surgery Center (eye). Page 12 of 15

13 Series 2012,2010 UTILIZATION STATISTICS Fiscal Year ended June 30, 2017 MHS, MHH 2017 Beds (Adults & Pediatrics): Licensed 283 Staffed 138 Occupancy Rate (Adult/Pediatric; Staffed Beds) 71.1% Observation Days 3,374 Hospital Outpatient Visits (Not Including OPS or Observation) 190,781 Discharges: Adult & Pediatrics 9,562 Newborns 1,001 Patient Days 35,811 Clinic Visits 746,193 Urgent Care Visits 67,244 Emergency Visits (Total) 51,407 Inpatient Surgeries 3,141 Outpatient Surgeries 10,388 Page 13 of 15

14 FINANCIAL INFORMATION Series 2012,2010 The last two sentences in the first paragraph under the heading "FINANCIAL INFORMATION Fiscal Year Ended June 30, 2017 The net assets of the Obligated Group constitute approximately 92.8% of Mercyhealth's consolidated net assets. The net patient service revenues of the Obligated Group constitute approximately 95.7% of Mercyhealth's consolidated net patient service revenues for the fiscal year ended June 30, Page 14 of 15

15 Series 2012,2010 Sources of Patient Revenue Fiscal Year Ended June 30, 2017 Hospital Payor Sources (excludes Mercy Harvard) 2017 Medicare 46.3% Medicaid 14.5% Mercy HMO 9.7% Other 3rd Party 27.6% Self Pay 2.0% Total 100.0% Physician Clinic Payor Sources (excludes Mercy Harvard) 2017 Medicare 16.4% Medicaid 11.2% Mercy HMO 11.5% Other 3rd Party 58.2% Self Pay 2.7% Total 100.0% Page 15 of 15

Mercy Health Corporation (WI)

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