May 27, 2016

Don Waters

Chairman, Chatham County Hospital Authority

c/o Brasseler USA

1 Brasseler Blvd.

Savannah, GA 31419

Dear Mr. Waters and Members of the Board:

As you know there has been considerable discussion and speculation about a possible contractual

relationship between the CEO of Memorial Hospital and Novant Health. Memorial Hospital has

refused this newspaper’s request to provide documents reflecting any actual or proposed contract

of that nature.

The purpose of this letter is to request that the Hospital Authority exercise its rights under the

2004 amended lease with Memorial, Section 27, pages 29 and 30, to have an audit conducted to

determine if there were any contracts or proposed contracts between Novant and the Memorial

CEO, and whether any payments were made by Novant either to the CEO or to Memorial and

how those payments were used.

The exercise by the Hospital Authority of its rights under paragraph 27 would be of great public

benefit in determining what did or did not occur between Novant, Memorial and Ms. Gill. We

are advised by counsel that the alternative of an open records lawsuit by the newspaper would be

a year-long process at a minimum. We hope you agree that the audit approach is the better

alternative to obtain transparency on this issue so our citizens can be informed.

Please advise us of whether the Hospital Authority will require such an audit.

Sincerely,

Susan Catron

Executive Editor

912-652-0327

CC: Harry Haslam, Jr., Jan Skutch, Maggie Gill, Becky Keightley

COMMENT FROM AUTHORITY MEMBERS REGARDING BOARD MEETING:

While we are unable to comment on the legal issues discussed today, we can say we welcome continuing

discussions with Novant or any other health care companies dedicated to the continued delivery of quality

services to Chatham County residents.

We were notified last week that Novant had decided to cease all further discussions about a possible

transaction with Memorial Health. As of today, we have not heard from Novant. Any conversation or

discussion that does not include an interaction with Novant would be merely hypothetical – and not

beneficial to the citizens of Chatham County.

As the Hospital and its leadership know, our primary issues with regard to the Novant transaction have

been (and remain) that the lease must provide:

1. Any change to the service level designation for Trauma or NICU services at Memorial must not

be decided based upon commercial standards that may conflict with the larger mission of the Hospital.

2. Novant must agree not to amend or revise the $295 million capital commitment or obligation to

pay off Memorial’s bonds.

3. Novant must guarantee the Memorial bonds (so long as they remain outstanding) and establish a

reserve account at Memorial equal to the amount of the outstanding debt.

4. If the lease terminates, the hospital’s assets would revert to the Authority and there must be

sufficient cash (and an absence of liabilities) for the hospital to continue operations. The County cannot

be put into a position where the Hospital is laden with so much debt to Novant that a lease default is

impractical.

These are reasonable positions that do not impact the operation of the Hospital and place a tremendous

amount of trust and goodwill in the hands of the Hospital Board and Management.

Absent a renewed interested by Novant, we are aware (as is Memorial Health) of other interested third

parties who have asked to engage with the Authority and Memorial Health to pursue other, strong

relationships and commitments to Chatham County.

As trustee for all of Memorial assets, the Authority is eager to move forward with Memorial’s leadership

for the long-term betterment of our community.

________________________________________

ABOUT THE CHATHAM COUNTY HOSPITAL AUTHORITY:

When Memorial Health University Medical Center opened in 1955, the Chatham County Hospital

Authority was created to represent the public. Thirty years later, an agreement was reached that

designated the Authority to contract with the Hospital and its board to lease the land and buildings from

the county.

The Chatham County Hospital Authority is made up of nine unpaid board members who are each

appointed for six-year terms by the County Commission to serve as stewards of taxpayer money. We are

legally charged to not only oversee any property or infrastructure decisions, but our primary role is to

protect and ensure safety net services for all residents.

The lease between the Authority and the Hospital is a fundamental agreement as to the operations,

management and maintenance of Chatham County's primary source of public health care. The lease

arrangement between the Authority and Memorial is far more than a mere "ground lease" as may be

found in common, for-profit commercial operations and real estate transactions.

Contrary to various reports suggesting that the Hospital's financial obligation to the Authority is $1 per

year, Memorial actually has significant financial obligations to the Authority. Memorial is obligated to

pay annual rent sufficient to (i) pay all principal and interest required by all debt obligations of Memorial

and the Authority (ii) create and maintain sufficient financial reserves to meet the debt service obligations

of Authority issued debt, (iii) pay the cost of insurance or self-insurance reserves, and (iv) pay for the

maintenance and operation of the Hospital and all related facilities. In 2012, the Authority issued certain

bonds for the benefit of Memorial. Under the lease, Memorial is obligated to pay the amounts due under

that financing as well. As you can imagine, these financial obligations constitute several million dollars

per year.

If the lease were to terminate for any reason, all of the assets, licenses, permits and operations of

Memorial, and its related facilities, would be automatically transferred and conveyed back to the

Authority, which would continue the operation and management of the Hospital.

The Authority and Memorial are full partners in the mission of the Hospital.