Verity Health System of California, Inc. Unaudited ...(FORMERLY KNOWN AS DAUGHTERS OF CHARITY HEALTH SYSTEM) MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE TWELVE MONTHS ENDED June

Verity Health System of California, Inc.

Unaudited Financial Report and Utilization Statistics

For the Twelve Months Ended June 30, 2017

Verity Health System of California, Inc.

Page Ref

Management's Discussion and Analysis 3-10

Financial Statements

Balance Sheet (unaudited)

As of June 30, 2017 11 As of March 31, 2017 12 Statement of Operations and Changes in Net Assets (unaudited)

For the Twelve Months Ended June 30, 2017 13 For the Quarter Ended June 30, 2017 14 For the Twelve Months Ended June 30, 2016 15 Statement of Cash Flows (unaudited)

For the Twelve Months Ended June 30, 2017 16 Utilization Statistics

For the Twelve Months Ended June 30, 2017 and June 30, 2016 17 Supplemental Schedules Consolidating Balance Sheet

As of June 30, 2017 18 Consolidating Statement of Operations

For the Twelve Months Ended June 30, 2017 19 Consolidating Statement of Cash Flows

For the Twelve Months Ended June 30, 2017 20 Certification of Permitted Liens 21

VERITY HEALTH SYSTEM OF CALIFORNIA, INC. (FORMERLY KNOWN AS DAUGHTERS OF CHARITY HEALTH SYSTEM)

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE TWELVE MONTHS ENDED

June 30, 2017

Verity Health System of California, Inc., a California nonprofit public benefit corporation (the “Parent”) (formerly named Daughters of Charity Health System) is the sole corporate member of five California nonprofit public benefit corporations that operate five acute care hospitals and other facilities (collectively, the “Hospitals,” see list below) in the state of California. The Parent and the following affiliated entities (collectively, “Verity”) operate as a nonprofit health care system in the state of California, with approximately 1,680 licensed acute care and skilled nursing beds. Verity consists of Parent* and the following:

• O’Connor Hospital*

• Saint Louise Regional Hospital*

• St. Francis Medical Center*

• St. Vincent Medical Center*

• Seton Medical Center (including its unincorporated division Seton Medical Center Coastside)*

• Verity Business Services

• Marillac Insurance Company, Ltd.

• O’Connor Hospital Foundation

• Saint Louise Regional Hospital Foundation

• St. Francis Medical Center Foundation

• St. Vincent Medical Center Foundation

• Seton Medical Center Foundation

• St. Vincent de Paul Ethics Corporation

• St. Vincent Dialysis Center

• De Paul Ventures, LLC

• Verity Medical Foundation

• Verity Holdings, LLC

• Verity BASM Holdco, LLC

* Member of the Obligated Group, as defined in the Master Indenture of Trust, dated as of December 1, 2001 (as previously amended and supplemented, the “Master Indenture”), between the Parent, the other Initial Members (as defined therein) and U.S. Bank National Association.

The financial information summarized herein represents consolidated financial information for Verity, not financial information solely for the Obligated Group. This summarized financial information includes the operations of all Obligated Group Members, as well as the results of operations of other entities that are not Members of the Obligated Group. For the twelve months ended June 30, 2017, the entities that are not Members of the Obligated Group had revenues and investment income totaling $129.2 million (after the elimination of $31.6 million of inter-

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company revenues) representing 8.7% of Verity’s consolidated revenues and investment income. Additional financial information pertaining to the entities that are not Members of the Obligated Group can be found in the accompanying unaudited financial statements. The financial information for the twelve months ended June 30, 2017 is unaudited but includes all adjustments which Verity management considers necessary to fairly present such information in conformity with United States (U.S.) generally accepted accounting principles. Operating results for the twelve months ended June 30, 2017 are not necessarily indicative of the results that may be expected in future periods. Certain corrections and reclassifications have been made to the unaudited consolidated statement of operations and changes in net assets for the twelve months ended June 30, 2016, from amounts previously reported in order to conform the presentation to the audited consolidated financial statements for the year ended June 30, 2016. CONSUMMATION OF THE RESTRUCTURING AGREEMENT

On July 17, 2015, Daughters of Charity Ministry Services Corporation, the Parent, certain funds managed by Blue Mountain Capital Management, LLC, and Integrity Healthcare, LLC entered into a System Restructuring and Support Agreement (the “Restructuring Agreement”) to change the governance of and recapitalize the Parent and certain of its subsidiaries. Under the Restructuring Agreement, the Parent and other members of the Obligated Group were converted from religious corporations to public benefit corporations. In exchange for options to acquire the assets of Verity, Blue Mountain agreed to provide $100,000,000 in funding to the Parent and a commitment to provide additional debt financing at the option of the Parent. Having obtained the approval of the California Attorney General’s office, the transactions contemplated by the Restructuring Agreement closed on December 14, 2015. Effective upon the closing of the transaction, the Parent’s board of directors resigned, Daughters of Charity Ministry Services Corporation, acting as sole corporate member of the Parent, appointed an independent board of the Parent and amended the bylaws of the Parent to eliminate the corporate membership rights of Daughters of Charity Ministry Services Corporation as sole corporate member of the Parent and to convert the Parent into a nonprofit corporation without members. The name of the Parent has been amended to be Verity Health System of California, Inc. The Parent and all of its nonprofit corporate affiliates that were not previously public benefit corporations changed status from religious corporations to public benefit corporations under the California Nonprofit Corporation Law.

CALIFORNIA HOSPITAL FEE PROGRAM

California legislation established a program in 2009 that imposes a Quality Assurance Fee (the “QA Fee”) on certain general acute-care hospitals in order to make supplemental and grant payments and increased capitation payments (the “Supplemental Payments”) to hospitals up to the aggregate upper payment limit for various periods. There have been four such programs (collectively, the “Programs”) since inception. The Programs are designed to make supplemental inpatient and outpatient Medi-Cal payments to private hospitals, including additional payments for certain facilities that provide high-acuity

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care and trauma services to the Medi-Cal population. This hospital QA Fee program provides a mechanism for increasing payments to hospitals that serve Medi-Cal patients, with no impact on the state’s General Fund. Payments are made directly by the state or Medi-Cal managed care plans, which will receive increased capitation rates from the state in amounts equal to the Supplemental Payments. Outside of the legislation, the California Hospital Association has created a private program, operated by the California Health Foundation and Trust (CHFT), which was established to alleviate disparities potentially resulting from the implementation of the Programs. The Programs require full federal approval (i.e., by the Centers for Medicare and Medicaid Services (“CMS”)) in order for them to be fully enacted. If final federal approval is not ultimately obtained, provisions in the underlying legislation allowed for the QA Fee, previously assessed, and Supplemental Payments, previously received, to be returned and recouped, respectively. In October 2013, the fourth program (the “36-Month Program”) covering the period from January 2014 to December 2016 was signed into law by the Governor of California. The fee-for-service payments of the 36-Month Program were approved in December 2014 by CMS. The first six months of non-expansion managed care payments were approved by CMS in June 2015. The first six months of expansion managed care payments were approved by CMS in March 2016. On December 30, 2016, CMS approved the managed care payments spanning July 1, 2014 to December 31, 2014 for the expansion population and July 1, 2014 to June 30, 2015 for the non-expansion population. For the twelve months ended June 30, 2016, Verity recognized payments to the California Department of Health Care Services (the “DHCS”) for the QA Fee in the amount of $84.2 million and pledge payments to the CHFT of $1.3 million within purchased services and other expenses. Verity recognized Supplemental Payment revenue for the twelve months ended June 30, 2016 in the amount of $134.1 million within net patient service revenues. During the twelve months ended June 30, 2016, Verity made fee payments to DHCS of $88.7 million and received cash receipts of $148.3 million. For the twelve months ended June 30, 2017, Verity recognized payments to the DHCS for the QA Fee in the amount of $70.0 million and pledge payments to the CHFT of $2.4 million within purchased services and other expenses. Verity recognized Supplemental Payment revenue for the twelve months ended June 30, 2017, in the amount of $169.7 million within net patient service revenues. These amounts include the six months of the 36-Month Program related to the fee-for-service portion (July 1, 2016 through December 31, 2016) and the managed care rates approved by CMS on December 30, 2016 noted above. During the twelve months ended June 30, 2017, Verity made fee payments to the DHCS of $87.1 million and received cash receipts of $185.4 million.

VOLUMES

Patient discharges for the twelve months ended June 30, 2017 increased by 5.3% as compared to the same period of the prior year. Adjusted discharges for the twelve months ended June 30, 2017 increased by 1.8% compared to the same period of the prior year.

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Total deliveries decreased by 4.3% during the twelve months ended June 30, 2017 as compared to the same period of the prior year. Inpatient surgeries for the twelve months ended June 30, 2017 increased 1.4% as compared to the same period of the prior year. Outpatient surgeries for the twelve months ended June 30, 2017 increased 4.5% as compared to the same period of the prior year. Emergency department visits for the twelve months ended June 30, 2017 decreased 0.8% compared to the same period of the prior year.

REVENUES

Net Patient Service Revenue Less Provision for Bad Debts

Net patient service revenue of $1,267.2 million for the twelve months ended June 30, 2017 represents a net increase of $132.3 million or 11.7% as compared to the same period of the prior year. The net overall change in net patient service revenue was impacted by an increase of $35.6 million in Hospital Fee Program revenue and an increase of $96.7 million related to increasing volumes and increased reimbursement rates. Net patient service revenue per adjusted discharge (excluding premium revenue, other revenue, contributions and investment earnings) of $17,289 for the twelve months ended June 30, 2017 increased 9.6% as compared to the same period of the prior year. This increase in net patient service revenue per adjusted discharge is primarily due to the increase in the amount of Hospital Fee Program revenue recognized into income and rate increases during the twelve months ended June 30, 2017.

Premium Revenues, Other Revenues, and Contributions

Premium and other revenues of $146.1 million for the twelve months ended June 30, 2017 is comparable to the same period of the prior year. Contributions of $65.1 million during the twelve months ended June 30, 2017 increased $48.4 million from the same period of the prior year. This increase in contributions is related to the release of the restricted contribution as part of the consummation of the restructuring agreement.

Investment Earnings

For the twelve months ended June 30, 2017, investment earnings totaled $4.3 million compared to earnings of $2.0 million during the same period of the prior year. Verity includes both realized and unrealized gains/losses as part of investment income. Verity invests in cash, equity securities, domestic and foreign, U.S. federal and corporate obligations.

EXPENSES

Total Operating Expenses

Total operating expenses of $1,520.1 million for the twelve months ended June 30, 2017 represents an increase of $25.2 million or 1.7% as compared to the same period of the prior year. The overall net change in operating expenses is primarily due to an increase in the management fee expense of $27.1 million and increases in other operating expense categories to support the growth in net patient service revenue partially offset by a decrease of $14.2 million in Hospital Fee Program expenses. Total expense per adjusted discharge of $20,738 for the twelve months ended June 30, 2017 is comparable to the same period of the prior year.

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Salaries, Wages, and Benefits

Salaries, wages and benefits (“SWB”) expense of $741.7 million for the twelve months ended June 30, 2017 increased $18.4 million or 2.6% as compared to the same period of the prior year. SWB as a percent of net patient revenue (excluding premium revenue) for the twelve months ended June 30, 2017 was 58.5%, which is lower by 5.2% when compared to the same period of the prior year.

Supplies

Supplies expense of $172.3 million for the twelve months ended June 30, 2017 increased $6.8 million or 4.1% as compared to the prior year due to the increase in overall volumes. Supplies expense as a percent of net patient revenue for the twelve months ended June 30, 2017 was 13.6% compared to 14.6% for the twelve months ended June 30, 2016. Purchased Services/Other

Purchased services and other expenses for the twelve months ended June 30, 2017 of $543.0 million increased by $5.8 million or 1.1% as compared to the same period of the prior year. The increase in purchased services and other expenses is primarily due to an increase of $27.1 million in management fee expense and partially offset by a decrease of $14.2 million in the Hospital Fee Program expense and decreases in expenses associated with consummation of the restructuring agreement during the prior year.

Depreciation Expense

Depreciation expense of $34.9 million for the twelve months ended June 30, 2017 is a decrease of $13.4 million or 27.7% as compared to the same period of the prior year.

Interest Expense - Net

Interest expense of $28.1 million for the twelve months ended June 30, 2017 is an increase of $7.5 million as compared to the same period of the prior year due to borrowings of the Series 2015 Notes. Management Agreement Fee Activity

The management agreement fee expense for the twelve months ended June 30, 2017 is $59.3 million of which $29.7 million was deferred and $29.6 million was paid.

RESULTS FROM OPERATIONS

Operating Income

For the twelve months ended June 30, 2017, Verity recorded an operating loss of $41.6 million (including contributions), equating to a negative operating margin of 2.8%. This compares to an operating loss of $197.5 million and a negative operating margin of 15.2% for the same period of the prior year. The operating performance for the twelve months ended June 30, 2017 included $99.7 million of net income related to the Hospital Fee Program.

Excess of Revenues Over Expenses (Net Income)

For the twelve months ended June 30, 2017, Verity recorded a net loss of $37.3 million, equating to a negative net margin of 2.5%. The net loss for the twelve months ended June 30, 2016 was $195.4 million, which equated to a negative operating margin of 15.0%.

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Performance Relative to Budget For the twelve months ended June 30, 2017, Verity’s actual operating performance compared to budget was favorable by approximately $3.7 million. Total unrestricted revenues and other support was unfavorable to budget by $14.0 million. Expenses were favorable to budget by $17.7 million which was related to a decrease in supplies and purchased services, offset by an increase in interest expense.

FINANCIAL POSITION

Liquidity

The following table summarizes Verity’s cash position:

Days Cash on Hand (DCOH)

AS OF

JUNE 30, 2017

'($'s in 000s)

Operating Expenses 1

1,454,561

Cash & Equivalents, Balance Sheet 2

63,470

Plus: Available Series 2015 Borrowings 3

-

Cash & Equivalents 63,470

DCOH 15.9

1) As calculated for the trailing twelve months per Amendment No. 2 to the System Restructuring and Support Agreement. 2) Per available month-end financial statements at the time of calculation, including any unrestricted capital contribution funds. 3) Includes undrawn amounts on the Series 2015 Bonds.

Patient Accounts Receivable

Net patient accounts receivable of $235.8 million as of June 30, 2017 is an increase of $5.8 million or 2.5% when compared to March 31, 2017. Days in net patient accounts receivable increased to 67.9 days as of June 30, 2017 versus 65.9 days as of March 31, 2017.

Capital Expenditures

Capital expenditures during the quarter ended June 30, 2017 for Members of the Obligated Group total $8.5 million. However, only one single capital expenditure exceeded $1 million; Seton Medical Center expended $1,016,639 for the Seismic Master Facility Plan. Refer to page 17.

Long-Term Debt

Series 2015 Notes. On December 14, 2015, the California Public Finance Authority issued an aggregate of $160,000,000 of 2015 Revenue Notes (Verity Health System) Series 2015A, B, C, and D (collectively, the “2015 Notes”) for the benefit of the Parent. A portion of the proceeds of the 2015 Notes was used, together with other funds, to pay the principal of and accrued and unpaid interest on prior bonds that matured on December 15, 2015. The 2015A, B, and D Notes are tax exempt, and the Series 2015C Notes are taxable.

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The 2015 Notes are secured by an Obligation (as defined in the Master Indenture) on parity with other Obligations issued pursuant to the Master Indenture. In addition to their parity lien under the Master Indenture, the 2015 Notes have additional lien rights on the Obligated Group’s accounts receivable and in certain properties owned by St. Francis Medical Center and Saint Louise Regional Hospital.

Net of current portion, long-term debt as of June 30, 2017 was $459.2 million for the Obligated Group. Net of current portion, long-term debt as of March 30, 2017 was $421.8 million for the Obligated Group. This increase is related to C-PACE funding described in the Other Events. Debt Service Coverage Ratio

Verity reports the debt service coverage ratio for fiscal year to date June 30, 2017 using Annual Debt Service Coverage Ratio methodology and annualized Income Available for Debt Service excluding the 15% Basket Indebtedness.

FYTD 06/30/17

(Deficit) Excess of Revenues over Expenses $ (72,787)

Plus: Depreciation and Amortization 32,122

Plus: Interest 27,641

Plus : Management Agreement Fees Deferral 29,667

Income Available for Debt Service $ 16,643

Interest Payment $ 15,460

Principal Payment 6,405

$ 21,865

Annual Debt Service Coverage Ratio 0.76

* Represents Debt Service Requirement calculated pursuant to Schedule C

of the Amended and Restated Supplemental Master Indenture Number 20

VHS Obligated Group Only

Annual Debt Service Coverage Ratio (DSCR) ($’s in 000’s)

Debt Service Requirement *

OTHER EVENTS

In May 2017, Verity closed a Commercial Property Assessed Clean Energy (“C-PACE”) funding of a $40 million seismic upgrade for Seton Medical Center campus. CleanFund Commercial PACE Capital, Inc. provided $20 million of its own capital and brought in a partner, Petros PACE Finance, to provide an additional $20 million. The proceeds will allow the hospital to make upgrades to meet California’s mandatory Hospital Facilities Seismic Safety Act (SB 1953). C-PACE is long-term, fixed-rate financing, similar to the traditional tax-exempt debt that hospitals often use for infrastructure investments and is recorded as long-term debt in the unaudited balance sheet as of June 30, 2017. C-PACE financing simplifies the process, allowing Seton to make payments as a line item on their property tax bill.

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Management Changes of Members of the Obligated Group for the period

Appointments: None. Resignations: None.

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VERITY HEALTH SYSTEM

BALANCE SHEET - UNAUDITED

AS OF JUNE 30, 2017

(In thousands)

OBLIGATED

GROUP

NON-

OBLIGATED

GROUP

ELIMINATIONS Verity Total

ASSETS

CURRENT ASSETS:

Cash and cash equivalents 50,207$ 13,263$ -$ 63,470$

Subtotal 50,207 13,263 - 63,470

Net patient accounts receivable 230,641 5,126 - 235,767

Due from government agencies 15,938 - - 15,938

Due from related organizations 3,162 20,320 (23,482) -

Other current assets 79,521 23,278 (4,693) 98,106

Total current assets 379,469 61,987 (28,175) 413,281

ASSETS LIMITED AS TO USE:

Other investments 41,698 54,661 - 96,359

Under bond indenture agreements 24,834 - - 24,834

Total assets limited as to use 66,532 54,661 - 121,193

PROPERTY AND EQUIPMENT, Net 221,535 25,507 - 247,042

OTHER LONG-TERM ASSETS 4,563 30,258 (256) 34,565

TOTAL ASSETS 672,099 172,413 (28,431) 816,081

LIABILITIES AND NET ASSETS

CURRENT LIABILITIES:

Accounts payable 72,913 3,230 - 76,143

Current portion of long-term debt 6,590 5,890 - 12,480

Due to government agencies 5,299 - - 5,299

Accrued liabilities/other 239,253 24,684 (4,940) 258,997

Due to related organizations (21,323) 44,804 (23,481) -

Total current liabilities 302,732 78,608 (28,421) 352,919

OTHER LIABILITIES

Pension and other long-term liabilities 291,084 35,473 (10) 326,547

OTHER LIABILITIES 291,084 35,473 (10) 326,547

LONG-TERM DEBT, Net of current portion 459,156 - - 459,156

Total liabilities 1,052,972 114,081 (28,431) 1,138,622

NET ASSETS:

Unrestricted - Verity Health System (384,191) 34,671 - (349,520)

Unrestricted - Noncontrolling - 4,750 - 4,750

Temporarily restricted 575 13,451 - 14,026

Permanently restricted 2,743 5,460 - 8,203

Total net assets (380,873) 58,332 - (322,541)

TOTAL LIABILITIES AND NET ASSETS 672,099 172,413 (28,431) 816,081

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BALANCE SHEET - UNAUDITED

AS OF MARCH 31, 2017

(In thousands)

OBLIGATED

GROUP

NON-

OBLIGATED

GROUP


x ASSETS

CURRENT ASSETS:

Cash and cash equivalents 29,811$ 29,897$ -$ 59,708$ Subtotal 29,811 29,897 - 59,708

Net patient accounts receivable 224,894 5,174 - 230,068Due from government agencies 11,398 - - 11,398Due from related organizations 43,611 22,746 (66,357) -Other current assets 82,394 17,672 (25) 100,041

Total current assets 392,108 75,489 (66,382) 401,215


Other investments 2,932 55,661 - 58,593Under bond indenture agreements 25,160 - - 25,160

Total assets limited as to use 28,092 55,661 - 83,753

PROPERTY AND EQUIPMENT, Net 219,620 27,349 - 246,969

OTHER LONG-TERM ASSETS 10,953 9,817 (34) 20,736

TOTAL ASSETS 650,773 168,316 (66,416) 752,673



Accounts payable 67,475 3,055 - 70,530Current portion of long-term debt 6,940 197 - 7,137Due to government agencies 2,844 - - 2,844Accrued liabilities/other 191,580 20,445 (49) 211,976Due to related organizations 22,746 43,611 (66,357) -

Total current liabilities 291,585 67,308 (66,406) 292,487

OTHER LIABILITIES

Pension and other long-term liabilities 296,024 33,995 (10) 330,009

OTHER LIABILITIES 296,024 33,995 (10) 330,009

LONG-TERM DEBT, Net of current portion 421,778 4,991 - 426,769

Total liabilities 1,009,387 106,294 (66,416) 1,049,265

NET ASSETS:

Unrestricted (361,842) 44,099 - (317,743)Temporarily restricted 592 12,448 - 13,040Permanently restricted 2,636 5,475 - 8,111

Total net assets (358,614) 62,022 - (296,592)

TOTAL LIABILITIES AND NET ASSETS 650,773 168,316 (66,416) 752,673

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STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS - UNAUDITED

FOR THE TWELVE MONTHS ENDED JUNE 30, 2017

(In thousands)

OBLIGATED

GROUP

NON-

OBLIGATED

GROUP


UNRESTRICTED REVENUES AND OTHER SUPPORT:

Net patient service revenue 1,269,567$ 31,438$ -$ 1,301,005$

Provision for doubtful accounts (33,319) (451) - (33,770)

Net patient service revenue less provision for doubtful accounts 1,236,248 30,987 - 1,267,235

Premium revenue 98,607 21,686 - 120,293

Other revenue 12,148 45,325 (31,637) 25,836

Contributions 4,287 60,769 - 65,056

Total unrestricted revenues and other support 1,351,290 158,767 (31,637) 1,478,420

EXPENSES:

Salaries and benefits 714,566 35,576 (8,422) 741,720

Supplies 166,393 5,871 - 172,264

Purchased services and other 485,658 80,592 (23,215) 543,035

Depreciation and amortization 32,122 2,795 - 34,917

Interest, net 27,641 492 - 28,133

Total expenses 1,426,380 125,326 (31,637) 1,520,069

OPERATING LOSS (75,090) 33,441 - (41,649)

INVESTMENT INCOME (LOSS) 2,303 2,022 - 4,325

(DEFICIT) EXCESS OF REVENUES OVER EXPENSES (72,787) 35,463 - (37,324)

LESS EXCESS OF REVENUES OVER EXPENSES ATTRIBUTABLE TO

NONCONTROLLING INTEREST - 187 - 187

(DEFICIT) EXCESS OF REVENUES OVER EXPENSES, NET OF

NONCONTROLLING INTEREST (72,787) 35,276 - (37,511)

Net unrealized gains on investments - 5 - 5

Net assets released from restrictions used for purchase of property and

equipment610 - - 610

Change in funded status of pension and other postretirement benefit plans 21,043 - - 21,043

Other 26,210 (21,318) - 4,892

INCREASE (DECREASE) IN UNRESTRICTED NET ASSETS (24,924) 14,150 - (10,774)

TEMPORARILY RESTRICTED NET ASSETS

Contributions 39 5,870 - 5,909

Net realized and unrealized gains on investments - 173 - 173

Net assets released from restrictions:

Operations (138) (64,413) - (64,551)

Property, plant and equipment - (610) - (610)

Other - (225) - (225)

INCREASE (DECREASE) IN TEMPORARILY RESTRICTED NET ASSETS (99) (59,205) - (59,304)

PERMANENTLY RESTRICTED NET ASSETS

Contributions - - - -

Net realized and unrealized gains on investments 72 (7) - 65

Net assets released from restrictions: - - - -

Operations - - - -

Property, plant and equipment - - - -

Other - - - -

INCREASE (DECREASE) IN PERMANENTLY RESTRICTED NET ASSETS 72 (7) - 65

INCREASE (DECREASE) IN NET ASSETS (24,951) (45,062) - (70,013)

NET ASSETS AS OF JUNE 30, 2016 (355,922) 103,394 - (252,528)


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FOR THE QUARTER ENDED JUNE 30, 2017

(In thousands)

OBLIGATED

GROUP

NON-

OBLIGATED

GROUP



Net patient service revenue 310,066$ 7,957$ -$ 318,023$

Provision for doubtful accounts (7,665) (108) - (7,773)

Net patient service revenue less provision for doubtful accounts 302,401 7,849 - 310,250

Premium revenue 28,982 5,331 - 34,313

Other revenue 2,951 11,276 (7,652) 6,575

Contributions 884 212 - 1,096

Total unrestricted revenues and other support 335,218 24,668 (7,652) 352,234

EXPENSES:

Salaries and benefits 181,139 9,480 (2,106) 188,513

Supplies 42,170 1,527 - 43,697

Purchased services and other 117,515 21,966 (5,546) 133,935

Depreciation and amortization 6,967 971 - 7,938

Interest, net 8,345 223 - 8,568

Total expenses 356,136 34,167 (7,652) 382,651

OPERATING LOSS (20,918) (9,499) - (30,417)

INVESTMENT INCOME (LOSS) 1,001 2,029 - 3,030

(DEFICIT) EXCESS OF REVENUES OVER EXPENSES (19,917) (7,470) - (27,387)

EXCESS (DEFICIT) OF REVENUES OVER EXPENSES

ATTRIBUTABLE TO NONCONTROLLING INTEREST - 187 - 187


NONCONTROLLING INTEREST (19,917) (7,657) - (27,574)

Net unrealized gains on investments - 3 - 3

Net assets released from restrictions used for purchase of property

and equipment368 - - 368

Change in pension obligations (4,049) - - (4,049)

Other 1,249 2,789 - 4,038

INCREASE (DECREASE) IN UNRESTRICTED NET ASSETS (22,349) (4,678) - (27,027)


Contributions - 3,109 - 3,109

Net realized and unrealized gains on investments - 37 - 37

Net assets released from restrictions:

Operations (17) (1,030) - (1,047)

Property, plant and equipment - (533) - (533)

Other - (580) - (580)

INCREASE (DECREASE) IN TEMPORARILY RESTRICTED NET

ASSETS(17) 1,003 - 986


Net realized and unrealized gains on investments 107 (15) - 92

Net assets released from restrictions: - - - -

Other - - - -

INCREASE (DECREASE) IN PERMANENTLY RESTRICTED NET

ASSETS107 (15) - 92

INCREASE (DECREASE) IN NET ASSETS (22,259) (3,690) - (25,949)

NET ASSETS AS OF MARCH 31, 2017 (358,614) 62,022 - (296,592)


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(In thousands)

OBLIGATED

GROUP

NON-

OBLIGATED

GROUP



Net patient service revenue 1,121,431$ 40,248$ -$ 1,161,679$ Provision and write-off for doubtful accounts (26,195) (539) - (26,734)

Net patient service revenue less provision and write off for doubtful accounts 1,095,236 39,709 - 1,134,945

Premium revenue 96,166 26,683 - 122,849 Other revenue 13,766 45,046 (35,850) 22,962 Contributions 4,249 12,396 - 16,645

Total unrestricted revenues and other support 1,209,417 123,834 (35,850) 1,297,401

EXPENSES:

Salaries and benefits 697,956 37,937 (12,612) 723,281 Supplies 158,756 6,788 (127) 165,417 Purchased services and other 471,864 88,423 (23,006) 537,281 Depreciation and amortization 44,937 3,476 (105) 48,308 Interest, net 20,301 292 - 20,593

Total expenses 1,393,814 136,916 (35,850) 1,494,880

OPERATING LOSS (184,397) (13,082) - (197,479)

INVESTMENT INCOME (LOSS) 693 1,357 - 2,050

(DEFICIT) EXCESS OF REVENUES OVER EXPENSES (183,704) (11,725) - (195,429)

LESS (DEFICIT) EXCESS OF REVENUES OVER EXPENSE ATTRIBUTABLE TO NON-CONTROLLING INTEREST - - - - (DEFICIT) EXCESS OF REVENUES OVER EXPENSES, NET OF

NONCONTROLLING INTEREST (183,704) (11,725) - (195,429)

Net unrealized gains on investments - (4) - (4) Net assets released from restrictions used for purchase of property and equipment 1,903 (21) - 1,882

Net assets released from restrictions used for operations - - - - Change in pension obligations (53,981) - - (53,981) Other (42,046) 41,992 - (54)

INCREASE (DECREASE) IN UNRESTRICTED NET ASSETS ($277,828) $30,242 - ($247,586)


Contributions 95 76,057 - 76,152 Net realized and unrealized gains on investments - 12 - 12 Net assets released from restrictions:

Operations (126) (16,149) - (16,275) Property, plant and equipment - (1,780) - (1,780)

Other - (232) - (232) INCREASE (DECREASE) IN TEMPORARILY RESTRICTED NET ASSETS (31) 57,908 - 57,877


Contributions - 107 - 107 Net realized and unrealized gains on investments (63) (10) - (73) Net assets released from restrictions: - - - -

Operations - - - - Property, plant and equipment - (104) - (104)

Other - - - - INCREASE (DECREASE) IN PERMANENTLY RESTRICTED NET ASSETS (63) (7) - (70)

INCREASE (DECREASE) IN NET ASSETS (277,922) 88,143 - (189,779)

NET ASSETS AS OF JUNE 30, 2015 (78,000) 15,251 (0) (62,749)

NET ASSETS AS OF JUNE 30, 2016 (355,922) 103,394 (0) (252,528)

Page 15 of 23


STATEMENT OF CASH FLOWS - UNAUDITED


(In thousands)

OBLIGATED

GROUP

NON-

OBLIGATED

GROUP


Operating activities

Increase (Decrease) in net assets (24,951)$ (45,062)$ -$ (70,013)$

Adjustments to reconcile increase (decrease) in net assets

to net cash provided by (used in) operating activities:

Depreciation and amortization 32,122 2,795 - 34,917

Provision for doubtful accounts 33,319 451 - 33,770

Changes in fair value and unrealized and realized gains on investments, net - 633 - 633

Amortization of bond premium 688 - - 688

Amortization of deferred debt issuance cost 182 - - 182

Change in funded status of pension plans (21,043) - - (21,043)

Gain on disposal of property and equipment (44) (4,454) - (4,498)

Gains on disposal of other assets (4) - - (4)

Changes in operating assets and liabilities:

Patient accounts receivable (108,726) (487) - (109,213)

Due to/from government agencies 8,344 - - 8,344

Other current assets 55,516 (257) (32,190) 23,069

Other long-term assets (189) 39,074 256 39,141

Accounts payable 37,802 (1,748) - 36,054

Accrued liabilities 7,547 6,625 28,543 42,715

Other short-term liabilities 6,055 5,890 - 11,945

Workers’ compensation Change 205 (1,012) - (807)

Change in Pension obligations (28,012) - - (28,012)

Other long-term liabilities (9,543) (872) 3,391 (7,024)

Net cash provided by (used in) operating activities (10,732) 1,576 - (9,156)

Investing activities

Purchases of investments - (78,254) - (78,254)

Purchase of asset for health-related activity - (15,505) - (15,505)

Proceeds from disposal of property and equipment - 4,778 - 4,778

Proceeds from sales of investments 2,244 83,747 - 85,991

Changes in interest in pooled investment fund - short term - (264) - (264)

Cash and cash equivalents movements in assets limited as to use (38,659) - - (38,659)

Changes in loans and receivables - (3,410) - (3,410)

Changes in assets under bond indenture agreements 320 - - 320

Additions to property and equipment (33,720) (1,574) - (35,294)

Net cash provided by (used in) investing activities (69,815) (10,482) - (80,297)

CASH FLOWS FROM FINANCING ACTIVITIES

Debt issuance costs (1,337) - - (1,337)

Repayment of debt (6,855) (242) - (7,097)

Issuance of debt 95,000 - - 95,000

Net cash provided by (used in) financing activities 86,808 (242) - 86,566

Net Increase (Decrease) in Cash and Cash Equivalents 6,261 (9,148) - (2,887)

CASH AND CASH EQUIVALENTS AS OF JUNE 30, 2016 43,946 22,411 - 66,357

CASH AND CASH EQUIVALENTS AS OF JUNE 30, 2017 50,207 13,263 - 63,470

Page 16 of 23


UTILIZATION STATISTICS, PAYOR MIX, AND CAPITAL EXPENDITURES - UNAUDITED

FOR THE TWELVE MONTHS ENDED JUNE 30, 2017 AND JUNE 30, 2016

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2016

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2017

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2016

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2017

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2016

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2017

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2016

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2017

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2016

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2017

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2016

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2017

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2016

FOR THE

TWELVE

MONTHS

ENDED

JUNE 30,

2017

Total Licensed Beds 358 358 93 93 384 384 366 366 357 357 121 121 1,679 1,679

Total Available Beds 357 357 72 72 384 384 366 366 294 294 121 121 1,594 1,594

Total Discharges 9,585 9,652 2,607 2,703 20,063 21,049 10,064 11,088 5,345 5,695 104 121 47,768 50,308

Total Patient Days 44,386 44,282 9,553 9,280 92,158 103,599 56,994 64,539 43,689 45,242 36,680 39,889 283,460 306,831

Acute Licensed Beds 334 334 72 72 314 314 320 320 250 250 5 5 1,295 1,295

Acute Available Beds 333 333 72 72 314 314 320 320 250 250 5 5 1,294 1,294

Acute Discharges 9,565 9,615 2,607 2,703 17,727 18,653 9,097 10,102 5,320 5,668 - - 44,316 46,741

Acute Patient Days 36,164 36,343 9,553 9,280 72,713 82,854 43,518 50,965 28,498 30,269 - - 190,446 209,711

Acute Average Length of Stay 3.78 3.78 3.66 3.43 4.10 4.44 4.78 5.05 5.36 5.34 - - 4.30 4.49

Adjusted Discharges 15,050 14,835 5,403 5,689 28,812 29,197 14,524 15,205 8,067 8,231 126 142 71,981 73,298

Adjusted Patient Days 69,692 68,059 19,797 19,532 132,345 143,702 82,249 88,500 65,940 65,390 44,483 46,743 414,506 431,927

ADC 121 121 26 25 252 284 156 177 119 124 100 109 774 841

ALOS 4.6 4.6 3.7 3.4 4.6 4.9 5.7 5.8 8.2 7.9 352.7 329.7 5.9 6.1

Surgery OP 2,371 2,544 1,515 2,088 2,431 2,310 3,216 3,186 2,757 2,721 - - 12,290 12,849

Surgery IP 1,964 1,897 858 684 3,120 3,112 2,438 2,651 1,100 1,267 - - 9,480 9,611

Newborn Days 3,453 3,491 663 704 11,096 10,344 - - - - - - 15,212 14,539

OP ED Visits 47,542 46,087 25,474 26,431 65,726 64,480 21,647 23,231 24,345 23,478 3,047 2,635 187,781 186,342

OP & Clinic Visits excluding ED OP 90,313 80,508 27,168 26,170 84,869 76,138 51,278 51,875 107,432 93,720 3,666 3,071 364,726 331,482

Clinical Visits 90,313 80,508 27,168 26,170 6,443 - - - 107,432 93,720 3,666 3,071 235,022 203,469

CMI - Total 1.39 1.42 1.25 1.18 1.13 1.18 1.73 1.73 1.77 1.81 1.40 1.40

FTEs Paid 1,061 1,020 343 317 1,651 1,599 902 883 913 830 130 130 5,000 4,779

FTEs Prod 904 865 291 267 1,484 1,399 768 753 766 706 114 114 4,327 4,103

Payor Mix

Medicare 34.5%

Medi-Cal 31.2%

HMO/PPO 29.4%

Self-Pay 3.7%

Other 1.3%

Total 100.0%

Inpatient 68.6%

Outpatient 31.4%

Total 100.0%



O'Connor

Hospital

Saint Louise Regional

Hospital

St. Francis

Medical Center

O'Connor

Hospital

Saint Louise Regional

Hospital

St. Francis

Medical Center

FOR THE THREE

MONTHS ENDED

FOR THE THREE

MONTHS ENDED

Seton Medical Center

CoastsideVerity Total

St. Vincent

Medical Center

Seton

Medical Center

Seton Medical Center

CoastsideVerity Total

St. Vincent

Medical Center

Seton

Medical Center

FOR THE THREE

MONTHS ENDED

FOR THE THREE

MONTHS ENDED

FOR THE THREE

MONTHS ENDED

FOR THE THREE

MONTHS ENDED

FOR THE THREE

MONTHS ENDED

JUNE 30, 2017 JUNE 30, 2017 JUNE 30, 2017 JUNE 30, 2017 JUNE 30, 2017 JUNE 30, 2017 JUNE 30, 2017

$124,211 $8,538,647$1,672,625 $313,597 $178,483 $631,349 $5,618,382

Page 17 of 23


CONSOLIDATING BALANCE SHEET - UNAUDITED

AS OF JUNE 30, 2017

(In thousands)

O'Connor

Hospital

Saint Louise

Regional

Hospital

St. Francis

Medical

Center

St. Vincent

Medical

Center

Seton

Medical

Center

Seton

Medical

Center

Coastside

System

Office

System

Elimination -

Obligated

Group

Obligated

Group

Subtotal

Non-

Obligated

Group

System

Elimination -

Non Obligated

Group

Verity Total

ASSETS

CURRENT ASSETS:

Cash and cash equivalents 6,795$ 3,500$ 27,888$ 3,614$ 7,982$ 164$ 264$ -$ 50,207$ 13,263$ -$ 63,470$

Subtotal 6,795 3,500 27,888 3,614 7,982 164 264 - 50,207 13,263 - 63,470

Net patient accounts receivable 44,085 12,937 87,216 45,862 36,629 3,912 - - 230,641 5,126 - $235,767

Due from government agencies 1,788 - 5,528 5,537 3,085 - - - 15,938 - - $15,938

Due from related organizations 8,366 5,556 318,786 17,611 24,828 46 349,255 (721,286) 3,162 20,320 (23,482) -

Other current assets 11,421 4,548 36,589 13,334 7,510 378 5,741 - 79,521 23,278 (4,693) $98,106

Total current assets 72,455 26,541 476,007 85,958 80,034 4,500 355,260 (721,286) 379,469 61,987 (28,175) 413,281


Other investments - - - 3,039 38,659 - - - 41,698 54,661 - 96,359

Under bond indenture agreements - - - - - - 24,834 - 24,834 - - 24,834

Total assets limited as to use - - - 3,039 38,659 - 24,834 - 66,532 54,661 - 121,193

PROPERTY AND EQUIPMENT, Net 30,884 12,866 94,973 45,086 35,311 495 1,920 - 221,535 25,507 - 247,042

OTHER LONG-TERM ASSETS 306 7 98 13 460 3 3,676 - 4,563 30,258 (256) 34,565

TOTAL ASSETS 103,645 39,414 571,078 134,096 154,464 4,998 385,690 (721,286) 672,099 172,413 (28,431) 816,081



Accounts payable 12,387 2,621 11,335 13,854 8,901 127 23,688 - 72,913 3,230 - 76,143

Current portion of long-term debt 744 451 3,800 833 912 - (150) - 6,590 5,890 - 12,480

Due to government agencies 975 27 2,529 1,513 255 - - - 5,299 - - 5,299

Accrued liabilities/other 19,195 5,964 68,202 22,143 52,729 1,861 69,159 - 239,253 24,684 (4,940) 258,997

Due to related organizations 219,333 66,413 1,315 214,430 117,733 19,235 61,504 (721,286) (21,323) 44,804 (23,481) -

Total current liabilities 252,634 75,476 87,181 252,773 180,530 21,223 154,201 (721,286) 302,732 78,608 (28,421) 352,919

OTHER LIABILITIES

Pension and other long-term liabilities 53,229 6,442 103,970 73,521 2,959 27 50,936 - 291,084 35,473 (10) 326,547

Total other liabilities 53,229 6,442 103,970 73,521 2,959 27 50,936 - 291,084 35,473 (10) 326,547

LONG-TERM DEBT, Net of current portion 48,410 29,323 68,184 54,192 98,002 - 161,045 - 459,156 - - 459,156

Total liabilities 354,273 111,241 259,335 380,486 281,491 21,250 366,182 (721,286) 1,052,972 114,081 (28,431) 1,138,622

NET ASSETS:

Unrestricted - Verity Health System (250,629) (71,829) 311,691 (249,654) (127,026) (16,252) 19,508 - (384,191) 34,671 - (349,520)

Unrestricted - Noncontrolling - - - - - - - - - 4,750 - 4,750

Temporarily restricted - - 52 523 - - - - 575 13,451 - 14,026

Permanently restricted - - - 2,743 - - - - 2,743 5,460 - 8,203

Total net assets (250,629) (71,829) 311,742 (246,388) (127,026) (16,252) 19,508 - (380,873) 58,332 - (322,541)

TOTAL LIABILITIES AND NET ASSETS 103,644 39,412 571,077 134,098 154,465 4,998 385,690 (721,286) 672,099 172,413 (28,431) 816,081

Page 18 of 23


STATEMENT OF OPERATIONS - UNAUDITED


(In thousands)

O'Connor

Hospital

Saint Louise

Regional

Hospital

St. Francis

Medical

Center

St. Vincent

Medical

Center

Seton

Medical

Center

Seton

Medical

Center

Coastside

System

Office

System

Elimination -

Obligated

Group

Obligated

Group

Subtotal

Non-

Obligated

Group

System

Elimination -

Non Obligated

Group

Verity Total


Net patient service revenue 270,032$ 88,164$ 443,825$ 215,368$ 230,312$ 21,866$ -$ -$ 1,269,567$ 31,438$ -$ 1,301,005$

Provision for doubtful accounts (6,847) (3,099) (12,742) (7,104) (3,212) (315) - - (33,319) (451) - (33,770)

Net patient service revenue less provision for doubtful accounts 263,185 85,065 431,083 208,264 227,100 21,551 - - 1,236,248 30,987 - 1,267,235

Premium revenue 326 - 80,039 18,312 - - - (70) 98,607 21,686 - 120,293

Other revenue 3,574 106 1,985 1,963 3,458 575 187,543 (187,056) 12,148 45,325 (31,637) 25,836

Contributions 423 51 2,755 1,218 223 - - (382) 4,287 60,769 - 65,056

Total unrestricted revenues and other support 267,508 85,222 515,862 229,757 230,781 22,126 187,543 (187,508) 1,351,290 158,767 (31,637) 1,478,420

EXPENSES:

Salaries and benefits 170,917 52,585 200,689 105,550 141,069 16,268 27,488 - 714,566 35,576 (8,422) 741,720

Supplies 40,741 6,457 38,617 48,264 31,324 1,935 (945) - 166,393 5,871 - 172,264

Purchased services and other 98,143 30,908 194,849 110,469 83,504 4,132 150,779 (187,126) 485,658 80,592 (23,215) 543,035

Depreciation and amortization 7,992 1,701 10,048 6,037 6,019 160 165 - 32,122 2,795 - 34,917

Interest, net 2,821 1,667 4,284 3,075 3,440 (5) 12,359 - 27,641 492 - 28,133

Total expenses 320,614 93,318 448,487 273,395 265,356 22,490 189,846 (187,126) 1,426,380 125,326 (31,637) 1,520,069

OPERATING LOSS (53,106) (8,096) 67,375 (43,638) (34,575) (364) (2,303) (382) (75,090) 33,441 - (41,649)

INVESTMENT INCOME (LOSS) - - - - - - 2,303 - 2,303 2,022 - 4,325

(DEFICIT) EXCESS OF REVENUES OVER EXPENSES (53,106) (8,096) 67,375 (43,638) (34,575) (364) - (382) (72,787) 35,463 - (37,324)

EXCESS OF REVENUES OVER EXPENSES ATTRIBUTABLE TO NON-

CONTROLLING INTEREST - - - - - - - - - 187 - 187


NONCONTROLLING INTEREST(53,106) (8,096) 67,375 (43,638) (34,575) (364) - (382) (72,787) 35,276 - (37,511)

Page 19 of 23


STATEMENT OF CASH FLOWS - UNAUDITED


(In thousands)

O'Connor

Hospital

Saint Louise

Regional

Hospital

St. Francis

Medical

Center

St. Vincent

Medical

Center

Seton

Medical

Center

Seton

Medical

Center

Coastside

System

Office

System

Elimination -

Obligated

Group

Obligated

Group

Subtotal

Non-

Obligated

Group

System

Elimination -

Non Obligated

Group

Verity Total

Operating Activities

Increase (Decrease) in net assets (46,900)$ (8,170)$ 74,602$ (20,925)$ (33,317)$ (354)$ 10,113$ -$ (24,951)$ (45,062)$ -$ (70,013)$

Adjustments to reconcile increase (decrease) in net assets

to net cash provided by (used in) operating activities:

Depreciation and amortization 7,992 1,701 10,048 6,037 6,018 161 165 - 32,122 2,795 - 34,917

Provision for doubtful accounts 6,847 3,099 12,742 7,104 3,213 314 - - 33,319 451 - 33,770

Changes in fair value and unrealized and realized gains on investments, net- - - - - - - -

- 633 -

633

Amortization of bond premium - - - - - - 688 - 688 - - 688

Amortization of deferred debt issuance cost - - - - - - 182 - 182 - - 182

Change in funded status of pension plans (4,265) 121 (7,969) (18,856) (57) (13) 9,996 - (21,043) - - (21,043)

Gain on disposal of property and equipment (30) - (9) (5) - - - - (44) (4,454) - (4,498)

Gains on disposal of other assets - - - - - - (4) - (4) - - (4)

Changes in operating assets and liabilities:

Patient accounts receivable (19,427) (5,405) (41,119) (27,334) (15,909) 468 - - (108,726) (487) - (109,213)

Due to/from government agencies 1,495 246 7,445 194 (1,036) - - - 8,344 - - 8,344

Other current assets 3,603 638 (50,086) (118) 1,041 (162) (143,151) 243,751 55,516 (257) (32,190) 23,069

Other long-term assets (288) (2) 231 53 (373) (1) 191 - (189) 39,074 256 39,141

Accounts payable 2,875 859 6,659 6,494 2,282 22 18,611 - 37,802 (1,748) - 36,054

Accrued liabilities 63,204 10,123 9,796 55,025 55,329 (237) 58,058 (243,751) 7,547 6,625 28,543 42,715

Other short-term liabilities 744 451 3,800 833 912 - (685) - 6,055 5,890 - 11,945

Workers’ compensation Change - - - - - - 205 - 205 (1,012) - (807)

Change in Pension obligations (4,830) (638) (5,970) (4,761) (402) (24) (11,387) - (28,012) - - (28,012)

Other long-term liabilities (731) (451) (3,790) (708) (749) - (3,114) - (9,543) (872) 3,391 (7,024)

Net cash provided by (used in) operating activities 10,289 2,572 16,380 3,033 16,952 174 (60,132) - (10,732) 1,576 - (9,156)

Investing activities

Purchases of investments - - - - - - - - - (78,254) - (78,254)

Purchase of asset for health-related activity - - - - - - - - - (15,505) - (15,505)

Proceeds from disposal of property and equipment - - - - - - - - - 4,778 - 4,778

Proceeds from sales of investments - - - - - - 2,244 - 2,244 83,747 - 85,991

Changes in interest in pooled investment fund - short term - - - - - - - - - (264) - (264)

Cash and cash equivalents movements in assets limited as to use - - - - (38,659) - - - (38,659) - - (38,659)

Changes in loans and receivables - - - - - - - - - (3,410) - (3,410)

Changes in assets under bond indenture agreements - - - - - - 320 - 320 - - 320

Additions to property and equipment (5,458) (2,582) (6,448) (5,789) (12,992) (266) (185) - (33,720) (1,574) - (35,294)

Net cash provided by (used in) investing activities (5,458) (2,582) (6,448) (5,789) (51,651) (266) 2,379 - (69,815) (10,482) - (80,297)

Financing activities

Retirement of debt - - - - (1,337) - - - (1,337) - - (1,337)

Repayment of debt (699) (424) (3,642) (783) (857) - (450) - (6,855) (242) - (7,097)

Issuance of debt - - - - 40,000 - 55,000 - 95,000 - - 95,000

Cash contributions received for the purchase of property and equipment - - - - - - - - - - - -

Net cash provided by (used in) financing activities (699) (424) (3,642) (783) 37,806 - 54,550 - 86,808 (242) - 86,566

-

Net Increase (Decrease) in Cash and Cash Equivalents 4,132 (434) 6,290 (3,539) 3,107 (92) (3,203) - 6,261 (9,148) - (2,887)

CASH AND CASH EQUIVALENTS AS OF JUNE 30, 2016 2,663 3,934 21,598 7,153 4,875 256 3,467 - 43,946 22,411 - 66,357

-

CASH AND CASH EQUIVALENTS AS OF JUNE 30, 2017 6,795 3,500 27,888 3,614 7,982 164 264 - 50,207 13,263 - 63,470

Page 20 of 23

QUARTERLY CERTIFICATE FOR 06/30/17 RE: (Q) OF “PERMITTED LIENS”

August 14, 2017

The undersigned, an Authorized Representative (as defined in the Master Indenture

referred to herein) of Verity Health System of California, Inc. (“Verity”) as Obligated Group

Representative pursuant to the Master Indenture of Trust (as supplemented and amended, the

“Master Indenture”) dated as of December 1, 2001 among Verity, the Members of the Obligated

Group and U.S. Bank National Association as Master Trustee, hereby certifies pursuant to clause

(q) of the definition of “Permitted Liens” in the Master Indenture as follows:

As of the end of the fiscal quarter ending June 30, 2017, any Liens granted under clause

(q) of the definition of Permitted Liens do not exceed the maximum permitted value permitted

value of such Liens under such clause (q).

The Computations Regarding Permitted Liens, Paragraph (q) is attached hereto.

[Signature Page to Follow]

Page 21 of 23

Page 22 of 23

Exhibit D

Computations Regarding Permitted Liens, Paragraph (q)

$ in thousands

A. Book Value of Property Subject to Liens (1, 2) St. Francis Medical Center $94,973

Saint Louise Regional Hospital $12,866

Total Property Subject to Liens $107,839

B. Total Property of Obligated Group (2) Obligated Group Total Property $672,099

C. Property Subject to Liens as a % of Total A Divided by B 16.0%

Threshold Percentage (Maximum) 20.0%

2. Historical financial data for the Obligated Group reflects June 30, 2017 unaudited financial statements.

1. Includes all property, plant and equipment as of June 30, 2017. Property subject to liens is less than total

property, plant and equipment.

Page 23 of 23

Documents

Verity Health System of California, Inc. Unaudited ...(FORMERLY KNOWN AS DAUGHTERS OF CHARITY HEALTH SYSTEM) MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE TWELVE MONTHS ENDED June