Lee Memorial Health System Trauma District & Full Board of Directors Meetings. Thursday, August 25, :00 p.m.

Lee Memorial Health System Trauma District & Full Board of Directors Meetings Thursday, August 25, 2016 1:00 p.m.

AGENDA TRAUMA DISTRICT & FULL BOARD OF DIRECTORS MEETINGS August 25, 2016 at 1:00 p.m. BOARD OF DIRECTORS OFFICE 239-343-1500 FAX: 239-343-1599 13685 DOCTORS WAY #190 FT MYERS, FLORIDA 33912 CAPE CORAL HOSPITAL GULF COAST MEDICAL CENTER HEALTHPARK MEDICAL CENTER LEE MEMORIAL HOSPITAL GOLISANO CHILDRENS HOSPITAL OF SOUTHWEST FLORIDA THE REHABILITATION HOSPITAL LEE PHYSICIAN GROUP LEE CONVENIENT CARE BOARD OF DIRECTORS DISTRICT ONE Stephen R. Brown, M.D. Therese Everly, BS, RRT DISTRICT TWO Donna Clarke Nancy M. McGovern, RN, MSM DISTRICT THREE Sanford N. Cohen, M.D. David Collins DISTRICT FOUR Diane Champion Chris Hansen DISTRICT FIVE Jessica Carter Peer Stephanie Meyer, BSN, RN Gulf Coast Medical Center Boardroom (Medical Office Building) 13685 Doctors Way, Ft. Myers, FL 33912 1. CALL TO ORDER (Sanford Cohen, M.D., Board Chairman) Lee Memorial Health System Board of Directors, sitting as the Lee Memorial Health System (LMHS) Board of Directors for Gulf Coast Medical Center & Lee Memorial Hospital/HealthPark Medical Center and the Board of Directors of its subsidiary corporations, including but not limited to Cape Memorial Hospital, Inc. doing business as Cape Coral Hospital; Lee Memorial Home Health, Inc.; and HealthPark Care Center, Inc. 2. INVOCATION & PLEDGE OF ALLEGIANCE (Rev. Mike Warthen, MDiv) 3. PUBLIC INPUT Agenda Items: Any Public Input is limited to three minutes and a Request to Address the Board of Directors card must be completed and submitted to the Board Staff prior to meeting. Individuals wishing to address the Board on a Non Agenda item must notify the Board Staff of the subject matter at least three (3) days prior to the meeting. 4. RECOGNITIONS Judith C. Maier 33 years (Richard Helvey, Director, Housekeeping) Kathryn J. Georgeson, RN, BSN, CCM 33 years (Heidi Shoriak, RN, BS, CCM, Director, Care Management) 5. LMHS MILITARY SUPPORT UPDATE (Kim Gaide, Practice Manager, LPG Medical Records) 6. PRESIDENT S REPORT (Jim Nathan, CEO/President) RECESS to CALL TO ORDER Lee County Trauma Services District Board of Directors Meeting (Sanford Cohen, M.D., Board Chairman) RECONVENE LEE MEMORIAL HEALTH SYSTEM BOARD MEETING (Sanford Cohen, M.D., Board Chairman) LMHS SYSTEM BUSINESS SANFORD COHEN, M.D., BOARD CHAIRMAN 7. CONSENT AGENDA (Approve) 1. Full Board Meeting Minutes of April 28, 2016 2. Financial and Statistical Reports of May 31, 2016 3. Financial and Statistical Reports of June 30, 2016 4. Policy 20.02C Conflict of Interest Reviewed, No Revisions 8. OBSERVATION VS. INPATIENT (Jon Hart, MD, Lead Physician Advisor, Shelley Koltnow, Interim Chief Compliance Officer, Anne Rose, Vice President, Revenue Cycle) 9. MEDICAL STAFF RECOMMENDATIONS OF 8/25/2016 (Approve) 1. Lee Memorial Hospital 2. Cape Coral Hospital 3. Gulf Coast Medical Center 4. HealthPark Medical Center 5. Golisano Children s Hospital of SW Florida

AGENDA (Page 2 of 2) BOARD OF DIRECTORS OFFICE 239-343-1500 FAX: 239-343-1599 13685 DOCTORS WAY #190 FT MYERS, FLORIDA 33912 CAPE CORAL HOSPITAL GULF COAST MEDICAL CENTER HEALTHPARK MEDICAL CENTER LEE MEMORIAL HOSPITAL GOLISANO CHILDRENS HOSPITAL OF SOUTHWEST FLORIDA TRAUMA AND FULL BOARD OF DIRECTORS MEETINGS August 25, 2016 at 1:00 p.m. 10. OLD BUSINESS 11. NEW BUSINESS 12. BOARD MEETING CRITIQUE 13. BOARD OF DIRECTORS REPORTS 14. Date of the next Meeting: September 8, 2016 at 1:00 p.m. Quality & Safety and Full Board of Directors Gulf Coast Medical Center Boardroom 13685 Doctors Way, Ft. Myers, FL 33912 ADJOURN (Sanford Cohen, M.D., Board Chairman) THE REHABILITATION HOSPITAL LEE PHYSICIAN GROUP LEE CONVENIENT CARE BOARD OF DIRECTORS DISTRICT ONE Stephen R. Brown, M.D. Therese Everly, BS, RRT DISTRICT TWO Donna Clarke Nancy M. McGovern, RN, MSM DISTRICT THREE Sanford N. Cohen, M.D. David Collins DISTRICT FOUR Diane Champion Chris Hansen DISTRICT FIVE Jessica Carter Peer Stephanie Meyer, BSN, RN

LEE MEMORIAL HEALTH SYSTEM BOARD OF DIRECTORS Invocation & Pledge of Allegiance

LEE MEMORIAL HEALTH SYSTEM BOARD OF DIRECTORS PUBLIC INPUT AGENDA ITEMS: Any public input pertaining to items on the Agenda is limited to three minutes and a Request to Address the Board of Directors card must be completed and submitted to the Board Staff prior to meeting. Refer to Board Policy: 10:15F: Public Addressing the Board Non-Agenda Item: Individuals wishing to address the Board on an item NOT on the Agenda, the Board office must be notified of subject matter at least three (3) days prior to the meeting to allow staff time to prepare and to insure the matter is within the jurisdiction of the Board.

Proclamation LEE MEMORIAL HEALTH SYSTEM would like to recognize with sincere appreciation Judith C. Maier in her retirement of 33 dedicated service years to the Lee Memorial Health System. The entire system wishes you health & happiness, and all the best in your future endeavors. BOARD OF DIRECTORS District 1 Stephen R. Brown, MD Therese Everly, BS, RRT District 2 Donna Clarke Nancy M. McGovern, RN, MSM District 3 Sanford N. Cohen, MD David F. Collins District 4 Diane Champion Chris Hansen District 5 Jessica Carter Peer Stephanie L. Meyer, BSN, RN

Proclamation LEE MEMORIAL HEALTH SYSTEM would like to recognize with sincere appreciation Kathryn J. Georgeson, RN, BSN, CCM in her retirement of 33 dedicated service years to the Lee Memorial Health System. The entire system wishes you health & happiness, and all the best in your future endeavors. BOARD OF DIRECTORS District 1 Stephen R. Brown, MD Therese Everly, BS, RRT District 2 Donna Clarke Nancy M. McGovern, RN, MSM District 3 Sanford N. Cohen, MD David F. Collins District 4 Diane Champion Chris Hansen District 5 Jessica Carter Peer Stephanie L. Meyer, BSN, RN

LEE MEMORIAL HEALTH SYSTEM BOARD OF DIRECTORS MILITARY SUPPORT UPDATE Kim Gaide, Practice Manager LPG Medical Records

LMHS Military Support Program The Lee Memorial Health System Military Support Program is: Dedicated to supporting our military men and women and their families while deployed. Over 75,000 pounds of care packages sent since May 2003. Supporting our returning troops with resume building, VA benefits, job placement, readjustment to civilian living. Sustaining our homeless veterans with their needs. Support our local veterans with referrals and assistance. What does the Military Support Program do? Connected supporters to adopt 17 families for Christmas packages for veteran/ deployed troops families, December 2015. Sponsors Military Appreciation Day first Saturday of November, held at First Christian Church. Event all about the Vets and their families Free Daycare Provided, Resumes built while you wait, Social Support Agencies, VA Burial Benefits, Mental Health Benefits, Eligibility and coordination of VA benefits, Job Placement employers hiring, Colleges and Universities, MASH Unit to include Health Screenings, PSAs, Flu Shots, Hot Showers, Hair Cuts, Dental screenings, Chow Hall for free breakfast and lunch, Widows Benefits, Aid and Attendance for Assisted Living Benefits, and Shop at our free PX. Suite Support for the Military is a program with the Florida Everblades A veteran or active duty member may sign up for a hockey game and take 9 of his/her best friends, pick one of the catered meals and drinks, and also receive passes for free parking. Call or email the information below for more information. Assist local returning home veterans and their families in getting community resources to them. We have a network of businesses, community organizations, and military supporters that assist us. We also have supplies of wheelchairs and other DME equipment available. Steering committee member of Lee County Community Blue Print, a MOAA program. Sponsor local troops and their families while on active duty including deployment. Fundraise (Easter, 4 th of July, Thanksgiving, and Christmas) for our care package mailing fund and any other needs the troops may have that families may not be able to afford. We are not supported financially by LMHS. Send clipped coupons to over 18 bases stateside and overseas to families who can use the clipped coupons at the PX or on-base store. We send blank greeting cards about 6 weeks before a holiday (Easter, Mothers Day, Fathers Day, Thanksgiving, and Christmas) so that the troops may forward them on signed to their family. They don t have a Hallmark store at the corner! Communicates with over 1,200+ military families and supporters to assist our troops with their immediate need: broken ipod replaced and sent in 24 hours, jeep broken down, a family with no food. Built relationships with FPL, Lee County Electric, and Sprint United so utilities of our supported families were not turned off while their loved one were deployed. Kim Gaide 239-343-2045 or kim.gaide@leememorial.org Facebook page: LMHS Military Support Program PO Box 2218, Fort Myers FL 33902 6/14/2016

5th Annual Military Appreciation Day For All Veterans November 5, 2016 9:00 AM - 1:00 PM First Christian Church 2061 McGregor Boulevard Fort Myers, FL 33901 WELCOME! Any discharged veteran Medically retired Active duty National Guard and Reserves University and Colleges, Local Hiring Employers Come enjoy the following activities plus many more: Brunch Provided Health Screenings Massages Social Support Agencies Hair Cuts VA Burial Benefits Widow Benefits Mental Health Benefits Aid and Attendance for Assisted Living Benefits Eligibility and coordination Shop at our free PX of VA benefits Dental Exams by appointment Day Care Provided Call for Reservations: 239-343-2045 so that we may be prepared to care for your child(ren) while you take care of yourself. Brought to you by: For More Information, call 239-343-2045 Military Support Program at Lee Memorial Health System First Christian Church LeeSar Prudential Financial American Legion Post #38 Hearts and Homes for Veterans, Inc. Victor Paul Tuchman Post 400 Jewish War Veterans American Red Cross

LEE MEMORIAL HEALTH SYSTEM BOARD OF DIRECTORS PRESIDENT S REPORT Jim Nathan, CEO / President

President s Report LMHS Board of Directors August 25, 2016 NOTE: Open enrollment for health exchanges begins November 15 through January; health plans have had to declare where they will be competing this summer and identify rate increases; hence activity in the marketplaces!!! Aetna to Drop Some Affordable Care Act Markets Withdrawing from ACA Marketplace health plans in 11 of 15 states including Florida; remaining in Delaware, Iowa, Nebraska, and Virginia Followed announcements by UnitedHealthcare pulling out of Arizona, North Carolina, South Carolina and Kentucky Aetna had 1.1 million individual market enrollees (837,000 in the exchanges); estimates exchange losses at $430 300 million Health exchanges are only way to garner Federal subsidies Likely one market states include Oklahoma, Alabama, Alaska, Wyoming Increases concerns about sufficient competitive health exchange plans Aetna Warned It Would Drop Out of Obamacare Exchanges if Its Merger Was Blocked April, 2016, Aetna CEO stated that selling insurance in the ACA health exchange markets a good investment July 5, Aetna warned US Department of Justice (DOJ) it was very likely it would exit public exchanges if merger with Humana was blocked; offered to explore more exchange coverage over next few years, if merger approved July 21, DOJ sued to block $37B merger August 15, Aetna announces pulling from 11 of 15 states; exiting nearly 70% of current markets Meanwhile, Aetna finished last year with profits of $2.4B, up 17.1% over previous year Humana dropped out of 88% of current markets Where Insurers Exits Are Hurting Obamacare Exchanges and Where They Aren t Most major metro areas such as in California, New York, Texas, plus Northwest, Midwest and New England are unaffected o Texas: Even after Aetna and United pull out, Austin, Dallas, Houston, and San Antonio will have at least three different insurers o Note: Blue Cross/Blue Shield of Texas requested nearly a 60% rate hike! Most hurt: Arizona, North and South Carolina, Georgia and parts of Florida o Lee and Collier Counties will only have Florida Blue for the health exchanges in 2017 1

25% of counties nationally may have only one insurer choice; could over time result in more small insurers entering markets While fewer insurers may result in premiums rising, over 80% of marketplace enrollees have significant subsidies Possible consequence: narrower networks; fewer choices of physicians and hospitals Of 13 million individuals on the exchanges, 2 million are with Aetna, Humana, and UnitedHealthcare >>> estimate >>> 1 1.5 million will need to switch Health Cost Spike Coming Commonwealth Fund: Increased premiums or dropping from unprofitable markets inevitable now that insurers have to compete on price instead of attracting the healthiest customers Aetna had lowest price only 16% of time while Blue Cross had lowest prices 42% of time Insurers average price increase requested nationally 24%; average approved so far 17%; last year average increase 10% Potential ACA changes under discussion include: o Helping insurers manage risk including extending reinsurance program set to expire this year and/or including prescription drug use in risk adjustment formula o Having states help insurers (Alaska invested $55 million in its only state exchange insurer last year) o Increasing subsidies to individuals over 250% of federal poverty level ($50,400 for a family of 3) o A public option for areas with limited competition/choice of plans o Making student loan payments deductible for younger enrollees to boost tax credits Feds Hope to Woo New Customers to Obamacare Letters going directly to individuals who paid penalties on tax returns Planning advertising campaign using testimonials of newly insured Enrolling younger, healthier individuals helps reduce the risk adjustment challenges and may reduce or reverse outmigration of participating insurance CMS Wants to Stop Providers from Inappropriately Steering Patients into Exchange Plans August 18, CMS began accepting public input to prevent health providers from steering Medicare and Medicaid eligible individuals into health exchanges to gain higher payments Health insurers have raised concerns that third party organizations are encouraging high cost patients to enroll in exchanges by subsidizing their premiums 2

Lives at Stake: How Insurance Status Can Affect Cancer Survival Odds Dana Farber Study o Uninsured men had 58% higher risk of all cause mortality and 88% higher risk of testicular tumor mortality than insured o not related to poor nutrition, ethnicity, or other factors possibly related to poverty but probably due to delayed presentation due to fear of financial implications Johns Hopkins Study brain cancer o Uninsured 14% shorter survival times; 43% less likely to receive radiation treatment Who Are the Remaining Uninsured and Why Haven t They Signed Up for Coverage? Commonwealth Fund Study US uninsured have declined by 20 million since ACA in 2010; 24 million estimated still uninsured Key findings even with dramatic declines in uninsured o Latinos rose from 29% of all uninsured in 2013 to 40% in 2016 o Whites declined from 50% of uninsured to 41% o 39% of uninsured adults have incomes below the federal poverty level which is twice the rate of overall adult population Other key factors o ACA excludes undocumented immigrants from coverage expansion o 19 states including two of the largest, Texas and Florida, have chosen not to expand coverage (accounts for 51% of uninsured) o Some demographic groups unaware of marketplace opportunities o Concerns about affordability (real or perceived) o Difficulty in selecting plans Group Calls on Florida Officials to Reconsider Their Stand Against Medicaid Expansion August 17, Florida CHAIN, League of Women Voters of Florida, Tampa Bay Healthcare Collaborative, Tampa Crossroads unveiled funded study In Hillsborough and Pinellas Counties, nearly 110,000 uninsured adults between 18 and 64 could receive coverage under Medicaid expansion Cited University of Wisconsin study: States that have expanded coverage eligibility show significant increases in self reported health status. More than 3000 uninsured veterans under 65 could gain coverage With federal reimbursement cuts, health providers will be forced to increase charges to the insured to cover uninsured; whereas expansion would reduce such pressure due to fewer uninsured Kentucky economists cited job increases due to Medicaid expansion; using same formula it could create 23,000 jobs in Tampa Bay area alone Study identified major roadblocks being Florida lawmakers 3

RECESS To Call to Order the Lee County Trauma Services District Board of Directors Meeting Thursday, August 25, 2016 BOARD CHAIRMAN: Sanford Cohen, M.D.

TRAUMA DISTRICT MEETING TO CHAIRMAN: RECONVENE Lee Memorial Health System FULL BOARD OF DIRECTORS MEETING Thursday, August 25, 2016 BOARD CHAIRMAN: Sanford Cohen, M.D.

LEE MEMORIAL HEALTH SYSTEM BOARD OF DIRECTORS CONSENT AGENDA (Approval) 1. Full Board Meeting Minutes of April 28, 2016 2. Financial & Statistical Reports of May 31, 2016 3. Financial & Statistical Reports of June 30, 2016 4. Policy 20.02C Conflict of Interest No Revisions

LEE MEMORIAL HEALTH SYSTEM FULL BOARD OF DIRECTORS MEETING MINUTES Thursday, April 28, 2016 LOCATION: Gulf Coast Medical Center, Medical Office Building, Board of Directors Boardroom, 13685 Doctors Way, Fort Myers, FL 33912 MEMBERS PRESENT: Sanford N. Cohen, M.D., Board Chairman; Donna Clarke, Board Vice Chairman; David Collins, Board Treasurer; Therese Everly, Board Secretary; Steven Brown, M.D., Board Member; Diane Champion, Board Member; Chris Hansen, Board Member; Nancy McGovern, RN, MSM, Board Member; Jessica Carter Peer, Board Member; Stephanie Meyer, BSN, RN, Board Member MEMBERS ABSENT: NOTE: Documents referred to in these minutes are on file by reference to this meeting date in the Office of the Board of Directors and on the Board of Directors website at www.leememorial.org/boardofdirectors, for public inspection. SUBJECT DISCUSSION ACTION FOLLOW- UP MEETING CALLED TO ORDER The LEE MEMORIAL HEALTH SYSTEM FULL BOARD OF DIRECTORS MEETING was CALLED TO ORDER at 1:02 p.m. by Sanford Cohen, M.D., Board Chairman. INVOCATION AND PLEDGE OF ALLEGIANCE Rev. Denise Sawyer, MDiv, BCC gave the Invocation, followed by the Pledge of Allegiance. PUBLIC INPUT None at this time RECOGNITIONS Mary Kirkwood, RN, MS was recognized for 35 years of service. Doug Wade was recognized for 36 years of service. Pete Morgan was recognized for 25 years of service. DEPT. OF ACADEMICS AND MEDICAL EDUCATION UPDATE Dr. Eric Goldsmith presented an update on the Department of Academics and Medical Education for LMHS. The Department of Academics and Medical Education website is http://intranet1/academics/default.asp Discussion ensued amongst Board members regarding the need for more psychiatrists and a focus on behavioral health as part of the family medicine residency programs. David Collins made a motion to make education a core principle to be emphasized through our strategic initiatives and administration to be informed of such. Nancy McGovern seconded the motion. Steve Brown asked that the motion be tabled and a lengthy discussion ensued. Steve Brown withdrew his request to table the education motion. All voted in favor of the motion and it carried with no opposition. Education update to be presented at September Board meeting. RECESS MEETING MEETING RECESSED at 2:23 p.m. to Convene Lee County Trauma Services District Meeting. RECONVENE MEETING CONSENT AGENDA Dr. Cohen asked for approval of the Consent Agenda consisting of: A. Behavioral Health Board of Directors Workshop minutes of April 7, 2016. B. Policy 20.17R Financial Goal Policy RECONVENED FULL BOARD MEETING at 2:53 p.m. by Sanford N. Cohen, M.D., Board Chairman. A motion was made by Nancy McGovern to accept the Consent Agenda consisting of: A. Behavioral Health Board of Directors Workshop minutes of April 7, 2016. B. Policy 20.17R Financial Goal Policy The motion was seconded by Diane Champion and it carried with no opposition.

LEE MEMORIAL HEALTH SYSTEM FULL BOARD OF DIRECTORS MEETING MINUTES Thursday, April 28, 2016 Page 2 of 3 SUBJECT DISCUSSION ACTION FOLLOW- UP GOLISANO CHILDREN S HOSPITAL SWFL PI INDICATORS Alex Daneshmand, D.O. presented the 2016 semi-annual GCHSWF performance indicators. A motion was made by Chris Hansen to accept the Golisano Children s Hospital of SWFL PI indicators. The motion was seconded by Steve Brown and it carried with no opposition. EQUIPMENT LOAN MEDICAL STAFF RECOMMENDATIONS OF 4/28/16 Ben Spence recommended approval to adopt the resolution approving the execution and delivery of a third lease schedule to the master lease agreement with Banc of America Public Capital Corp in the maximum principal amount of $25,000,000; approving the form of documents and conditions to be met in connection with the second lease schedule; authorizing the appropriate officers of the Lee Memorial Health System to take all actions in connection therewith; and providing an effective date. Jim Humphrey stated for the record that he has reviewed and approved the resolution. Dr. Cohen asked for a motion to approve the Medical Staff Recommendations as of 4/28/16: A. Lee Memorial Hospital B. Cape Coral Hospital C. Gulf Coast Medical Center D. HealthPark Medical Center E. Golisano Children s Hospital of SWFL Stephanie Meyer recused herself from voting. A motion was made by David Collins to adopt the resolution approving the execution and delivery of a third lease schedule to the master lease agreement with Banc of America Public Capital Corp in the maximum principal amount of $25,000,000; approving the form of documents and conditions to be met in connection with the second lease schedule; authorizing the appropriate officers of the Lee Memorial Health System to take all actions in connection therewith; and providing an effective date. The motion was seconded by Chris Hansen and it carried with no opposition. A motion was made by Therese Everly to approve the Medical Staff Recommendationsas of 4/28/16: A. Lee Memorial Hospital B. Cape Coral Hospital C. Gulf Coast Medical Center D. HealthPark Medical Center E. Golisano Children s Hospital of SWFL The motion was seconded by Nancy McGovern and it carried with no opposition. OLD BUSINESS None NEW BUSINESS Chris Hansen requested periodical updates to the Board on our progress with the LMHS quality ratings and whether we are showing improvement transitions. David Collins asked for updates every 6 weeks until we get a handle on this issue. Therese Everly requested dashboards on CMS ratings utilizing real time data. Therese Everly made a motion to receive reports on the advances being made toward quality improvement every six weeks. The motion was seconded by David Collins and it carried with no opposition. The first report out scheduled for the 6/9/16 Board meeting. BOARD MEETING CRITIQUE Great meeting with great discussion. BOARD OF DIRECTORS REPORTS Therese Everly attended a Chamber of Commerce lecture on healthcare with a presentation by Scott Kashman. Steve Brown attended an Alzheimer s meeting in Naples. LEGISLATIVE DELEGATION RECOGNITION OF CENTENNIAL The meeting was adjourned prior to this Agenda item.

LEE MEMORIAL HEALTH SYSTEM FULL BOARD OF DIRECTORS MEETING MINUTES Thursday, April 28, 2016 Page 3 of 3 SUBJECT DISCUSSION ACTION FOLLOW- UP NEXT REGULAR MEETING The next LEE MEMORIAL HEALTH SYSTEM PLANNING AND FULL BOARD OF DIRECTORS MEETINGS will be held on May 12, 2016, at 1:00 p.m. in the Gulf Coast Medical Center, Medical Office Building, Boardroom 13685 Doctors Way, Fort Myers, FL 33912 ADJOURNMENT The LEE MEMORIAL HEALTH SYSTEM FULL BOARD OF DIRECTORS MEETING ADJOURNED at 3:45 p.m. by Sanford Cohen, M.D., Board Chairman. Minutes were recorded by Donna Shapiro, Assistant to the Board of Directors Therese Everly Date approved Board Secretary

LEE MEMORIAL HEALTH SYSTEM LEE COUNTY, FLORIDA CONSOLIDATED FINANCIAL STATEMENTS AND STATISTICAL REPORTS MAY 31, 2016

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED FINANCIAL STATEMENTS & STATISTICAL REPORTS TABLE OF CONTENTS SECTION A PAGE CONSOLIDATED SCHEDULES HIGHLIGHTS A.1 EXECUTIVE SUMMARY A.2 CONSOLIDATED STATISTICAL REPORT A.3 CONSOLIDATED INCOME STATEMENT A.4 SOURCES & APPLICATIONS OF FUNDS A.6 CONSOLIDATED BALANCE SHEET A.7 CONSOLIDATED FINANCIAL RATIOS A.8 CONSOLIDATED PAYOR MIX A.10

Lee Memorial Health System Operating Highlights For the month ended May 31, 2016 Adjusted admits for the month ended May 31, 2016 are 11,503 which is 1.8% below budget. Actual inpatient admits for the month are 6,192 or 7.7% less than budget and actual patient days are 32,809 or 4.6% less than budget which resulted in an increase in length of stay to 5.30 days. Outpatient volumes are up significantly as seen in Emergency room visits which are 4.5% above budget at 18,165 and outpatient surgeries of 2,089 which are above budget by 13.1%. Net patient revenue for May reflects an $8.8 million or 7.1% favorable variance to budget. This favorable variance in net patient revenue is the result of a favorable rate variance of $11.1 million due to increase Case Mix Index to 1.62 vs. budget of 1.46 and better payer mix, offset by an unfavorable volume variance of $2.3 million. Net Patient Revenue per CMI adjusted admit for the month ended May 31, 2016 is $7,127 vs. budget of $7,237. Total operating expenses before depreciation and interest expense are 7.2% higher than budget. Salaries & Wages are 2.8% higher than budget, largely due to staff not flexing to the reduced volumes. Salaries, Wages & Benefits as a percent of Net Operating Revenue are 53.6% for May 2016 versus a budget of 55.6%. The actual hourly pay rate is $32.41 which is $0.46 lower than budget. Supply expense came in over budget by 9.3%; on a case mix adjusted admission basis the variance is also unfavorable at $1,357 actual vs. $1,351 budget. The majority of this variance was seen in drug expense which was over budget $0.9 million. Purchased services are over budget by $2.6 million, the majority of which was due to locum tenens being brought in to fill in for the shortage in coverage for our Hospitalist Program. Total operating costs per case mix adjusted admit is less than budget at $6,527 actual vs. $6,621, a 1.4% favorable variance. FTEs/AOB are higher than budget by 2.8% (5.53 actual vs. 5.38 budget) during May 2016. Productive FTE s per adjusted daily admission were 5.7% higher than budget at 26.73 vs. a budget of 25.28, resulting in lower productivity than budgeted. The gain from operations is $5.3 million or 3.9% versus a budgeted gain of $5.1 million or 4.0%. Excess revenue over expenses is a gain of $9.5 million versus a budget of $10.8 million, resulting in $1.4 million negative variance. The majority of this negative variance is due to expenses for salaries, drug costs and contracts for locum tenens being higher than budgeted as mentioned above. For the month, Cash & Investments increased by $11.5 million to $974.9 million. Cash flow from Operations increased $16.8 million while working capital decreased by $5.3 million. Cash was reduced by $10.3 million for routine equipment replacement and $1.4 million for principal payments made during May on net borrowings. Days in Accounts Receivable decreased from 45.6 days in April to 44.6 days in May resulting in a source of cash of $9.7 million. Total Notes & Bonds payable on May 31, 2016 is $685.7 million resulting in the Cash to Debt ratio of 142.2%. Page A.1

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED EXECUTIVE SUMMARY Current Month Year-to-Date For the Period Ending May 31, 2016 % Variance % Variance Budget Actual Prior Year Budget Actual Prior Year Act to Bud Act to PY Act to Bud Act to PY Inpatient Volumes: Admits - Adults & Peds 6,707 6,192 6,672-7.7% -7.2% 58,622 54,692 57,453-6.7% -4.8% Patient Days - Adults & Peds 34,398 32,809 35,656-4.6% -8.0% 298,704 278,100 296,898-6.9% -6.3% Length of Stay 5.13 5.30 5.34-3.3% 0.9% 5.10 5.08 5.17 0.2% 1.6% Inpatient Surgeries 1,644 1,718 1,617 4.5% 6.2% 14,459 14,600 14,379 1.0% 1.5% Outpatient Volumes: Emergency Room Visits 17,387 18,165 17,370 4.5% 4.6% 141,406 146,972 141,433 3.9% 3.9% Outpatient Surgeries 1,847 2,089 1,758 13.1% 18.8% 14,744 16,290 14,951 10.5% 9.0% Hospital Based Physician Visits 36,754 35,011 18,830-4.7% 85.9% 302,102 301,460 163,271-0.2% 84.6% Physician Visits 67,305 72,067 60,093 7.1% 19.9% 546,633 560,593 504,134 2.6% 11.2% Home Health Visits 5,911 5,768 5,392-2.4% 7.0% 46,532 46,353 44,280-0.4% 4.7% Adjusted Admits 11,715 11,503 11,444-1.8% 0.5% 99,313 98,604 96,196-0.7% 2.5% (overall in/outpat volume indicator) Total Case Mix Index 1.46 1.62 1.43 10.8% 13.4% 1.46 1.55 1.44 5.9% 7.7% Operating Ratios: Net Revenue/Adj Adm CMI 7,438 7,308 7,478-1.7% -2.3% 7,224 7,158 7,248-0.9% -1.3% Operating Exp/Adj Adm CMI 6,621 6,527 6,633 1.4% 1.6% 6,355 6,282 6,189 1.2% -1.5% Supply Exp/Adj Adm CMI 1,351 1,357 1,413-0.5% 4.0% 1,345 1,358 1,376-0.9% 1.3% Wages/Ben - % of Net Oper Rev 55.6% 53.6% 53.8% 3.6% 0.5% 54.7% 53.1% 51.2% 2.9% -3.7% Supplies as a % of Net Oper Rev 18.2% 18.6% 18.9% -2.2% 1.7% 18.6% 19.0% 19.0% -1.9% 0.0% Charity/Bad Debt - % of Gross Rev 6.4% 7.0% 5.7% -9.6% -22.1% 6.4% 6.3% 6.3% 1.1% -1.0% FTEs/AOB 5.38 5.53 5.08-2.8% -8.8% 5.20 5.27 4.88-1.3% -8.0% Productive Hours/Adjusted Admit 144.5 152.7 140.7-5.7% -8.6% 138.1 139.4 131.0-0.9% -6.4% Average Hourly Rate 32.87 32.41 31.75 1.4% -2.1% 32.71 33.01 31.68-0.9% -4.2% Financial Ratios: Operating Margin (%) 4.0% 3.9% 4.3% -2.1% -8.9% 5.5% 5.9% 8.0% 6.4% -26.8% Excess Margin (%) 8.1% 6.7% 6.4% -17.1% 5.2% 9.5% 10.1% 12.0% 6.2% -15.7% Liquidity Ratios: Days Cash on Hand (net of VRDB) 243.7 244.3 264.6 Cash to Debt (%) 140.7% 142.2% 142.1% Days in Acct Receivable 43.8 44.6 43.9 Income Statement Summary (in Thousands) Total Net Operating Revenue 127,461 136,198 122,278 6.9% 11.4% 1,048,396 1,092,562 1,002,401 4.2% 9.0% Total Operating Expenses 122,385 130,885 117,044-6.9% -11.8% 990,598 1,028,455 922,058-3.8% -11.5% Consolidated Gain(Loss) from Oper 5,077 5,313 5,234 4.7% 1.5% 57,798 64,107 80,343 10.9% -20.2% Investment Earnings/Non Op Income 5,759 4,145 2,780-28.0% 49.1% 46,117 51,205 44,844 11.0% 14.2% Consolidated Excess Rev over Exp 10,836 9,458 8,014-12.7% 18.0% 103,915 115,312 125,187 11.0% -7.9% Balance Sheet Highlights (In Thousands): Cash & Investments 954,570 974,902 945,969 Bonds & Notes Payable 678,459 685,735 665,858 VRDB = variable rate demand bonds CMI = Case Mix Index Page A.2

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED STATISTICAL SUMMARY For the Period Ending May 31, 2016 Current Month Year-to-Date Budget Actual Prior Year % Variance % Variance Budget Actual Prior Year Act to Bud Act to PY Act to Bud Act to PY Admissions ADULTS 6,085 5,568 6,062-8.5% -8.1% 53,388 49,381 52,325-7.5% -5.6% PEDIATRICS 361 340 348-5.7% -2.3% 3,108 3,021 3,054-2.8% -1.1% NICU 68 79 78 16.8% 1.3% 530 552 545 4.1% 1.3% POST ACUTE 194 205 184 5.7% 11.4% 1,595 1,738 1,529 9.0% 13.7% Total Adult & Peds 6,707 6,192 6,672-7.7% -7.2% 58,622 54,692 57,453-6.7% -4.8% NEWBORNS 460 469 541 2.0% -13.3% 4,092 4,052 4,120-1.0% -1.7% Total Admissions 7,167 6,661 7,213-7.1% -7.7% 62,714 58,744 61,573-6.3% -4.6% Patient Days ADULTS 27,250 25,450 28,332-6.6% -10.2% 239,956 219,270 239,450-8.6% -8.4% PEDIATRICS 1,076 1,047 1,081-2.7% -3.1% 9,606 9,916 9,545 3.2% 3.9% NICU 1,330 1,437 1,447 8.0% -0.7% 10,964 10,616 10,908-3.2% -2.7% POST ACUTE 4,742 4,875 4,796 2.8% 1.6% 38,178 38,298 36,995 0.3% 3.5% Total Adult & Peds 34,398 32,809 35,656-4.6% -8.0% 298,704 278,100 296,898-6.9% -6.3% NEWBORNS 1,074 1,122 1,219 4.4% -8.0% 9,539 9,291 9,632-2.6% -3.5% Total Patient Days 35,473 33,931 36,875-4.3% -8.0% 308,243 287,391 306,530-6.8% -6.2% Average Length of Stay ADULTS 4.48 4.57 4.67-2.1% 2.2% 4.49 4.44 4.58 1.2% 3.0% PEDIATRICS 2.98 3.08 3.11-3.2% 0.9% 3.09 3.28 3.13-6.2% -5.0% NICU 19.66 18.19 18.55 7.5% 1.9% 20.67 19.23 20.01 7.0% 3.9% POST ACUTE 24.44 23.78 26.07 2.7% 8.8% 23.94 22.04 24.20 7.9% 8.9% Total Adult & Peds 5.13 5.30 5.34-3.3% 0.9% 5.10 5.08 5.17 0.2% 1.6% NEWBORNS 2.34 2.39 2.25-2.4% -6.2% 2.33 2.29 2.34 1.6% 1.9% Total Length of Stay 4.95 5.09 5.11-2.9% 0.4% 4.92 4.89 4.98 0.5% 1.7% OP Registrations EMERGENCY ROOM 17,387 18,165 17,370 4.5% 4.6% 141,406 146,972 141,433 3.9% 3.9% OP SURGERY CASES 1,847 2,089 1,758 13.1% 18.8% 14,744 16,290 14,951 10.5% 9.0% SUBTOTAL 19,234 20,254 19,128 5.3% 5.9% 156,150 163,262 156,384 4.6% 4.4% Visits HOME HEALTH VISITS 5,911 5,768 5,392-2.4% 7.0% 46,532 46,353 44,280-0.4% 4.7% HOSP BASED PHY VISITS 36,754 35,011 18,830-4.7% 85.9% 302,102 301,460 163,271-0.2% 84.6% PHYSICIAN VISITS 67,305 72,067 60,093 7.1% 19.9% 546,633 560,593 504,134 2.6% 11.2% TRAUMA SERVICES DISTRICT 774 1,131 768 46.1% 47.3% 8,464 8,820 8,266 4.2% 6.7% SUBTOTAL 110,744 113,977 85,083 2.9% 34.0% 903,731 917,226 719,951 1.5% 27.4% TOTAL OP 129,978 134,231 104,211 3.3% 28.8% 1,059,881 1,080,488 876,335 1.9% 23.3% Page A.3

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED STATEMENT OF OPERATIONS For the Period Ending May 31, 2016 (in thousands) Current Month Budget Actual Prior Year Year-to-Date % Variance % Variance Budget Actual Prior Year Act to Bud Act to PY Act to Bud Act to PY INPATIENT REVENUE 311,402 309,572 297,355-0.6% 4.1% 2,697,021 2,646,813 2,541,549-1.9% 4.1% OUTPATIENT REVENUE 232,516 265,504 212,662 14.2% 24.8% 1,872,072 2,125,126 1,713,866 13.5% 24.0% TOTAL PATIENT REVENUE 543,918 575,076 510,017 5.7% 12.8% 4,569,093 4,771,939 4,255,415 4.4% 12.1% DED FROM REV-MEDICARE 216,268 220,000 203,821-1.7% -7.9% 1,839,089 1,892,182 1,722,361-2.9% -9.9% DED FROM REV-MEDICAID 60,884 60,887 60,578 0.0% -0.5% 511,242 485,635 483,581 5.0% -0.4% DED FROM REV-CHARITY 18,306 18,550 14,863-1.3% -24.8% 153,960 155,914 135,601-1.3% -15.0% DED FROM REV-HMO/PPO 46,378 57,703 46,861-24.4% -23.1% 392,806 452,471 373,239-15.2% -21.2% DED FROM REV-OTHER 61,583 63,356 53,475-2.9% -18.5% 512,602 572,225 445,978-11.6% -28.3% DED FROM REV-BAD DEBT 16,475 21,755 14,407-32.0% -51.0% 139,129 146,965 131,809-5.6% -11.5% TOTAL DED FROM REV 419,895 442,251 394,004-5.3% -12.2% 3,548,829 3,705,393 3,292,568-4.4% -12.5% NET PATIENT REVENUE 124,024 132,825 116,013 7.1% 14.5% 1,020,264 1,066,546 962,847 4.5% 10.8% OTHER OPER REV 3,438 3,373 6,265-1.9% -46.2% 28,132 26,016 39,554-7.5% -34.2% TOTAL OPERATING REV 127,461 136,198 122,278 6.9% 11.4% 1,048,396 1,092,562 1,002,401 4.2% 9.0% OPERATING EXPENSES PROD SALARIES 53,800 54,822 48,492-1.9% -13.1% 430,853 425,781 376,206 1.2% -13.2% PROD OVERTIME 1,421 1,876 1,698-32.0% -10.5% 11,771 16,512 14,912-40.3% -10.7% CONTRACT LABOR 121 206 173-70.7% -19.2% 2,390 2,633 1,985-10.1% -32.6% NON-PROD SALARIES 5,347 5,495 6,005-2.8% 8.5% 46,471 53,009 45,654-14.1% -16.1% TOTAL SALARIES & WAGES 60,689 62,399 56,369-2.8% -10.7% 491,485 497,935 438,757-1.3% -13.5% FRINGE BENEFITS 10,177 10,582 9,474-4.0% -11.7% 81,729 82,159 74,348-0.5% -10.5% HEALTH CARE ACCESS 1,457 1,475 1,471-1.2% -0.3% 12,077 11,849 11,560 1.9% -2.5% SUPPLIES 23,144 25,285 23,099-9.3% -9.5% 195,273 207,286 190,227-6.2% -9.0% OTHER SERVICES 6,203 7,553 6,863-21.8% -10.0% 51,373 56,161 53,256-9.3% -5.5% PURCHASED SERVICES 11,794 14,355 11,192-21.7% -28.3% 90,428 103,501 87,683-14.5% -18.0% TOTAL OPER EXPENSES 113,462 121,648 108,467-7.2% -12.2% 922,366 958,892 855,831-4.0% -12.0% EBITDA 13,999 14,549 13,811 3.9% 5.3% 126,030 133,670 146,570 6.1% -8.8% DEPRECIATION/AMORT 7,082 7,387 6,377-4.3% -15.8% 52,886 54,663 49,748-3.4% -9.9% INTEREST EXPENSE 1,840 1,850 2,200-0.5% 15.9% 15,346 14,900 16,479 2.9% 9.6% GAIN(LOSS) FROM OPER 5,077 5,313 5,234 4.7% 1.5% 57,798 64,107 80,343 10.9% -20.2% Page A.4

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED INCOME STATEMENT BY ENTITY For the Year-to-Date Period Ending May 31, 2016 (in thousands) Current Month Year-to-Date ENTITY Budget Actual Prior Year Variance Budget Actual Prior Year Variance LEE MEMORIAL HOSPITAL 5,823 7,983 5,390 2,161 54,403 64,744 56,430 10,341 HEALTHPARK MEDICAL CTR 11,261 10,219 10,277 (1,042) 83,183 87,695 86,568 4,512 CAPE CORAL HOSPITAL 4,965 7,274 4,596 2,309 40,800 43,924 40,148 3,124 GULF COAST MEDICAL CENTER 5,441 7,590 4,657 2,149 46,348 57,340 49,544 10,992 TRAUMA SERVICES DIST (416) (398) (636) 18 (2,862) (2,961) (2,691) (98) OUTPATIENT CENTERS 2,617 3,083 1,904 466 20,964 22,815 17,248 1,851 HEALTHPARK CARE CTR 71 (15) 84 (86) 547 (129) 357 (676) HOME HEALTH AGENCIES (243) (348) (191) (105) (2,029) (2,888) (1,466) (858) FOUNDATION 6 9 6 4 93 241 77 148 REHAB HOSPITAL 476 546 518 70 3,789 4,032 3,780 243 ALL PHYSICIANS (6,183) (8,667) (4,902) (2,484) (46,162) (57,808) (37,689) (11,646) CORPORATE SERVICES (18,654) (21,840) (16,448) (3,186) (140,589) (152,301) (131,713) (11,711) ALL OTHERS (86) (123) (19) (37) (688) (598) (251) 89 TOTAL GAIN FROM OPS 5,077 5,313 5,234 236 57,798 64,107 80,343 6,309 INT EARN & REALIZED GAIN 1,204 6,329 567 5,126 9,674 34,594 19,867 24,920 UNREALIZED GAIN (LOSS) 3,071 (4,503) 1,772 (7,574) 24,568 2,368 13,821 (22,200) UNREALIZED GAIN (LOSS) ON SWAP 0 0 0 0 0 0 0 0 OTHER NON OPERATING 3,884 195 106 (3,689) 31,069 (126) 18,866 (31,195) RESTRICTED GIFTS (2,399) 2,125 335 4,524 (19,193) 14,369 (7,709) 33,562 TOTAL NON OPERATING 5,759 4,145 2,780 (1,614) 46,117 51,205 44,844 5,088 EXCESS OF REV/EXPS 10,836 9,458 8,014 (1,378) 103,915 115,312 125,187 11,397 Page A.5

Sources of Funds: LEE MEMORIAL HEALTH SYSTEM SOURCES & APPLICATIONS OF FUNDS For the Year-to-Date Period Ending: May 31, 2016 (In thousands) Current Month Year-to-Date Excess Revenue Over Expenses 9,458 115,312 Depreciation/Amortization Expense 7,387 54,663 (Gain)/Loss on Sale of Assets (6) 68 Total Sources 16,839 170,043 Sources/(Uses) of Funds: Dec(Inc) in Accts Receivable 9,728 (35,008) Net borrowings (1,373) (28,720) Dec(Inc) in Other Assets 2,032 (805) Inc(Dec) in Liabilities (5,435) 21,849 Capital Expenditures, net (10,263) (94,230) Total Sources/(Uses) (5,311) (136,914) Net Increase(Decrease) In Funds 11,529 33,129 Cash & Investments at beginning of period 963,373 941,773 Cash & Investments at end of period 974,902 974,902 Total Bonds & Notes Payable-end of period 685,735 Cash to Debt Ratio 142.2% Page A.6

Lee Memorial Health System Consolidated Balance Sheet Fiscal period ending: May 31, 2016 in Thousands (000's) ASSETS: Current Prior Month Prior Year LIABILITIES: Current Prior Month Prior Year Current Assets: Current Liabilities: Cash And Cash Equivalents * 66,798 77,476 57,567 Accounts Payable 36,982 43,425 62,909 Operating Fund Investments * 877,498 855,845 854,561 Wages and Benefits Payable 46,458 43,087 27,590 Accrued Interest Receivable 391 364 453 Notes Payable - Short Term 24,603 25,710 32,777 Accounts Receivable (net) 188,446 195,597 156,985 Current Portion Bonds Payable 0 0 1,100 Accounts Receivable - Phys (Net) 13,673 16,250 10,125 Due to State of Florida 12,217 11,817 17,070 Inventories 30,735 30,785 30,361 Malpractice Liability - Short Term 3,751 3,751 3,751 Limited or Restricted Use Assets 334 333 8,042 Accrued Bond Costs 3,245 1,630 8,815 Other Current Assets 28,521 30,643 31,328 Other Current Liabilities 88,414 94,006 58,677 Total Current Assets: 1,206,396 1,207,293 1,149,423 Total Current Liabilities 215,670 223,425 212,688 Other Assets Other Liabilities and Fund Balance Limited or Restricted Use Assets * 30,606 30,052 29,645 Benefits Payable - Long Term 0 0 0 Bond Issuance Costs 0 0 (0) Notes Payable - Long Term 347,533 347,773 366,767 Trustee Held Funds * 0 0 0 Due to State of Florida - Long Term 13,228 12,181 4,227 Directors/Officers Indemnity Fund * 0 0 0 Malpractice Liability - Long Term 11,402 11,402 11,402 Long Term Operating Fund Investments * 0 0 0 Bonds Payable 313,599 313,625 313,811 Other Assets 121,498 121,385 117,373 Other Long Term Liabilities 75,495 75,101 72,891 UnRestricted Fund Balance 1,113,320 1,105,987 1,012,377 Restricted Fund Balance 92,166 90,041 77,798 Total Other Assets 152,104 151,437 147,018 Total Other Liabilities & Fund Balance 1,966,744 1,956,110 1,859,274 Property and Equipment: Plant In Use 1,529,661 1,521,795 1,522,993 Construction in Process 193,849 191,480 109,411 Accumulated Depreciation (911,354) (904,227) (861,757) Total Property & Equipment (Net) 812,157 809,049 770,646 Restricted Assets 11,757 11,757 4,874 TOTAL ASSETS 2,182,414 2,179,536 2,071,961 TOTAL LIABILITIES AND EQUITY 2,182,414 2,179,536 2,071,961 * Cash and Investments Above Balance Sheet has been adjusted to eliminate intercompany receivables, payables and investments in subsidiaries Page A.7

LEE MEMORIAL HEALTH SYSTEM FINANCIAL RATIOS For the Year-to-Date Period Ending May 31, 2016 2014 2016 Moody's Financial FYE YTD Median Goals 2015 5/31/2016 PROFITABILITY RATIOS: Operating Margin (%) - Total 3.1% 3.5% 6.9% 5.9% + Excess Margin (%) 6.3% 6.7% 7.1% 10.1% + Operating CashFlow Margin (%) 10.4% 10.7% 13.8% 12.2% + LIQUIDITY RATIOS: Days Cash on Hand (net of Callable Debt) 225.2 239.9 261.4 244.3 + Cushion Ratio (x) 19.9 16.7 16.0 16.5 + Cash-to-Debt (%) 155.3% 139.0% 131.8% 142.2% + CAPITALIZATION RATIOS: Debt to Capitalization(%) - (net of Callable Debt) 32.5% 34.2% 41.4% 38.1% (-) Annual Debt Service Coverage (x) 5.4 3.9 5.0 5.4 + Debt to Cashflow (net of Callable Debt) 2.9 3.8 3.2 2.7 (-) NOTE: + = Ratios that should be above the Moody's median (-) = Ratios that should be lower than the Moody's median Page A.8

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED OPERATING RATIOS For the Period Ending: May 31, 2016 (in thousands) Current Month Budget Actual Prior Year Year-to-Date % Variance % Variance Budget Actual Prior Year Act to Bud Act to PY Act to Bud Act to PY AS % NET OPERATING REVENUE Wages and Benefits 55.6% 53.6% 53.8% 3.6% 0.5% 54.7% 53.1% 51.2% 2.9% -3.7% Supplies 18.2% 18.6% 18.9% -2.2% 1.7% 18.6% 19.0% 19.0% -1.9% 0.0% All Other Operating Expenses 15.3% 17.2% 16.3% -12.5% -5.6% 14.7% 15.7% 15.2% -7.0% -3.2% Capital Costs 7.0% 6.8% 7.0% 3.1% 3.3% 6.5% 6.4% 6.6% 2.2% 3.6% EBDITA Margin 11.0% 10.7% 11.3% -2.7% -5.4% 12.0% 12.2% 14.6% 1.8% -16.3% Operating Margin 4.0% 3.9% 4.3% -2.1% -8.9% 5.5% 5.9% 8.0% 6.4% -26.8% Excess Margin 8.1% 6.7% 6.4% -17.1% 5.2% 9.5% 10.1% 12.0% 6.2% -15.7% Per CMI ADJ ADMIT / VISIT Net Operating Revenue 7,438 7,308 7,478-1.7% -2.3% 7,224 7,158 7,248-0.9% -1.2% Total Operating Expenses 6,621 6,527 6,633 1.4% 1.6% 6,355 6,282 6,189 1.2% -1.5% Wages and Benefits 4,135 3,916 4,027 5.3% 2.7% 3,950 3,800 3,710 3.8% -2.4% Supplies 1,351 1,357 1,413-0.5% 4.0% 1,345 1,358 1,376-0.9% 1.3% All Other Operating Expenses 1,135 1,255 1,194-10.5% -5.1% 1,060 1,124 1,103-6.0% -1.9% Capital Costs 521 496 525 4.8% 5.5% 470 456 479 3.1% 4.8% Operating Margin 296 285 320-3.8% -10.9% 398 420 581 5.5% -27.7% Excess Margin 632 507 490-19.7% 3.6% 716 755 905 5.5% -16.5% LABOR Productive FTEs/Adj Daily Admit 25.28 26.73 24.62-5.7% -8.6% 24.17 24.39 22.92-0.9% -6.4% Average Hourly Rate 32.87 32.41 31.75 1.4% -2.1% 32.71 33.01 31.68-0.9% -4.2% OP REV % of Total Revenue 42.7% 46.2% 41.7% 8.0% 10.7% 41.0% 44.5% 40.3% 8.7% 10.6% Page A.9

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED - PAYOR MIX (BASED ON GROSS REVENUE) For the Period Ending May 31, 2016 Current Month Year-to-Date Budget Actual Prior Year Budget Actual Prior Year MEDICARE 35.0% 34.0% 34.3% 35.4% 34.9% 35.7% MEDICARE HMO 13.8% 12.7% 14.3% 13.8% 13.6% 14.1% MEDICAID 4.4% 3.0% 4.4% 4.4% 3.3% 4.5% MEDICAID HMO 9.3% 9.6% 9.7% 9.3% 9.1% 9.4% HMO/PPO 17.0% 18.7% 17.8% 16.9% 17.9% 17.1% COMMERCIAL 3.4% 3.8% 3.5% 3.4% 4.1% 3.4% OTHER 17.1% 18.2% 16.0% 16.8% 17.1% 15.8% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Budget Actual % Variance Budget Actual % Variance MEDICARE CASE MIX INDEX 1.52 1.78 17.1% 1.52 1.67 9.9% SYSTEM CASE MIX INDEX 1.46 1.62 11.0% 1.46 1.55 6.2% 09/30/15 05/31/16 Variance Gross Accounts Receivable 388,105 499,682 111,577 Net Accounts Receivable 167,111 202,119 35,008 Net Days in Accounts Receivable 43.6 44.6 1.0 Page A.10

LEE MEMORIAL HEALTH SYSTEM LEE COUNTY, FLORIDA CONSOLIDATED FINANCIAL STATEMENTS AND STATISTICAL REPORTS JUNE 30, 2016

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED FINANCIAL STATEMENTS & STATISTICAL REPORTS TABLE OF CONTENTS SECTION A PAGE CONSOLIDATED SCHEDULES HIGHLIGHTS A.1 EXECUTIVE SUMMARY A.2 CONSOLIDATED STATISTICAL REPORT A.3 CONSOLIDATED INCOME STATEMENT A.4 SOURCES & APPLICATIONS OF FUNDS A.6 CONSOLIDATED BALANCE SHEET A.7 CONSOLIDATED FINANCIAL RATIOS A.8 CONSOLIDATED PAYOR MIX A.10

Lee Memorial Health System Operating Highlights For the month ended June 30, 2016 Adjusted admits for the month ended June 30, 2016 are 11,339 which is 2.3% above budget. Actual inpatient admits for the month are 6,042 or 4.7% less than budget and actual patient days are 30,823 or 4.7% less than budget which resulted in length of stay of 5.10 days. Outpatient volumes are up significantly as we continue to see significant growth in short stays at 4,513 which are above budget by 91.9% and outpatient surgeries of 2,194 which are above budget by 20.1%. Net patient revenue for June reflects a $15.8 million or 13.5% favorable variance to budget. This favorable variance in net patient revenue is the result of a favorable rate variance of $13.1 million due to increase Case Mix Index to 1.55 vs. budget of 1.46 and better payer mix, coupled with a favorable volume variance of $2.7 million. Net Patient Revenue per CMI adjusted admit for the month ended June 30, 2016 is $7,564 vs. budget of $7,231. Total operating expenses before depreciation and interest expense are 12.7% higher than budget. Salaries & Wages are 4.3% higher than budget, largely due to staff not flexing to the reduced volumes. Salaries, Wages & Benefits as a percent of Net Operating Revenue are 51.3% for June 2016 versus a budget of 55.8%. The actual hourly pay rate is $33.04 which is $0.22 higher than budget. Supply expense came in over budget by 24.5%; on a case mix adjusted admission basis the variance is also unfavorable at $1,564 actual vs. $1,363 budget. The majority of this variance was seen in drug expense which was over budget $2.2 million. Purchased services are over budget by $4.1 million, the majority of which was due to locum tenens being brought in to fill in for the shortage in coverage for our Hospitalist Program. Total operating costs per case mix adjusted admit is greater than budget at $6,924 actual vs. $6,666, a 3.9% unfavorable variance. FTEs/AOB are higher than budget by 1.3% (5.50 actual vs. 5.42 budget) for June 2016. Productive FTE s per adjusted daily admission were 0.8% higher than budget at 25.34 vs. a budget of 25.16, resulting in lower productivity than budgeted. The gain from operations is $6.6 million or 4.8% versus a budgeted gain of $3.8 million or 3.2%. Excess revenue over expenses is a gain of $11.9 million versus a budget of $9.6 million, resulting in $2.3 million positive variance. For the month, Cash & Investments increased by $29.7 million to $1,004.6 million. Cash flow from Operations and working capital increased $19.3 and $10.4 million, respectively. Cash was reduced by $16.3 million for routine equipment replacement and increased by $23.6 million for net borrowings. Days in Accounts Receivable decreased from 44.6 days in May to 43.8 days in June resulting in a source of cash of $10.4 million. Total Notes & Bonds payable on June 30, 2016 is $709.4 million resulting in the Cash to Debt ratio of 141.6%. Page A.1

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED EXECUTIVE SUMMARY Current Month Year-to-Date For the Period Ending June 30, 2016 % Variance % Variance Budget Actual Prior Year Budget Actual Prior Year Act to Bud Act to PY Act to Bud Act to PY Inpatient Volumes: Admits - Adults & Peds 6,337 6,042 6,415-4.7% -5.8% 64,959 60,734 63,868-6.5% -4.9% Patient Days - Adults & Peds 32,344 30,823 32,076-4.7% -3.9% 331,048 308,923 328,974-6.7% -6.1% Length of Stay 5.10 5.10 5.00 0.1% -2.0% 5.10 5.09 5.15 0.2% 1.2% Inpatient Surgeries 1,655 1,726 1,746 4.3% -1.1% 16,114 16,326 16,125 1.3% 1.2% Outpatient Volumes: Emergency Room Visits 16,054 16,442 16,015 2.4% 2.7% 157,461 163,414 157,448 3.8% 3.8% Outpatient Surgeries 1,826 2,194 1,864 20.1% 17.7% 16,570 18,484 16,815 11.6% 9.9% Hospital Based Physician Visits 38,445 31,980 19,440-16.8% 64.5% 340,547 333,440 182,711-2.1% 82.5% Physician Visits 65,397 70,404 59,453 7.7% 18.4% 612,030 630,997 563,587 3.1% 12.0% Home Health Visits 5,723 5,483 5,628-4.2% -2.6% 52,255 51,836 49,908-0.8% 3.9% Adjusted Admits 11,082 11,339 11,164 2.3% 1.6% 110,403 109,956 107,361-0.4% 2.4% (overall in/outpat volume indicator) Total Case Mix Index 1.46 1.55 1.48 6.0% 5.1% 1.46 1.55 1.44 5.9% 7.4% Operating Ratios: Net Revenue/Adj Adm CMI 7,460 7,822 7,421 4.9% 5.4% 7,247 7,225 7,267-0.3% -0.6% Operating Exp/Adj Adm CMI 6,666 6,924 6,327-3.9% -9.4% 6,391 6,347 6,204 0.7% -2.3% Supply Exp/Adj Adm CMI 1,363 1,564 1,378-14.7% -13.6% 1,347 1,379 1,376-2.4% -0.2% Wages/Ben - % of Net Oper Rev 55.8% 51.3% 50.6% 8.0% -1.5% 54.9% 52.9% 51.1% 3.6% -3.5% Supplies as a % of Net Oper Rev 18.3% 20.0% 18.6% -9.4% -7.7% 18.6% 19.1% 18.9% -2.7% -0.8% Charity/Bad Debt - % of Gross Rev 6.5% 6.9% 5.8% -7.2% -19.7% 6.4% 6.4% 6.2% 0.2% -2.8% FTEs/AOB 5.42 5.50 5.35-1.3% -2.7% 5.22 5.29 4.92-1.3% -7.4% Productive Hours/Adjusted Admit 143.7 144.8 139.1-0.8% -4.1% 138.7 139.9 131.8-0.9% -6.1% Average Hourly Rate 32.83 33.04 31.31-0.7% -5.5% 32.77 33.01 31.64-0.7% -4.3% Financial Ratios: Operating Margin (%) 3.2% 4.8% 8.0% 52.5% -39.5% 5.2% 5.8% 8.0% 10.6% -28.2% Excess Margin (%) 7.6% 8.4% 0.2% 10.3% 5285.6% 9.2% 9.9% 10.8% 7.2% -8.5% Liquidity Ratios: Days Cash on Hand (net of VRDB) 243.7 250.9 267.6 Cash to Debt (%) 140.7% 141.6% 143.8% Days in Acct Receivable 44.1 43.8 42.1 Income Statement Summary (in Thousands) Total Net Operating Revenue 120,871 137,492 122,244 13.8% 12.5% 1,169,268 1,230,053 1,124,645 5.2% 9.4% Total Operating Expenses 117,041 130,845 112,475-11.8% -16.3% 1,108,452 1,159,300 1,034,533-4.6% -12.1% Consolidated Gain(Loss) from Oper 3,831 6,646 9,770 73.5% -32.0% 60,815 70,753 90,113 16.3% -21.5% Investment Earnings/Non Op Income 5,761 5,280 (9,595) -8.4% -155.0% 51,879 56,485 35,249 8.9% 60.2% Consolidated Excess Rev over Exp 9,592 11,926 175 24.3% 6725.6% 112,694 127,238 125,362 12.9% 1.5% Balance Sheet Highlights (In Thousands): Cash & Investments 954,570 1,004,627 955,519 Bonds & Notes Payable 678,459 709,381 664,620 VRDB = variable rate demand bonds CMI = Case Mix Index Page A.2

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED STATISTICAL SUMMARY For the Period Ending June 30, 2016 Current Month Year-to-Date Budget Actual Prior Year % Variance % Variance Budget Actual Prior Year Act to Bud Act to PY Act to Bud Act to PY Admissions ADULTS 5,784 5,439 5,797-6.0% -6.2% 59,172 54,820 58,122-7.4% -5.7% PEDIATRICS 299 316 353 5.6% -10.5% 3,408 3,337 3,407-2.1% -2.1% NICU 67 71 78 6.5% -9.0% 597 623 623 4.3% 0.0% POST ACUTE 187 216 187 15.5% 15.5% 1,782 1,954 1,716 9.7% 13.9% Total Adult & Peds 6,337 6,042 6,415-4.7% -5.8% 64,959 60,734 63,868-6.5% -4.9% NEWBORNS 504 472 484-6.4% -2.5% 4,596 4,524 4,604-1.6% -1.7% Total Admissions 6,841 6,514 6,899-4.8% -5.6% 69,555 65,258 68,472-6.2% -4.7% Patient Days ADULTS 25,398 24,254 25,262-4.5% -4.0% 265,354 243,524 264,712-8.2% -8.0% PEDIATRICS 959 904 981-5.8% -7.8% 10,565 10,820 10,526 2.4% 2.8% NICU 1,404 1,194 1,305-15.0% -8.5% 12,368 11,810 12,213-4.5% -3.3% POST ACUTE 4,583 4,471 4,528-2.4% -1.3% 42,761 42,769 41,523 0.0% 3.0% Total Adult & Peds 32,344 30,823 32,076-4.7% -3.9% 331,048 308,923 328,974-6.7% -6.1% NEWBORNS 1,177 1,069 1,040-9.2% 2.8% 10,716 10,360 10,672-3.3% -2.9% Total Patient Days 33,521 31,892 33,116-4.9% -3.7% 341,765 319,283 339,646-6.6% -6.0% Average Length of Stay ADULTS 4.39 4.46 4.36-1.6% -2.3% 4.48 4.44 4.55 0.9% 2.5% PEDIATRICS 3.21 2.86 2.78 10.8% -2.9% 3.10 3.24 3.09-4.6% -4.9% NICU 21.06 16.82 16.73 20.1% -0.5% 20.71 18.96 19.60 8.5% 3.3% POST ACUTE 24.51 20.70 24.21 15.5% 14.5% 24.00 21.89 24.20 8.8% 9.5% Total Adult & Peds 5.10 5.10 5.00 0.1% -2.0% 5.10 5.09 5.15 0.2% 1.2% NEWBORNS 2.33 2.26 2.15 3.0% -5.4% 2.33 2.29 2.32 1.8% 1.2% Total Length of Stay 4.90 4.90 4.80 0.1% -2.0% 4.91 4.89 4.96 0.4% 1.4% OP Registrations EMERGENCY ROOM 16,054 16,442 16,015 2.4% 2.7% 157,461 163,414 157,448 3.8% 3.8% OP SURGERY CASES 1,826 2,194 1,864 20.1% 17.7% 16,570 18,484 16,815 11.6% 9.9% SUBTOTAL 17,881 18,636 17,879 4.2% 4.2% 174,031 181,898 174,263 4.5% 4.4% Visits HOME HEALTH VISITS 5,723 5,483 5,628-4.2% -2.6% 52,255 51,836 49,908-0.8% 3.9% HOSP BASED PHY VISITS 38,445 31,980 19,440-16.8% 64.5% 340,547 333,440 182,711-2.1% 82.5% PHYSICIAN VISITS 65,397 70,404 59,453 7.7% 18.4% 612,030 630,997 563,587 3.1% 12.0% TRAUMA SERVICES DISTRICT 1,003 1,058 923 5.5% 14.6% 9,467 9,878 9,189 4.3% 7.5% SUBTOTAL 110,568 108,925 85,444-1.5% 27.5% 1,014,299 1,026,151 805,395 1.2% 27.4% TOTAL OP 128,449 127,561 103,323-0.7% 23.5% 1,188,329 1,208,049 979,658 1.7% 23.3% Page A.3

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED STATEMENT OF OPERATIONS For the Period Ending June 30, 2016 (in thousands) Current Month Budget Actual Prior Year Year-to-Date % Variance % Variance Budget Actual Prior Year Act to Bud Act to PY Act to Bud Act to PY INPATIENT REVENUE 298,437 301,858 284,880 1.1% 6.0% 2,995,458 2,948,671 2,826,429-1.6% 4.3% OUTPATIENT REVENUE 223,495 264,636 210,882 18.4% 25.5% 2,095,567 2,389,762 1,924,748 14.0% 24.2% TOTAL PATIENT REVENUE 521,932 566,494 495,762 8.5% 14.3% 5,091,025 5,338,433 4,751,176 4.9% 12.4% DED FROM REV-MEDICARE 207,580 212,949 187,052-2.6% -13.8% 2,046,669 2,105,131 1,909,413-2.9% -10.3% DED FROM REV-MEDICAID 58,053 59,225 56,506-2.0% -4.8% 569,295 544,860 540,087 4.3% -0.9% DED FROM REV-CHARITY 17,471 21,831 13,214-25.0% -65.2% 171,432 177,745 148,815-3.7% -19.4% DED FROM REV-HMO/PPO 44,883 62,744 52,336-39.8% -19.9% 437,689 515,216 425,574-17.7% -21.1% DED FROM REV-OTHER 60,511 59,357 56,390 1.9% -5.3% 573,113 631,583 502,368-10.2% -25.7% DED FROM REV-BAD DEBT 16,261 17,428 15,496-7.2% -12.5% 155,391 164,393 147,305-5.8% -11.6% TOTAL DED FROM REV 404,760 433,535 380,994-7.1% -13.8% 3,953,588 4,138,927 3,673,562-4.7% -12.7% NET PATIENT REVENUE 117,173 132,959 114,768 13.5% 15.9% 1,137,437 1,199,506 1,077,614 5.5% 11.3% OTHER OPER REV 3,699 4,532 7,477 22.5% -39.4% 31,831 30,548 47,031-4.0% -35.0% TOTAL OPERATING REV 120,871 137,492 122,244 13.8% 12.5% 1,169,268 1,230,053 1,124,645 5.2% 9.4% OPERATING EXPENSES PROD SALARIES 50,824 51,068 46,364-0.5% -10.1% 481,677 476,850 422,570 1.0% -12.8% PROD OVERTIME 1,337 1,813 1,662-35.5% -9.0% 13,108 18,325 16,574-39.8% -10.6% CONTRACT LABOR 71 160 92-125.1% -75.3% 2,461 2,793 2,077-13.5% -34.5% NON-PROD SALARIES 5,308 6,977 5,328-31.4% -30.9% 52,592 59,987 50,982-14.1% -17.7% TOTAL SALARIES & WAGES 57,541 60,018 53,446-4.3% -12.3% 549,839 557,954 492,203-1.5% -13.4% FRINGE BENEFITS 9,873 10,568 8,375-7.0% -26.2% 91,602 92,727 82,724-1.2% -12.1% HEALTH CARE ACCESS 1,359 1,546 1,447-13.8% -6.8% 13,435 13,395 13,008 0.3% -3.0% SUPPLIES 22,090 27,495 22,692-24.5% -21.2% 217,363 234,781 212,919-8.0% -10.3% OTHER SERVICES 6,144 6,990 6,935-13.8% -0.8% 57,518 63,150 60,191-9.8% -4.9% PURCHASED SERVICES 10,999 15,084 11,333-37.1% -33.1% 101,427 118,585 99,016-16.9% -19.8% TOTAL OPER EXPENSES 108,006 121,700 104,228-12.7% -16.8% 1,031,185 1,080,592 960,060-4.8% -12.6% EBITDA 12,866 15,791 18,016 22.7% -12.3% 138,083 149,461 164,586 8.2% -9.2% DEPRECIATION/AMORT 7,041 7,387 6,579-4.9% -12.3% 59,926 62,050 56,327-3.5% -10.2% INTEREST EXPENSE 1,995 1,757 1,667 11.9% -5.4% 17,341 16,658 18,147 3.9% 8.2% GAIN(LOSS) FROM OPER 3,831 6,646 9,770 73.5% -32.0% 60,815 70,753 90,113 16.3% -21.5% Page A.4

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED INCOME STATEMENT BY ENTITY For the Year-to-Date Period Ending June 30, 2016 (in thousands) Current Month Year-to-Date ENTITY Budget Actual Prior Year Variance Budget Actual Prior Year Variance LEE MEMORIAL HOSPITAL 5,741 7,020 7,239 1,279 60,144 71,764 63,669 11,620 HEALTHPARK MEDICAL CTR 8,284 8,820 9,757 535 91,468 96,515 96,325 5,047 CAPE CORAL HOSPITAL 4,407 6,753 5,468 2,346 45,207 50,677 45,616 5,470 GULF COAST MEDICAL CENTER 5,498 7,499 7,197 2,000 51,847 64,839 56,742 12,992 TRAUMA SERVICES DIST (338) (409) (530) (71) (3,200) (3,369) (3,221) (169) OUTPATIENT CENTERS 2,329 3,516 2,003 1,187 23,294 26,332 19,252 3,038 HEALTHPARK CARE CTR 53 11 73 (42) 601 (118) 430 (719) HOME HEALTH AGENCIES (236) (865) (183) (629) (2,265) (3,753) (1,649) (1,487) FOUNDATION 29 8 8 (21) 122 249 84 127 REHAB HOSPITAL 460 445 465 (15) 4,249 4,477 4,246 228 ALL PHYSICIANS (4,902) (5,840) (5,025) (939) (51,877) (63,649) (42,714) (11,771) CORPORATE SERVICES (17,405) (20,266) (16,666) (2,861) (157,995) (172,567) (148,379) (14,572) ALL OTHERS (91) (46) (36) 45 (779) (644) (287) 135 TOTAL GAIN FROM OPS 3,831 6,646 9,772 2,816 60,815 70,753 90,115 9,938 INT EARN & REALIZED GAIN 1,206 320 227 (886) 10,880 34,914 20,094 24,034 UNREALIZED GAIN (LOSS) 3,071 5,465 (11,226) 2,394 27,639 7,833 2,595 (19,805) UNREALIZED GAIN (LOSS) ON SWAP 0 0 0 0 0 0 0 0 OTHER NON OPERATING 3,884 25,231 457 21,347 34,953 25,105 19,323 (9,848) RESTRICTED GIFTS (2,399) (25,736) 947 (23,337) (21,592) (11,368) (6,762) 10,225 TOTAL NON OPERATING 5,761 5,280 (9,595) (482) 51,879 56,485 35,249 4,606 EXCESS OF REV/EXPS 9,592 11,926 177 2,334 112,694 127,238 125,364 14,544 Page A.5

Sources of Funds: LEE MEMORIAL HEALTH SYSTEM SOURCES & APPLICATIONS OF FUNDS For the Year-to-Date Period Ending: June 30, 2016 (In thousands) Current Month Year-to-Date Excess Revenue Over Expenses 11,926 127,238 Depreciation/Amortization Expense 7,387 62,050 (Gain)/Loss on Sale of Assets 3 98 Total Sources 19,317 189,386 Sources/(Uses) of Funds: Dec(Inc) in Accts Receivable 10,399 (24,609) Net borrowings 23,646 (5,074) Dec(Inc) in Other Assets 4,717 3,912 Inc(Dec) in Liabilities (12,063) 9,796 Capital Expenditures, net (16,291) (110,558) Total Sources/(Uses) 10,408 (126,533) Net Increase(Decrease) In Funds 29,725 62,854 Cash & Investments at beginning of period 974,902 941,773 Cash & Investments at end of period 1,004,627 1,004,627 Total Bonds & Notes Payable-end of period 709,381 Cash to Debt Ratio 141.6% Page A.6

Lee Memorial Health System Consolidated Balance Sheet Fiscal period ending: June 30, 2016 in Thousands (000's) ASSETS: Current Prior Month Prior Year LIABILITIES: Current Prior Month Prior Year Current Assets: Current Liabilities: Cash And Cash Equivalents * 40,461 66,798 57,567 Accounts Payable 39,018 36,982 62,909 Operating Fund Investments * 933,461 877,498 854,561 Wages and Benefits Payable 30,014 46,458 27,590 Accrued Interest Receivable 434 391 453 Notes Payable - Short Term 24,341 24,603 32,777 Accounts Receivable (net) 178,509 188,446 156,985 Current Portion Bonds Payable 0 0 1,100 Accounts Receivable - Phys (Net) 14,038 14,500 10,953 Due to State of Florida 8,457 12,217 17,070 Inventories 30,820 30,735 30,361 Malpractice Liability - Short Term 3,751 3,751 3,751 Limited or Restricted Use Assets 334 334 8,042 Accrued Bond Costs 4,815 3,245 8,815 Other Current Assets 27,952 28,521 31,328 Other Current Liabilities 92,956 88,414 58,677 Total Current Assets: 1,226,008 1,207,224 1,150,251 Total Current Liabilities 203,353 215,670 212,688 Other Assets Other Liabilities and Fund Balance Limited or Restricted Use Assets * 30,706 30,606 29,645 Benefits Payable - Long Term 0 0 0 Bond Issuance Costs 0 0 (0) Notes Payable - Long Term 371,467 347,533 366,767 Trustee Held Funds * 0 0 0 Due to State of Florida - Long Term 14,332 13,228 4,227 Directors/Officers Indemnity Fund * 0 0 0 Malpractice Liability - Long Term 11,402 11,402 11,402 Long Term Operating Fund Investments * 0 0 0 Bonds Payable 313,572 313,599 313,811 Other Assets 120,580 120,670 116,545 Other Long Term Liabilities 74,653 75,495 72,891 UnRestricted Fund Balance 1,150,983 1,113,320 1,012,377 Restricted Fund Balance 66,429 92,166 77,798 Total Other Assets 151,286 151,276 146,190 Total Other Liabilities & Fund Balance 2,002,839 1,966,744 1,859,274 Property and Equipment: Plant In Use 1,536,557 1,529,661 1,522,993 Construction in Process 203,241 193,849 109,411 Accumulated Depreciation (918,470) (911,354) (861,757) Total Property & Equipment (Net) 821,328 812,157 770,646 Restricted Assets 7,571 11,757 4,874 TOTAL ASSETS 2,206,192 2,182,414 2,071,961 TOTAL LIABILITIES AND EQUITY 2,206,192 2,182,414 2,071,961 Page A.7

LEE MEMORIAL HEALTH SYSTEM FINANCIAL RATIOS For the Year-to-Date Period Ending June 30, 2016 2014 2016 Moody's Financial FYE YTD Median Goals 2015 6/30/2016 PROFITABILITY RATIOS: Operating Margin (%) - Total 3.1% 3.5% 6.9% 5.8% + Excess Margin (%) 6.3% 6.7% 7.1% 9.9% + Operating CashFlow Margin (%) 10.4% 10.7% 13.8% 12.2% + LIQUIDITY RATIOS: Days Cash on Hand (net of Callable Debt) 225.2 239.9 261.4 250.9 + Cushion Ratio (x) 19.9 16.7 16.0 16.4 + Cash-to-Debt (%) 155.3% 139.0% 131.8% 141.6% + CAPITALIZATION RATIOS: Debt to Capitalization(%) - (net of Callable Debt) 32.5% 34.2% 41.4% 38.1% (-) Annual Debt Service Coverage (x) 5.4 3.9 5.0 5.0 + Debt to Cashflow (net of Callable Debt) 2.9 3.8 3.2 2.9 (-) NOTE: + = Ratios that should be above the Moody's median (-) = Ratios that should be lower than the Moody's median Page A.8

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED OPERATING RATIOS For the Period Ending: June 30, 2016 (in thousands) Current Month Budget Actual Prior Year Year-to-Date % Variance % Variance Budget Actual Prior Year Act to Bud Act to PY Act to Bud Act to PY AS % NET OPERATING REVENUE Wages and Benefits 55.8% 51.3% 50.6% 8.0% -1.5% 54.9% 52.9% 51.1% 3.6% -3.5% Supplies 18.3% 20.0% 18.6% -9.4% -7.7% 18.6% 19.1% 18.9% -2.7% -0.8% All Other Operating Expenses 15.3% 17.2% 16.2% -12.2% -6.3% 14.7% 15.9% 15.3% -7.6% -3.6% Capital Costs 7.5% 6.7% 6.7% 11.0% 1.4% 6.6% 6.4% 6.6% 3.2% 3.4% EBDITA Margin 10.6% 11.5% 14.7% 7.9% -22.1% 11.8% 12.2% 14.6% 2.9% -17.0% Operating Margin 3.2% 4.8% 8.0% 52.5% -39.5% 5.2% 5.8% 8.0% 10.6% -28.2% Excess Margin 7.6% 8.4% 0.2% 10.3% 5218.4% 9.2% 9.9% 10.8% 7.2% -8.5% Per CMI ADJ ADMIT / VISIT Net Operating Revenue 7,460 7,822 7,421 4.9% 5.4% 7,247 7,226 7,267-0.3% -0.6% Total Operating Expenses 6,666 6,924 6,327-3.9% -9.4% 6,391 6,348 6,204 0.7% -2.3% Wages and Benefits 4,161 4,016 3,753 3.5% -7.0% 3,976 3,822 3,715 3.9% -2.9% Supplies 1,363 1,564 1,377-14.7% -13.6% 1,347 1,379 1,376-2.4% -0.2% All Other Operating Expenses 1,142 1,344 1,197-17.7% -12.3% 1,068 1,146 1,113-7.3% -3.0% Capital Costs 558 520 501 6.7% -3.9% 479 462 481 3.5% 3.9% Operating Margin 236 378 593 59.9% -36.3% 377 416 582 10.3% -28.6% Excess Margin 592 678 11 14.6% 6217.1% 698 747 810 7.0% -7.7% LABOR Productive FTEs/Adj Daily Admit 25.16 25.34 24.34-0.8% -4.1% 24.27 24.49 23.07-0.9% -6.1% Average Hourly Rate 32.83 33.04 31.31-0.7% -5.5% 32.77 33.01 31.64-0.7% -4.3% OP REV % of Total Revenue 42.8% 46.7% 42.5% 9.1% 9.8% 41.2% 44.8% 40.5% 8.8% 10.5% Page A.9

LEE MEMORIAL HEALTH SYSTEM CONSOLIDATED - PAYOR MIX (BASED ON GROSS REVENUE) For the Period Ending June 30, 2016 Current Month Year-to-Date Budget Actual Prior Year Budget Actual Prior Year MEDICARE 34.7% 32.3% 32.0% 35.3% 34.6% 35.3% MEDICARE HMO 13.6% 13.5% 13.9% 13.8% 13.6% 14.1% MEDICAID 4.3% 3.0% 4.9% 4.4% 3.2% 4.6% MEDICAID HMO 9.3% 9.6% 9.6% 9.3% 9.2% 9.5% HMO/PPO 17.0% 20.5% 20.5% 16.9% 18.2% 17.5% COMMERCIAL 3.3% 3.0% 3.1% 3.4% 4.0% 3.4% OTHER 17.9% 18.1% 16.1% 16.9% 17.2% 15.6% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Budget Actual % Variance Budget Actual % Variance MEDICARE CASE MIX INDEX 1.53 1.70 11.4% 1.52 1.67 9.8% SYSTEM CASE MIX INDEX 1.46 1.55 6.0% 1.46 1.55 5.9% 09/30/15 06/30/16 Variance Gross Accounts Receivable 388,105 442,230 54,125 Net Accounts Receivable 167,111 182,612 15,501 Net Days in Accounts Receivable 43.6 43.8 - Page A.10

LMHS Supply Cost per Case Mix Adjusted Admit For the 9 months ending June 30, 2016 1,600 1,400 1,336 1,299 1,294 1,382 1,347 1,379 1,200 1,000 Amount 800 600 400 426 416 401 395 379 382 200 0 2012 Act 2013 Act 2014 Act 2015 Act YTD 2016 Bud YTD 2016 Act Period Total Supplies/Adjusted Admit CMI Implant Costs/Adjusted Admit CMI

LEE MEMORIAL HEALTH SYSTEM CASHFLOW AVAILABLE FOR CAPITAL FOR THE NINE MONTHS ENDING JUNE 30, 2016 In 000's YTD Excess Revenue over Expenses 127,238 Add/(Subtract): Depreciation & Amortization 62,050 Net Dec/(Inc) in Accounts Receivable (24,609) Net Inc/(Dec) in Assets & Liabilities 13,708 Principal Payments (5,074) (Gain)/Loss on Sale of Assets 98 Total Cashflow 173,411 Total Actual Cashflow available for Capital @ 80.0% 138,729 YTD Capital Dollars Approved 103,627 YTD Capital $'s Spent 110,558

Once this policy is printed, it is not considered a controlled document. Please review electronic version of this policy for the most current document. LEE MEMORIAL HEALTH SYSTEM BOARD OF DIRECTORS POLICY MANUAL no. 20.02C supersedes no.20.02b --------------------------------------------------------------------------------------------------------------------------------------- category: General Operations title: Conflict of Interest --------------------------------------------------------------------------------------------------------------------------------------- Date Originated: 1/8/91 Reviewed/No Revision: 10/10/13, 8/25/16 Dates Revised: 10/23/92, 7/31/98, 7/26/02 Next Review Date: 8/25/19 --------------------------------------------------------------------------------------------------------------------------------------- PURPOSE: To affirm that Directors of Lee Memorial Health System, its officers, administrative staff, medical staff with administrative responsibility and employees are subject to the Florida Code of Ethics for public officers and employees, and other laws prohibiting financial conflicts of interest and to provide for a resolution of a conflict of interest. --------------------------------------------------------------------------------------------------------------------------------------- POLICY: The laws prohibiting financial conflicts of interest shall be strictly enforced. Directors, officers, administrative staff, medical staff with administrative responsibility and employees shall be periodically informed of this policy. The Board Attorney shall be responsible for advising Directors. The Hospital s Legal Services Department shall be responsible for disseminating general information, and for advising employees and the others listed regarding specific issues. Florida law prohibiting conflicts of interest generally provides: 1. No officer or employee of a hospital, nor any other person, may pay or receive anything of value for referral of a patient to a hospital or for medical services. 2. No public officer or employee shall accept anything of value which might influence him or her in the performance of official duties. 3. No public officer or employee shall derive a financial benefit from any transaction between any third party and the public agency for which the officer or employee works. 4. No public officer or employee shall enter into a financial arrangement ( do business ) with the public agency for which the officer or employee works. This includes the public officer or employee as owner or major shareholder of a firm or company which does business with the public agency. Exceptions exist for competitive bidding and sole supplier situations, if full disclosure is made. 5. Designated public officers and employees must file annual Financial Disclosure forms with the Supervisor of Elections. The law of Public Agency and Hospital Conflicts of Interest is complex, and specific situations which are not clear infractions shall review with legal counsel. In uncertain cases, an opinion of the Florida Commission on Ethics can be obtained to provide direction. 20.02C Conflict of Interest Page 1 of 2

Once this policy is printed, it is not considered a controlled document. Please review electronic version of this policy for the most current document. So that the Board of Directors may address any possible conflict of interest, the following procedure will be followed: 1. If a conflict is known by a Director, the Director shall outline his or her conflict on the issue in a meeting of the Board and will abstain from voting on that issue. The form (CE Form 8B Memorandum of Voting Conflict for County, Municipal, and Other Local Public Officers) required by law shall be filled out, signed and filed with corresponding minutes. 2. If a perceived conflict is brought to light and not disclosed in a meeting of the Board, any Director may request an opinion of legal counsel. An Ethics Commission opinion may be sought by any Director. 20.02C Conflict of Interest Page 2 of 2

LEE MEMORIAL HEALTH SYSTEM BOARD OF DIRECTORS OBSERVATION VS INPATIENT Jon Hart, MD, Lead Physician Advisor Shelley Koltnow, Interim Chief Compliance Officer Anne Rose, Vice President, Revenue Cycle

Determining Disposition Status Placement Jon Hart, MD, MBA Physician Advocate/Advisor Lead Physician Advisor Lee Memorial Health System

CMS Manual System, Pub. 100-02 Medicare Benefit Policy says Observation care is a well-defined set of specific, clinically appropriate services, which include ongoing short-term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. (up to 48 hours for Medicare FFS beneficiaries) ***Note that managed Medicare and private insurance companies admission status rules may vary from those of FFS Medicare (often 23 hours or 24 hours).

Evaluate a patient s condition in order to determine the need for acute inpatient placement.

Observe the patient when unsure of diagnosis or trajectory of current symptoms Avoid potentially unnecessary acute care placement and costs Decreases burden on ED Does not preclude an eventual inpt status

Any time spent in Observation does not count toward the 3 Day qualifying stay needed for Skilled Nursing placement after the hospital stay. The clock on those three days does not start until an inpatient order is written Thus, the importance of correct placement from the start

In what condition will the patient most likely be tomorrow? Better = Observation Is it risky to send the patient home today? Yes = Observation Is it likely I will know whether to make inpt or send the patient home by tomorrow? Yes = Observation

Are vital signs stable? Yes = Observation If undiagnosed, will a diagnosis likely be made in 24 hours? Yes = Observation Will treatment, such as IV fluids, require standard monitoring and be complete within 24 hours? Yes = Observation

Is the final Diagnosis actually an undiagnosed symptom(s) (e.g., chest pain, abdominal pain, dizzy) Yes = Observation

Social reasons Physician or patient convenience Routine prep for diagnostic testing Routine recovery from outpatient procedures Procedures designated as inpatient only

YES! OBS-to-Inpt: An outpatient observation patient may be progressed to inpatient status when it is determined the patient s condition requires an inpatient level of care.

YES Inpt-to-OBS (CODE 44): Hospital utilization review committee, with concurrence from patient s provider, can change the status if done before the patient is discharged and prior to submitting a bill/claim. NOTE: This is an acknowledgement of an inappropriate initial placement

Observation status MUST be specifically stated in the order An order simply documented as admit will be treated as an inpatient placement. A clearly-worded order will ensure appropriate patient care and prevent hospital billing errors. Avoid the phrase, admit to observation Substitute PLACEMENT for Admission

Medicare Observation or Inpatient? Placement Decision Test Yes Observation is appropriate. Yes Can condition be evaluated / treated / improved within 48 hours? No Inpatient placement is appropriate. Does condition require hospital Treatment?* No Unsure Alternate level of care is appropriate Additional time is needed to determine if inpatient placement is medically necessary. Observation is appropriate. * The decision to admit a patient as an inpatient requires complex medical judgment, including consideration of the patient s medical history and current medical needs, the medical predictability of something adverse happening to the patient, and the availability of diagnostic services/procedures when and where the patient presents.

Observation services can be provided anywhere in the hospital Example: Continuous monitoring (such as oximetry or telemetry) can be provided in observation or inpatient status; consider overall severity of illness and intensity of services in determining admission status rather than any single or specific intervention. Level of care based on severity of condition, foreseeable risks and intensity of services provided, not based on physical location of the bed, dictates placement status.

2 Midnight Benchmark As initially devised by CMS, the 2 Midnight Benchmark is a prospective tool for physicians to use when determining the status in which to place a patient. It has come to mean some other things, as well

2 MN Benchmark Per CMS: For purposes of meeting the 2-midnight benchmark, in deciding whether an inpatient admission is warranted, the physician must assess whether the beneficiary requires hospital services and whether it is expected that such services will be required for 2 or more midnights. The decision to admit the beneficiary as an inpatient is a complex medical decision made by the physician in consideration of various factors, including the beneficiary s age, disease processes, comorbidities, and the potential impact of sending the beneficiary home.

Further, If the beneficiary is expected to require medically necessary hospital services for 2 or more midnights, then the physician should order inpatient admission and Part A payment is generally appropriate per the 2-midnight benchmark. Except in cases involving services identified by CMS as inpatient-only, if the beneficiary is expected to require medically necessary hospital services for less than 2 midnights, then the beneficiary generally should remain an outpatient and Part A payment is generally inappropriate. Note: The Two-Midnight rule does not prevent the physician from providing any service at any hospital, regardless of the expected duration of the service.

Caveat: CMS and its contractors retain the option to review all cases and conclude whether the documentation is sufficient or not to support the medical necessity of an inpatient admission. For this reason, we review cases for: severity of condition foreseeable risks intensity of services provided clinical information available to the attending physician at the time the decision to place was actually made.

Abdominal Pain non-specific Chest Pain / Acute Coronary Syndrome / Unstable Angina Back Pain Gastrointestinal Bleeding with stable Vital Signs and Hemoglobin >8.5 & Platelets >60K Gastroenteritis / Nausea / Vomiting Dehydration (uncomplicated) Deep Vein Thrombosis uncomplicated Syncope unexplained, orthostatic, uncomplicated

Inpatient if documented as likely / suspected as due to: Known active cardiac disease (Congestive Heart Failure, Ischemic, Valvular) Cardiovascular drug-induced Systolic Blood Pressure < 90 Pulse < 60, or High-degree AtrioVentricular-block Observation if either: Unexplained and none of the above, or Simple vaso-vagal or orthostatic

Inpatient placement: consider when a patient has: Elevated Troponin ST elevation on EKG Myocardial Infarction or dynamic ST-T wave changes on the EKG Hemodynamic instability Chest pain not responding to Nitroglycerin Observation: consider when the patient has no EKG or enzyme changes, but the patient s story suggests the possibility of acute cardiac ischemia (what s your gut say?)

Complex Example: Pt presents with chest pain while walking, and pain resolves in ER. Enzymes and EKG are normal and pain doesn t recur. Stress Test is abnormal, but patient remains painfree Taken for Cardiac Cath and stent placed Obs or Inpt?

Observation or Inpatient? Part 2: Compliant Care for Bedded Hospital Patients Lee Memorial Health System Board of Directors Meeting August 25, 2016 Shelley C. Koltnow, Interim Chief Compliance Officer

Medicare s Foundation Philosophy Social Security Act enacted in August 1935 during Franklin D. Roosevelt s administration to create a system of transfer payments in which younger working people support older, retired people (FDR). Paid by income tax Entitlement began at age 65 In 1935, average life expectancy was 59.9 for males, 63.9 for females Big Gap in Social Security no reliable or consistent health insurance coverage for aged Americans. Cost of healthcare highest when in older years Health of aged population generally poor

Medicare s Foundation Philosophy Medicare Program in an amendment to the Social Security Act in July 1965 during the administration of Lyndon B. Johnson (LBJ). Purpose: To provide health insurance for those age 65 or older, those younger than age 65 who have received social security disability benefits for more than 24 months, and those with End Stage Renal Disease (ESRD) and Amyotrophic Lateral Sclerosis (ALS - or Lou Gehrig s Disease). According to President Johnson, Medicare incorporates the best concepts of health economics, health insurance and health care. These are: Financing the health benefit for beneficiaries Utilizing controls to assure no fraud, abuse or waste is paid for by the benefit Quality of care Methods for administration of payment to be fair and driven by best practices Qualifications and licensure of providers and suppliers Patient satisfaction / patient experience Medicare, like Social Security, is funded through income tax on working people which paid for those receiving Medicare (regressive tax)

How is Medicare Program Structured? Modeled upon Social Security and the health insurance plans of the day, Medicare was structured with two parts: Part A [Entitlement portion] Insurance to cover inpatient hospital services (short and long term acute hospitals, skilled nursing facilities, inpatient rehabilitation hospital, some home health, and hospice benefits) Part B [Voluntary portion] covers physician services, outpatient hospital (including observation services) some additional home health, laboratory, and other services not covered by Part A. Later, Medicare added two more voluntary parts: Part C (Medicare Advantage managed care plans) Part D (Medicare prescription drug coverage) Beneficiaries enroll in Part A around their 65 th birthday and most pay no premium for their Part A coverage. They also can elect coverage and pay premiums for voluntary coverage under Parts B, C and D.

Enduring Principles of Medicare LBJ also wanted to assure that Medicare would: Remain non-directive about health care while assuring such care would be of sufficient quality and appropriateness for each beneficiary Be medical and not custodial Would safeguard each individual beneficiary s cost-sharing through deductibles and co-payments designed not to burden the beneficiary Not create any incentives to providers and suppliers to overuse a particular service or benefit to gain profits Protect the funds that taxpayers paid for this benefit Solve the growing problem of caring for the health of aged Americans Average life expectancy in 1965 Men: 66.8 and Women 73.1. Medicare helped increase life expectancy for men by 12 years and women by 15 years. Medicare s basic philosophy has endured through the 51 years of its existence.

Medical Necessity Lynchpin for Coverage Medicare coverage depends on whether the care is medically necessary for the beneficiary and for the population for whom it is covered. Not all hospital care is appropriate for Part A (inpatient) payment. When a Medicare beneficiary arrives at a hospital in need of medical or surgical care, physicians or other qualified providers must decide if it is appropriate to admit the beneficiary as an inpatient or treat them as an outpatient. This Inpatient/Outpatient decision has significance for utilization of hospital resources, reimbursement, quality of care, beneficiary satisfaction and cost sharing (copay/deductible) and as such, is an element of compliance. Medical Necessity Accepted healthcare services and supplies provided to beneficiaries appropriate to the evaluation and treatment of a disease, condition, illness or injury, and consistent with the applicable standard of care as applied to each individual beneficiary. Medical care decisions must not consider monetary benefit to the provider or supplier of care. (implications under the Anti-kickback statute, Stark, and False Claims Act and conflicts of interest). As such, this is an element of compliance.

Payment Differs Under Parts A and B Medicare pays differently for inpatient (Part A) and outpatient observation (Part B) hospital stays. Part A pays for care prospectively based upon the individual s diagnosis, procedures and severity of illness. Part B pays in a hybrid of prospective care (grouping into a primary service) and fee for service for a particular item, service or procedure. Inpatient or outpatient status directly impacts the patient s copay, deductible, cost of drugs (Part B does not cover self-administered drugs) and eligibility for Skilled Nursing care. As such this is an element of compliance. Continued struggle to properly classify bedded patients as inpatients or observation patients - myriads of rules, criteria, guidance and other information. Although there are no statutory time requirements for observation services, Medicare guidance and recent rules signal Medicare s philosophy that observation should result in an admission to inpatient or discharge from the hospital in a relatively short time (24 36 hours, 48 hours at the outside).

Evolving Compliance Oversight Health Insurance Portability and Accountability Act (HIPAA) of 1996 set forth standards for submission of claims and privacy/security of electronic claims, as well as standard data sets. Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA) caused Medicare to reorganize its claim adjudication, replacing Fiscal Intermediaries (Part A claims) and Carriers (Part B claims) with a new system administered by regional Medicare A/B Administrative Contractors (A/B MACs). Data mining was initiated by MACs to catch and eliminate Fraud, Waste and Abuse [along with starting intensified recoupment and correlating payment of related Part A and Part B claims]. After a demonstration project, Recovery Audit Contractors (RACs) were widely introduced in 2007 to identify errors in paid claims. From outset, RACs focused on medical necessity of short inpatient hospital stays. Paid on % of errors identified.

Compliance Programs Expectations that providers participating in Medicare and other government programs will: Comply with applicable laws, regulations, guidance and sub-regulatory information to administer care to beneficiaries and enrollees in government health insurance programs. Monitor their operations to assure that they have identified, corrected, and prevented (where possible) errors, misconduct, and violations. Report any overpayments or other misconduct and engage in immediate corrective action to prevent further misconduct. Assure that employees, agents, volunteers, physicians, and contractors do not have past or present evidence of misconduct Integrate an effective and evidence-based compliance program into their culture to assure that there is an ethical and patient-centered focus for the organization

Conditions of Participation for Hospitals Regulatory provisions applicable to all hospitals participating in Medicare include: A qualified and credentialed medical staff 42 C.F.R 482.12 Patients are admitted to the hospital only on recommendation of a licensed physician or practitioner who is permitted by the State (and the hospital Medical Staff) to admit patients to the hospital. Utilization Review hospitals paid under the prospective payment system must conduct utilization reviews during hospital stays, particularly the medical necessity of the stay. 42 C.F.R. 482.20 Review of services furnished by the hospital and by members of the medical staff to individuals entitled to benefits under the Medicare and Medicaid Programs. Utilization Review Committee must have two physicians w/o a conflict of interest related to utilization. Review appropriateness and duration of hospital stay, including admission (reviews can be before, during and after the stay). Intended to coordinate use of hospital resources with the attending physician's medical judgment and medical decision making, as Dr. Hart explained in his presentation.

Avoiding Fraud, Waste, Abuse Founding principles of Medicare still in place today: No monetary inducements or benefit to provider beyond payment for appropriate care. Medically necessary care. Quality care. Best interest of the beneficiary (patient experience/satisfaction). Appropriate cost sharing for beneficiaries. Fraud, Waste and Abuse and the False Claims Act Workhorse statute to combat False Claims Act (FCA) ( Lincoln s Law ). Whistleblower provisions of FCA. Implicated by decisions about Inpatient or Observation status in a hospital bed. Misconduct and self-interest can undermine the principles above.

Health Management Associates Case Study

History and Allegations HMA operated 71 hospitals in 15 states and was based in Naples, FL In 2012, 8 whistleblower suits under the False Claims Act were filed alleging: HMA billed federal health care programs for medically unnecessary inpatient admissions from the emergency departments at HMA hospitals Former CEO directed HMA s corporate practice of pressuring emergency department physicians and hospital administrators to raise inpatient admission rates regardless of medical necessity HMA corporate officers at the CEO s direction, exerted significant pressure on doctors in the emergency departments to admit patients who could have been placed in observation, treated as outpatients, or discharged, and that this resulted in submission of inflated or false claims to the federal health care programs.

History and Allegations HMA rewarded physicians for these admissions with bonuses and other incentives, paying kickbacks for referrals in violation of the Anti-Kickback statute (which prohibits exchange of benefits for referrals) and the Stark law (which prohibits physician self-referrals with an entity that compensates them or in which they hold ownership interest). Specifically involved HMA hospitals in Georgia, Pennsylvania, North Carolina, Illinois, Florida, South Carolina. HMA hospital in Laredo, TX deliberately admitted beneficiaries as inpatients for outpatient procedures and surgeries in violation of the FCA, AKS and Stark laws. HMA CEO was alleged to have promoted this misconduct and the complaints included counts against him personally Other executives were alleged to have obstructed justice during the investigation of the allegations by the whistleblowers.

Settlement HMA was acquired by Community Health Systems, out of Frankfort, KY. In 2015, the Department of Justice and CMS settled the whistleblower suits by Settled the False Claims Suits of HMA regarding improper inpatient admissions for $98.15 million Entered into a 5-year Corporate Integrity Agreement in exchange for not being excluded from Medicare Independent Review Organization (IRO) required not allowed cost for cost report Cost of CIA varies but meeting its requirements could exceed 10 million per year for such a large organization.

Conclusion Compliance with requirements for Inpatient and Outpatient status for bedded hospital patients involves: Complex medical judgment and medical decision making by qualified physicians and providers who are authorized to admit patients to the hospital; Support of the mandatory utilization review function of the hospital; Support from the revenue cycle team and compliance department; Education and training as well as continuing communication with patients and their families; Continued focus on processes and documentation of the elements (per Dr. Hart s presentation) Billing correctly.

Document what you do Code what you document Bill what you code Collect what you bill

Inpatient or Observation Part III: Financial Implications August 25, 2016 Lee Memorial Health System Board of Directors Meeting Anne Rose VP Revenue Cycle

By the Numbers Date range of data = February 2016 through April 2016 Includes both Observation Discharges and Inpatient Discharges with 762 Revenue Code Excludes accounts without a payment

By the Numbers Total Discharges (762 Revenue Code) Total Discharged as Inpatient Total Discharged as Observation Medicare 3,515 1,418 2,097 Medicare Advantage 1,418 471 947 Commercial Insurance 1,652 325 1,327

Financial Obligations Medicare Observation Patients $166.00 Annual Deductible + 20% of Medicare Allowed Amount + Non-Covered Charges* Allowed Amount = Sum of Ambulatory Payment Classifications (APCs)** Amounts owed by patients are generally covered by Medigap policies, except for Non- Covered charges *Cannot collect Non-Covered Charges without issuing prior notice to patient **20% of each APC is capped at $1,288.00

Financial Obligations Medicare Observation Patients Average Amount owed by Patient/Medigap Policy: $428 Percentage of Patients with Medigap Policy: 93% Amounts owed by Patient/Medigap Policy range from $140 to $948

Financial Obligations Medicare Inpatients $1,288.00 Deductible per Benefit Period + Non- Covered Charges* Amounts owed by patients are generally covered by Medigap policies, except for Noncovered charges *Cannot collect Non-Covered Charges without issuing prior notice to patient

Financial Obligations Medicare Inpatients Average Amount owed by Patient/Medigap Policy: $860 Percentage of Patients with Medigap Policy: 93% Amounts owed by Patient/Medigap Policy range from $0 to $1,288

Financial Obligations Medicare Advantage Observation Patients Varies by payer and by product Average amount owed by patient: $101 Amounts owed range from $50 to $2,872 Medicare Advantage Inpatients Varies by payer and by product Average amount owed by patient: $627 Amounts owed range from $100 to $1,925

Financial Obligations Commercial Observation Patients Varies by payer and by product Average amount owed by patient: $1,033 Amounts owed range from $25 to $7,900 Commercial Inpatients Varies by payer and by product Average amount owed by patient: $1,810 Amounts owed range from $100 to $7,500

Financial Obligations Post Discharge Medicare Skilled Nursing Facility (SNF) coverage requires a 3 day hospital inpatient stay AND must meet skilled nursing criteria Post Discharge Medicare Advantage and Commercial No required hospital stay for coverage

Financial Obligations Medicare Discharge to SNF Number of Medicare Discharges: 3,515 Number of Discharges to SNF: 306 Number of Discharges that did not qualify for SNF benefits:0

Patient Communication Medicare Inpatients Must be given Important Message from Medicare (IMM) IMM given twice during stay once within 2 calendar days of admission and then within 2 calendar days of discharge Outlines discharge appeal rights Medicare Advantage and Commercial Inpatients Communication varies by plan

Patient Communication Medicare Patients 4 Page Communication given upon observation/admission order in the E.D. s 4 Page Communication given upon registration to all scheduled surgery patients Trifold brochure given by Care Management Team on floors Medicare Advantage /Commercial Observation Patients Communication varies by plan

Patient Communication Medicare Observation Patients Beginning in October, there will be an additional notice required to be given to Medicare and Medicare Advantage patients (MOON notice) MOON notice requires explanation of observation status and financial implications Requires signature acknowledging receipt by patient or family member

Summary Inpatient or Observation status decisions are based on clinical guidelines There are financial implications based on insurance benefits that are different for inpatient versus observation Most Medicare patients have secondary coverage that protects them from personal liability On average, observation status carries less financial liability for patients

E AMPLE S PLE SAMPLE SAMPLE SAMPLE AMPLE SAMPLE SAMPLE Patient Name: Patient ID Number: Physician: Department of Health & Human Services Centers for Medicare & Medicaid Services An Important Message From Medicare About Your Rights OMB Approval No. 0938-0692 As A Hospital Inpatient, You Have The Right To: Receive Medicare covered services. This includes medically necessary hospital services and services you may need after you are discharged, if ordered by your doctor. You have a right to know about these services, who will pay for them, and where you can get them. Be involved in any decisions about your hospital stay, and know who will pay for it. SAMPLE SAMPLE SAMPLE Report any concerns you have about the quality of care you receive to the Quality Improvement Organization (QIO) listed here: Name of QIO KEPRO, 5201 W. Kennedy Boulevard, Suite 900, Tampa, FL 33609 Telephone Number of QIO 1 (844) 455-8708 TTY/TDD# 1 (855) 843-4776 SAMPLE SAMPLE SAMPLE Your Medicare Discharge Rights Planning For Your Discharge: During your hospital stay, the hospital staff will be working with you to prepare for your safe discharge and arrange for services you may need after you leave the hospital. When you no longer need inpatient hospital care, your doctor or the hospital staff will inform you of your planned discharge date. If you think you are being discharged too soon: You can talk to the hospital staff, your doctor and your managed care plan (if you belong to one) about your concerns. LE SAMPLE SAMPLE SAMPL SAMPLE SAMPLE SAMPLE You also have the right to an appeal, that is, a review of your case by a Quality Improvement Organization (QIO). The QIO is an outside reviewer hired by Medicare to look at your case to decide whether you are ready to leave the hospital. PLE SAMPLE SAMPLE SAMP If you want to appeal, you must contact the QIO no later than your planned discharge date and before you leave the hospital. If you do this, you will not have to pay for the services you receive during the appeal (except for charges like copays and deductibles). LE SAMPLE SAMPLE SAMPLE If you do not appeal, but decide to stay in the hospital past your planned discharge date, you may have to pay for any services you receive after that date. AMPLE SAMPLE SAMPLE SA Step by step instructions for calling the QIO and filing an appeal are on page 2. To speak with someone at the hospital about this notice, call. (239) 424-2329 Please sign and date here to show you received this notice and understand your rights. PLE SAMPLE SAMPLE SAMP Signature of Patient or Representative Form CMS-R-193 (approved 07/10) Date/Time SAMPLE SAMPLE SAMPLE S LEE MEMORIAL HEALTH SYSTEM Lee County, Florida IMPORTANT MESSAGE FROM MEDICARE AMPLE SAMPLE SAMPLE SA FM# 120134480-1379RS Rev. 07/16 Page 1 of 2 SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE S SAMPLE SAMPL SAMPLE SAM UCO TAB MISCELLANEOUS

E AMPLE S PLE SAMPLE SAMPLE SAMPLE AMPLE SAMPLE SAMPLE Steps To Appeal Your Discharge Step 1: You must contact the QIO no later than your planned discharge date and before you leave the hospital. If you do this, you will not have to pay for the services you receive during the appeal (except for charges like copays and deductibles). Here is the contact information for the QIO: Name of QIO (in bold) KEPRO Telephone Number of QIO 1 (844) 455-8708 TTY/TDD# 1 (855) 843-4776 You can file a request for an appeal any day of the week. Once you speak to someone or leave a message, your appeal has begun. Ask the hospital if you need help contacting the QIO. The name of this hospital is : Cape Coral Hospital 100244 Gulf Coast Medical Center 100220 Lee Memorial Hospital/HealthPark Medical Center 100012 Lee Memorial Rehabilitation Hospital 10T012 SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE Step 2: You will receive a detailed notice from the hospital or your Medicare Advantage or other Medicare managed care plan (if you belong to one) that explains the reasons they think you are ready to be discharged. Step 3: The QIO will ask for your opinion. You or your representative need to be available to speak with the QIO, if requested. You or your representative may give the QIO a written statement, but you are not required to do so. LE SAMPLE SAMPLE SAMPL Step 4: The QIO will review your medical records and other important information about your case. SAMPLE SAMPLE SAMPLE Step 5: The QIO will notify you of its decision within 1 day after it receives all necessary information. If the QIO finds that you are not ready to be discharged, Medicare will continue to cover your hospital services. If the QIO finds you are ready to be discharged, Medicare will continue to cover your services until noon of the day after the QIO notifies you of its decision. PLE SAMPLE SAMPLE SAMP If You Miss The Deadline To Appeal, You Have Other Appeal Rights: You can still ask the QIO or your plan (if you belong to one) for a review of your case: If you have Original Medicare: Call the QIO listed above. LE SAMPLE SAMPLE SAMPLE If you belong to a Medicare Advantage Plan or other Medicare managed care plan: Call your plan. If you stay in the hospital, the hospital may charge you for any services you receive after your planned discharge date. For more information, call 1-800-MEDICARE (1-800-633-4227), or TTY: 1-877-486-2048. Additional Information: AMPLE SAMPLE SAMPLE SA Patient Initials Prior to Discharge: Date: Time: PLE SAMPLE SAMPLE SAMP According to the Paperwork Reduction Act of 1995, no persons are required to respond to a collection of information unless it displays a valid OMB control number. The valid OMB control number for this information collection is 0938-0692. The time required to complete this information collection is estimated to average 15 minutes per response, including the time to review instructions, search existing data resources, gather the data needed, and complete and review the information collection. If you have comments concerning the accuracy of the time estimate(s) or suggestions for improving this form, please write to: CMS, 7500 Security Boulevard, Attn: PRA Reports Clearance Officer, Mail Stop C4-26-05, Baltimore, Maryland 21244-1850. SAMPLE SAMPLE SAMPLE S LEE MEMORIAL HEALTH SYSTEM Lee County, Florida IMPORTANT MESSAGE FROM MEDICARE AMPLE SAMPLE SAMPLE SA FM# 120134480-1379RS Rev. 07/16 Page 2 of 2 SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE S SAMPLE SAMPL SAMPLE SAM UCO TAB MISCELLANEOUS

E AMPLE PLE SAMPLE SAMPLE SAMPLE Centers for Medicare & Medicaid Services Are You a Hospital Inpatient or Outpatient? If You Have Medicare Ask! MPLE SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE Did you know that even if you stay in a hospital overnight, you might still be considered an outpatient? Your hospital status (whether the hospital considers you an inpatient or outpatient ) affects how much you pay for hospital services (like X-rays, drugs, and lab tests) and may also affect whether Medicare will cover care you get in a skilled nursing facility (SNF) following your hospital stay. SAMPLE SAMPLE SAMPLE You re an inpatient starting when you re formally admitted to a hospital with a doctor s order. The day before you re discharged is your last inpatient day. LE SAMPLE SAMPLE SAMPL You re an outpatient if you re getting emergency department services, observation services, outpatient surgery, lab tests, X-rays, or any other hospital services, and the doctor hasn t written an order to admit you to a hospital as an inpatient. In these cases, you re an outpatient even if you spend the night at the hospital. SAMPLE SAMPLE SAMPLE Note: Observation services are hospital outpatient services given to help the doctor decide if the patient needs to be admitted as an inpatient or can be discharged. Observation services may be given in the emergency department or another area of the hospital. PLE SAMPLE SAMPLE SAMP The decision for inpatient hospital admission is a complex medical decision based on your doctor s judgment and your need for medically necessary hospital care. An inpatient admission is generally appropriate when you re expected to need 2 or more midnights of medically necessary hospital care, but your doctor must order such admission and the hospital must formally admit you in order for you to become an inpatient. LE SAMPLE SAMPLE SAMPLE AMPLE SAMPLE SAMPLE SA Read on to understand the differences in Original Medicare coverage for hospital inpatients and outpatients, and how these rules apply to some common situations. If you have a Medicare Advantage Plan (like an HMO or PPO), your costs and coverage may be different. Check with your plan. PLE SAMPLE SAMPLE SAMP SAMPLE SAMPLE SAMPLE AMPLE SAMPLE SAMPLE SA - 1 - SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE S SAMPLE SAMPL SAMPLE SAM

E AMPLE What do I pay as an inpatient? PLE SAMPLE Medicare Part A (Hospital Insurance) covers inpatient hospital services. Generally, this means you pay a one-time deductible for all of your hospital services for the first 60 days you re in a hospital. SAMPLE SAMPLE Medicare Part B (Medical Insurance) covers most of your doctor services when you re an inpatient. You pay 20% of the Medicare-approved amount for doctor services after paying the Part B deductible. MPLE SAMPLE SAMPLE What do I pay as an outpatient? SAMPLE SAMPLE SAMPLE Part B covers outpatient hospital services. Generally, this means you pay a copayment for each individual outpatient hospital service. This amount may vary by service. Note: The copayment for a single outpatient hospital service can t be more than the inpatient hospital deductible. However, your total copayment for all outpatient services may be more than the inpatient hospital deductible. SAMPLE SAMPLE SAMPLE Part B also covers most of your doctor services when you re a hospital outpatient. You pay 20% of the Medicare-approved amount after you pay the Part B deductible. LE SAMPLE SAMPLE SAMPL SAMPLE SAMPLE SAMPLE Generally, prescription and over-the-counter drugs you get in an outpatient setting (like an emergency department), sometimes called self-administered drugs, aren t covered by Part B. Also, for safety reasons, many hospitals have policies that don t allow patients to bring prescription or other drugs from home. If you have Medicare prescription drug coverage (Part D), these drugs may be covered under certain circumstances. You ll likely need to pay out-ofpocket for these drugs and submit a claim to your drug plan for a refund. Call your drug plan for more information. PLE SAMPLE SAMPLE SAMP LE SAMPLE SAMPLE SAMPLE For more detailed information on how Medicare covers hospital services, including premiums, deductibles, and copayments, visit Medicare.gov/ publications to view the Medicare & You handbook. You can also call 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048. AMPLE SAMPLE SAMPLE SA PLE SAMPLE SAMPLE SAMP SAMPLE SAMPLE SAMPLE AMPLE SAMPLE SAMPLE SA - 2 - SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE S SAMPLE SAMPL SAMPLE SAM

E AMPLE PLE SAMPLE Here are some common hospital situations and a description of how Medicare will pay. Remember, you pay deductibles, coinsurance, and copayments. Situation You re in the emergency department (ED) (also known as the emergency room or ER ) and then you re formally admitted to the hospital with a doctor s order. You visit the ED and are sent to the intensive care unit (ICU) for close monitoring. Your doctor expects you to be sent home the next morning unless your condition worsens. Your condition resolves and you re sent home the next day. You come to the ED with chest pain and the hospital keeps you for 2 nights. One night is spent in observation and the doctor writes an order for inpatient admission on the second day. You go to a hospital for outpatient surgery, but they keep you overnight for high blood pressure. Your doctor doesn t write an order to admit you as an inpatient. You go home the next day. Your doctor writes an order for you to be admitted as an inpatient, and the hospital later tells you it s changing your hospital status to outpatient. Your doctor must agree, and the hospital must tell you in writing while you re still a hospital patient before you re discharged that your hospital status changed. Inpatient or Outpatient Outpatient until you re formally admitted as an inpatient based on your doctor s order. Inpatient following such admission. SAMPLE SAMPLE - 3 - Part A pays Your inpatient hospital stay Part B pays Your doctor services MPLE SAMPLE SAMPLE Outpatient Nothing Your doctor services SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE Outpatient until you re formally admitted as an inpatient based on your doctor s order. Inpatient following such admission. Your inpatient hospital stay Doctor services and hospital outpatient services (for example, ED visit, observation services, lab tests, or EKGs) LE SAMPLE SAMPLE SAMPL SAMPLE SAMPLE SAMPLE Outpatient Nothing Doctor services and hospital outpatient services (for example, surgery, lab tests, or intravenous medicines) PLE SAMPLE SAMPLE SAMP LE SAMPLE SAMPLE SAMPLE Outpatient Nothing Doctor services and hospital outpatient services AMPLE SAMPLE SAMPLE SA PLE SAMPLE SAMPLE SAMP SAMPLE SAMPLE SAMPLE Remember: Even if you stay overnight in a regular hospital bed, you might be an outpatient. Ask the doctor or hospital. AMPLE SAMPLE SAMPLE SA SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE S SAMPLE SAMPL SAMPLE SAM

E AMPLE How would my hospital status affect the way Medicare covers my care in a skilled nursing facility (SNF)? PLE SAMPLE Medicare will only cover care you get in a SNF if you first have a qualifying inpatient hospital stay. SAMPLE SAMPLE A qualifying inpatient hospital stay means you ve been a hospital inpatient (you were formally admitted to the hospital after your doctor writes an inpatient admission order) for at least 3 days in a row (counting the day you were admitted as an inpatient, but not counting the day of your discharge). MPLE SAMPLE SAMPLE If you don t have a 3-day inpatient hospital stay and you need care after your discharge from a hospital, ask if you can get care in other settings (like home health care) or if any other programs (like Medicaid or Veterans benefits) can cover your SNF care. Always ask your doctor or hospital staff if Medicare will cover your SNF stay. SAMPLE SAMPLE SAMPLE How would hospital observation services affect my SNF coverage? SAMPLE SAMPLE SAMPLE Your doctor may order observation services to help decide whether you need to be admitted to a hospital as an inpatient or can be discharged. During the time you re getting observation services in a hospital, you re considered an outpatient. This means you can t count this time towards the 3-day inpatient hospital stay needed for Medicare to cover your SNF stay. LE SAMPLE SAMPLE SAMPL SAMPLE SAMPLE SAMPLE For more information about how Medicare covers care in a SNF, visit Medicare.gov/ publications to view the booklet Medicare Coverage of Skilled Nursing Facility Care. PLE SAMPLE SAMPLE SAMP Here are some common hospital situations that may affect your SNF coverage: Situation You came to the ED and were formally admitted to the hospital with a doctor s order as an inpatient for 3 days. You were discharged on the 4th day. You came to the ED and spent one day getting observation services. Then, you were formally admitted to the hospital as an inpatient for 2 more days. - 4 - Is your SNF stay covered? Yes. You met the 3-day inpatient hospital stay requirement for a covered SNF stay. LE SAMPLE SAMPLE SAMPLE AMPLE SAMPLE SAMPLE SA No. Even though you spent 3 days in the hospital, you were considered an outpatient while getting ED and observation services. These days don t count toward the 3-day inpatient hospital stay requirement. PLE SAMPLE SAMPLE SAMP Remember: Any days you spend in a hospital as an outpatient (before you re formally admitted as an inpatient based on the doctor s order) aren t counted as inpatient days. An inpatient stay begins on the day you re formally admitted to a hospital with a doctor s order. That s your first inpatient day. The day of discharge doesn t count as an inpatient day. SAMPLE SAMPLE SAMPLE AMPLE SAMPLE SAMPLE SA Information courtesy of Centers for Medicare & Medicaid Services SAMPLE SAMPLE SAMPLE SAMPLE SAMPLE S SAMPLE SAMPL SAMPLE SAM 5400.03 7-15

1. What is outpatient observation? Observation is a special service or status that allows physicians to place a patient in an acute care setting, within the hospital, for a limited amount of time to determine the need for inpatient admission. The patient will receive periodic monitoring by the hospital s nursing staff while in observation. 2. What is the difference in billing? Observation stay is billed as an outpatient service (under Medicare, this would be Part B). 3. What kind of problems do people have that would make observation appropriate? There are many types of clinical problems that would support the need for observation, such as symptoms that can usually be resolved within 24-48 hours or when the need for admission is unclear. It is the intent of the Medicare program to allow a physician more time to evaluate/treat a patient and make a decision to admit or discharge. Observation generally does not exceed 24 hours and never (practically speaking) exceeds 48 hours. 4. What are some examples of these problems? Nausea, vomiting, stomach pain, headache, fever, and some types of shortness of breath and chest pain. 5. What is meant by a limited amount of time? Observation is only appropriate for short time periods. Medicare allows 24-48 hours. 6. What happens at the end of the specified amount of time? Typically your physician will decide whether to discharge you to home or admit you as an inpatient. 7. What if my physician decides my condition requires acute inpatient care? When that determination is made, your physician must then write an order to convert your outpatient observation stay to an inpatient admission. 8. What if my physician decides that I do not require acute inpatient care? Your physician will discharge you and arrange for your care to be followed up on an outpatient basis. 9. Can I be placed into outpatient observation after undergoing an outpatient surgical procedure? Procedures have a routine 4 to 6 hours of recovery associated with them. However, should you experience a post-operative or post-procedural complication then your physician may place you into observation to monitor you or admit you as an inpatient. 10. What type of post-surgical condition may warrant further evaluation in outpatient observation? Inability to urinate Inability to keep liquids down thus requiring IV hydration Inability to control pain Unexpected surgical bleeding Unstable vital signs Inability to safely ambulate after spinal anesthesia Unusual reaction to the surgical procedure or anesthesia (e.g. difficulty awakening from anesthesia, drug reaction, or other post-surgical complication).

11. If I desire to spend the night after my outpatient surgery, will my stay be covered? You may stay overnight after an outpatient procedure only if your physician determines that it is medically necessary for you to stay. Observation services are not to be used for the convenience of the hospital physician, patient, or their families. For example, the inability to arrange transportation home does not necessitate an overnight stay. 12. Can my physician order observation services before the procedure is performed? No. the routine preparation before a test or procedure is not considered to be an observation service. Observation services should only be ordered after the procedure and only after a routine recovery period has revealed a complication that would require additional time for monitoring and treatment. Attention: Medicare Advantage Participants Please Note the effect of Outpatient Observation Status may vary for those with Medicare HMO coverage, based on the terms and conditions of the individual plan; for clarification of how this affects you specifically; please contact your insurer directly. Developed in conjunction with the FHA Observation Task Force A Patient s Guide to Medicare Outpatient Observation 13. If my physician places me in observation, how does this affect my out-of-pocket costs? Since observation is an outpatient service, any outpatient coinsurance will apply. Medicare beneficiaries will be responsible for any self administrable medications. This means any medications, which you could give yourself if you were at home, such as pills and creams, are not-covered items on an outpatient bill. Lee Memorial Health System Department of Care Management Main Office (239) 343-1157 Revised April 2013