Quarter-End Report The Johns Hopkins Health System Corporation and Affiliates Three and Six Months Ended December 31, 2017 and 2016 UNAUDITED Contact: Mike Larson Senior Vice President and Chief Financial Officer Johns Hopkins Health System 3910 Keswick Road South Building, Suite 4300A Baltimore, MD 21211 Office (443) 997-5710 Fax (443) 997-5711 February 12, 2018 Index Notice to Readers 3  Overview of The Johns Hopkins Health System Corporation and Affiliates 5  Introduction 5  Wholly Owned or Controlled Affiliates 6  Other Partially Owned Affiliates 10  Maryland Health Services Cost Review Commission 11  Hospitals outside the State of Maryland 12  JHHSC and Affiliates Consolidated Financial Statements 14  Consolidated Balance Sheets 14  Consolidated Statements of Operations and Changes in Net Assets 15  Consolidated Statements of Cash Flows 16  Management’s Discussion and Analysis of Consolidated Operations and Financial Performance 17  Three months ended December 31, 2017 compared to the three months ended December 31, 2016 17 Six months ended December 31, 2017 compared to the six months ended December 31, 2016 18  Liquidity and Capital Resources 21  Consolidated Key Statistics 23  Inpatient Payor Mix 24  Other Significant Events 25  Consolidating Financial Statements 26  Page 2 of 31 Notice to Readers Forward Looking Information: This quarter-end report may contain disclosures, which contain “forward looking statements” within the meaning of the Federal securities laws. Forward looking statements include all statements that do not relate solely to historical or current fact and can be identified by the use of words such as “expect”, “anticipate”, “intend”, “project”, “likely”, “may”, “might”, “estimate”, and similar words or expressions. These forward looking statements are based on the current plans and expectations of The Johns Hopkins Health System Corporation (“JHHSC”) and its affiliates (the “Affiliates”) as of the date of this report and are subject to a number of known and unknown risks and uncertainties inherent in the operation of health care facilities, many of which are beyond JHHSC’s and its Affiliates’ control. Actual actions and results may differ materially from the forward looking statements. JHHSC and its Affiliates disclaim any obligation, and make no promise, to update any such forward looking statements or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward looking statement, whether as a result of changes in underlying factors, to reflect new information, as a result of the occurrence of events or developments or otherwise. Quarter-End Financial and Operating Information: The financial and operating information provided in this quarter-end report has been prepared on the accrual basis of accounting from records maintained by JHHSC and its Affiliates. All transactions have been included in the accounting records for financial reporting information in conformity with accounting principles generally accepted in the United States (“GAAP”). All financial data in the Consolidated Statements of Operations and Changes in Net Assets and the Consolidated Statements of Cash Flows covering the six months ended December 31, 2017 and 2016, and the Consolidated Balance Sheet as of December 31, 2017, are unaudited. The Consolidated Balance Sheet as of June 30, 2017 has been extracted from audited financial statements. All statistical data presented is unaudited. Accordingly, the data does not include all of the information and footnotes required by GAAP for complete financial statements. These quarter-end financial statements should be read in conjunction with the audited financial statements as of and for the year ended June 30, 2017. Certain amounts from prior year have been reclassified in order to conform to the current year presentation. Non-GAAP Disclosures: Certain financial data and ratios displayed throughout this quarter-end report are calculated using financial measures that are not considered GAAP. For example, EBIDA, operating revenues less operating expenses plus interest, depreciation and amortization, is a non-GAAP measure used to calculate operating cash flow margin percentage, which is calculated as EBIDA divided by operating revenues. These financial data and ratios are not intended to conform to GAAP, but are displayed to provide more meaningful analysis. The Johns Hopkins Hospital Endowment Fund, Incorporated: These interim financial statements and all ratios related thereto have been prepared excluding the assets of The Johns Hopkins Hospital Endowment Fund, Incorporated (“the Endowment Corporation”). A non-profit Maryland corporation chartered in 1972, the Endowment Corporation was organized for the purpose of holding and managing the endowment and certain other funds for the benefit of JHHSC and its Affiliates. The affairs of the Endowment Corporation are managed by a Board of Trustees that is self-perpetuating. Neither JHHSC nor any Affiliate holds Page 3 of 31 legal title to any endowment funds. These funds and any net income accruing from their investments are used in accordance with any restrictions imposed by donors, or if no restrictions, in accordance with the mission of the Endowment Corporation. The net assets of the Endowment Corporation as of December 31, 2017 and June 30, 2017 were $706.4 million and $678.5 million, respectively. Obligated Group: The Johns Hopkins Health System Obligated Group (“JHHS Obligated Group”) consists of The Johns Hopkins Hospital (“JHH”), Johns Hopkins Bayview Medical Center, Inc. (“JHBMC”), Suburban Hospital, Inc. (“SHI”), Suburban Hospital Healthcare System, Inc. (“SHHS”), Howard County General Hospital (“HCGH”), Sibley Memorial Hospital (“SMH”), Johns Hopkins All Children’s Hospital, Inc. (“JHACH”), and JHHSC. Each JHHS Obligated Group member, as coobligor and not as guarantor, jointly and severally covenants to pay the principal and interest on all outstanding JHHS Obligated Group obligations, including parity debt. The total amount of debt outstanding under the JHHS Obligated Group was $2.1 billion as of December 31, 2017 and June 30, 2017. The JHHS Obligated Group granted a security interest in the receipts of JHH, JHBMC, SHI, SHHS, HCGH, SMH, JHACH, and JHHSC which shall continuously apply for the entire term of the debt. Page 4 of 31 Overview of The Johns Hopkins Health System Corporation and Affiliates Introduction The Johns Hopkins Health System Corporation is a private, non-profit, non-stock membership corporation organized under the laws of the State of Maryland to support, oversee and coordinate the activities and management of its Affiliates. JHHSC provides certain shared services including purchasing, accounts payable, payroll, legal, finance, marketing, planning, treasury and other functions. JHHSC functions as the parent holding company of its wholly owned or partially owned or controlled Affiliates. JHHSC and The Johns Hopkins University (“JHU”) have entered into a collaboration called Johns Hopkins Medicine. Johns Hopkins Medicine provides a vehicle for internal operational coordination among JHHSC, the Affiliates, and the JHU School of Medicine (“JHUSOM”). Johns Hopkins Medicine also provides a united voice for external activities. Through Johns Hopkins Medicine, JHHSC and JHU, as distinct yet interdependent corporations, are able to respond in an integrated fashion to opportunities and pressures affecting the medical enterprise. JHHSC and its Affiliates are dedicated to providing the highest quality patient health care in the treatment and prevention of human illness through its wholly owned or partially owned or controlled Affiliates described below. JHHSC and its Affiliates offer a full continuum of integrated health care services in settings ranging from primary care physician offices and ambulatory care centers, to sophisticated quaternary patient care and acute care services provided through its six hospitals. All levels of care are offered on an inpatient and outpatient basis, as well as rehabilitation, chronic care, skilled nursing, home care, and home health care services. The medical staffs of the JHHSC hospitals and health care organizations are principally members of the JHUSOM full and part-time faculties, but also include private physicians. JHHSC and its Affiliates are an academically based health system that serves the greater Maryland area, the District of Columbia, the west coast of Florida, and many national and international patients. The separate employers that comprise JHHSC and its Affiliates collectively employ over 29,000 full and part-time employees. JHHSC and its Affiliates are, in the aggregate, one of the largest private employers in the State of Maryland. The National Institutes of Health (“NIH”) leases facilities on the JHBMC campus for the National Institute on Drug Abuse and the National Institute on Aging. The NIH has also constructed a research facility on the JHBMC campus. Neither JHHSC nor any of its Affiliates has guaranteed any of the debt issued to finance construction of the NIH facility. Furthermore, NIH has a presence on the SHI campus, located in Bethesda across the street from the NIH campus. A number of programs are operated jointly by SHI and the NIH, including programs for stroke and cardiac imaging. In addition to the research conducted on its East Baltimore campus, the JHUSOM conducts research into many areas including rheumatology, respiratory disease, gerentological illness, and substance abuse on the JHBMC campus (described below). JHHSC’s eighteen principal Affiliates are highlighted below. Page 5 of 31 Wholly Owned or Controlled Affiliates The Johns Hopkins Hospital JHH is organized as a not-for-profit Maryland corporation that operates a 1,154-licensed bed facility (1,091 acute beds, 45 Neonatal Intensive Care bassinets and 18 Comprehensive Inpatient Rehabilitation beds) on the east side of Baltimore City. JHH is a world-renowned academic medical center providing tertiary and quaternary care, which draws patients not only from metropolitan Baltimore and surrounding counties, but also from Maryland’s four contiguous states and Washington, DC as well as the rest of the United States and over 100 countries. Opened in 1889, JHH has been ranked No.1 in the nation by U.S. News and World Report for 22 years of the survey’s 28-year history. JHH is home to many nationallyrecognized centers including the Brady Urological Institute, the Sidney Kimmel Comprehensive Cancer Center, the Wilmer Eye Institute, the Johns Hopkins Heart and Vascular Institute, and the Johns Hopkins Children’s Center. The Johns Hopkins Outpatient Center provides high quality ambulatory care services using state-of-the-art diagnostic facilities, imaging equipment, and operating rooms. JHH also houses Maryland’s only level 1 eye trauma center. The Sidney Kimmel Comprehensive Cancer Center is one of only two facilities in the State, and 69 in the United States that are designated by the National Cancer Institute as a comprehensive cancer centers. In May 2012, JHH opened the Charlotte R. Bloomberg Children’s Center, a children’s tower housing the only dedicated pediatric burn and trauma center in Maryland, and the Sheikh Zayed Tower, a cardiovascular and critical care adult tower. Johns Hopkins Bayview Medical Center, Inc. JHBMC is a not-for-profit Maryland corporation that operates a community based teaching acute hospital located in southeast Baltimore. Founded in 1773, it is one of the oldest, continuous health care institutions on the east coast. The City of Baltimore transferred ownership to JHHSC in 1984. JHBMC’s acute hospital has 342 licensed acute beds and 25 Neonatal Intensive Care bassinets. JHBMC offers a broad range of inpatient and outpatient services and is home to one of Maryland’s most comprehensive neonatal intensive care units, and an area-wide trauma center that is part of the Maryland statewide emergency medical system. JHBMC services include the center for adult burn treatment, a sleep disorders center, and specialty services including OBGYN, Psychiatry, Neurology, Orthopedics, Urology, and Plastic Surgery. JHBMC also offers a wide variety of nationally recognized post-acute and geriatric programs through its Johns Hopkins Bayview Specialty Hospital Programs that provide specialty hospital medical, ventilator, and rehabilitation services, and the Beacham Ambulatory Care Center that provides outpatient care to geriatric and post-acute patients. JHBMC’s post-acute care facilities include 76 licensed specialty hospital beds, and 12 licensed Comprehensive Inpatient Rehabilitation beds. Howard County General Hospital, Inc. HCGH is a not-for-profit Maryland corporation that has 267 licensed acute beds and 18 Neonatal Intensive Care bassinets operating in this community hospital in Columbia, Maryland. Founded in 1973 as a short-stay facility, HCGH was incorporated the following year in response to growing demand in the county. In 1998, JHHSC became the sole member of HCGH, augmenting its strong community-focused integrated delivery system. HCGH is the sole provider of inpatient hospital services in Howard County. HCGH offers a full range of acute care inpatient services including general medicine, obstetrics, cardiology, Page 6 of 31 orthopedics, general surgery, infectious diseases, oncology, gynecology, neurology, pediatrics, and psychiatry. HCGH provides critical care services and operates a neonatal intensive care unit. HCGH also offers extensive outpatient services including outpatient surgery in a facility located adjacent to the main building, known as the Health Care and Surgery Center (“HCSC”). HCSC features six operating rooms, one minor procedure room, and one cystoscopy suite. HCGH has embarked on a 36,000 square foot expansion in order to address the growing demand for services within their market. HCGH will then renovate 19,000 square feet of vacated space once the expansion project is completed. HCGH is the sole member of Howard Hospital Foundation, Inc., a not-for-profit organization created to receive, administer, and expend funds for charitable and educational purposes benefiting HCGH. Suburban Hospital, Inc. SHI is a not-for-profit Maryland corporation that operates a 230 bed acute care community hospital located in Bethesda, Maryland, in the southern part of Montgomery County adjacent to Washington, D.C. SHI provides inpatient, ambulatory and ancillary services on both an emergent and scheduled basis. SHI is the county’s only trauma center (Level II) and operates as part of the Maryland statewide emergency medical services system. SHI is one of a limited number of cardiac surgery centers in the State. In addition, SHI offers services and specialized programs in Cardiovascular, Emergency Medicine, Neurosurgery, Oncology, Orthopedic, and Psychiatric care. Admitting physicians are primarily practitioners in the local area. SHI is the sole member of Suburban Hospital Foundation, a not-for-profit organization that conducts community outreach activities and raises funds to be used exclusively for charitable, educational, medical and scientific needs of the community, as well as to manage and distribute funds received on behalf of SHI and its related entities. SHI has begun the second phase of construction for its campus enhancement project. The first phase delivered a new 1,111 space parking garage that opened in the late summer of 2017. The second phase will deliver a new 300,000 square foot hospital building, targeted to open in the late fall of 2019. Sibley Memorial Hospital and Subsidiaries SMH is a not-for-profit corporation that operates a 288 bed general acute care community hospital located in Northwest Washington, D.C. SMH provides comprehensive medical services, most notably in the areas of obstetrics, orthopedics and oncology. In addition, SMH offers a full array of surgical services including thoracic, plastic, urology, neurosurgery and general surgery. The Johns Hopkins Sidney Kimmel Cancer Center at Sibley offers comprehensive oncologic care, including the Sullivan Breast Center, gynecologic oncology services, outpatient medical oncology, infusion, radiation oncology, and a variety of supportive services. SMH also operates a 172 unit assisted living residence, Grand Oaks, and The Sibley Renaissance which houses the Center for Rehabilitation Medicine, Sibley Senior Services, skilled nursing care (45 beds), and a residential Alzheimer’s unit. SMH is the sole member of The Sibley Memorial Hospital Foundation (“Sibley Foundation”), a notfor-profit organization created to receive, administer, and expend funds for charitable and educational purposes benefiting SMH. The Sibley Foundation began operations in January 2009. In March 2012, SMH provided funding for two additional not-for-profit organizations: The Stacy Mark Reed Foundation (“SMRF”) and The Jane Bancroft Robinson Foundation (“JBRF”). SMRF was created to receive, administer and expend funds for charitable, scientific, and educational purposes benefiting SMH. JBRF was created to provide financial Page 7 of 31 support and engage in activities that directly further the exempt purposes of SMH by funding initiatives that improve the health and well-being in medically underserved areas within Wards 7 & 8 in Washington, DC. In September 2016, SMH completed the construction of and occupied its new 475,000 square foot patient tower. The facility features 200 fullyprivate rooms, two floors dedicated to women and infant services with 18 labor and delivery suites and special-care nursery, and a cancer care infusion center spanning the first floor with 37 private rooms. In May 2016, SMH began construction of its 80,000 square foot Proton Therapy Center, which is expected to be completed in August, 2019. The facility will house three proton beam therapy treatment rooms and one proton beam research room. Johns Hopkins All Children’s Hospital, Inc. JHACH is a not-for-profit corporation that operates a 259 bed pediatric specialty care hospital located in St. Petersburg, Florida. Founded in 1926, JHACH is a leading pediatric referral center that is dedicated to the advancing treatment, education, research and advocacy for children’s health. JHACH began operations in its new state-of-the-art hospital facility in January 2010, which includes many disaster preparedness features, including its own Central Energy Plant and Hurricane-resistant design. In 2011, JHHSC became the sole member of JHACH to expand its academic mission of high-quality children’s care. JHACH boasts a 97 bed Neonatal Intensive Care Unit, a 28 bed Pediatric Intensive Care Unit, and a 22 bed Cardiovascular Intensive Care Unit. JHACH has one of Florida’s busiest pediatric heart surgery programs, and is well known for its pediatric heart and bone marrow/stem transplant programs. JHACH’s childhood cancer program is one of the largest in the southeast. JHACH is also a pediatric teaching center for future pediatricians. In March 2016, JHACH began construction of a 230,000 square foot research and education building, expected to be completed in July 2018. Johns Hopkins HealthCare LLC (“JHHC”) JHHC is owned 50% by JHHSC and 50% by JHU. JHHSC consolidates the operations of JHHC due to having control. JHHC develops and manages contractual relationships with the Department of Defense, the Maryland Department of Health and Mental Hygiene, the Centers for Medicare and Medicaid Services, employers, hospitals, physicians, and other health care providers to offer a variety of insurance products covering approximately 410,000 enrollees. In 2013, JHHC assumed responsibility for the Johns Hopkins Medicine Alliance for Patients (“JMAP”), a Medicare Shared Savings Program Accountable Care Organization with approximately 3,000 provider participants and more than 38,000 Medicare beneficiaries. Services and support include eligibility database management, memberphysician services, claims adjudication, care management, client-focused product development and physician/facility network development, and management. Priority Partners Managed Care Organization, Inc. is a 50% JHHC owned joint venture approved by the State of Maryland to operate as an authorized Medicaid managed care organization, and serves approximately 293,000 Medicaid enrollees in Baltimore City and throughout the State. The Maryland Community Health System owns the remaining 50%. A significant amount of the claims paid by JHHC are paid to JHHSC and its affiliates. Hopkins Health Advantage, Inc. is a Maryland corporation formed for the purposes of operating as a health insurer issuing Medicare Advantage plans to the residents of the State of Maryland. In September 2016, Hopkins Health Advantage announced that six prominent Page 8 of 31 area health systems have agreed to be equity investors and will have a direct financial stake in the success of these plans. Ownership is structured so that JHHC maintains a controlling interest. Johns Hopkins Community Physicians, Inc. (“JHCP”) JHCP is a not-for-profit Maryland corporation. JHCP operates as a multi-specialty physician group with a focus on primary care with a network of 58 practices across 40 locations throughout Maryland, Washington D.C., and Northern Virginia. Specialties include internal medicine, family practice, pediatrics, sports medicine, gynecology/obstetrics, neurology, cardiovascular and cardiothoracic surgery, orthopedic surgery, breast health, colon and rectal surgery, general surgery, vascular surgery, palliative care, cardiology, radiology, podiatry, acupuncture, aesthetic medicine, gastroenterology, rheumatology, urology, and hospital based physicians practicing at SHI, SMH, and HCGH. JHCP also contributes to the tripartite mission of Johns Hopkins Medicine by collaborating with the JHUSOM and the Johns Hopkins School of Public Health in clinical research activity and by partnering with the JHUSOM to offer residency programs in primary care. The Johns Hopkins Medical Services Corporation (“JHMSC”) JHMSC is a not-for-profit Maryland corporation. JHMSC is the contracting entity for the Uniformed Services Family Health Plan (“USFHP”) contract to provide and manage care for military retirees and active duty family members. JHMSC receives a monthly capitation fee for its services, and then pays a sub-capitation fee to JHHC, which is responsible for ensuring all services under the contract are provided. All primary care services are administered through the JHCP provider network; other services are provided through the JHHC provider network. Suburban Hospital Healthcare System, Inc. SHHS is a not-for-profit Maryland corporation established to manage the integrated delivery of health care services in and among the surrounding communities of Montgomery County, Maryland. Through its wholly owned and partially owned taxable and not-for-profit affiliates, SHHS operates outpatient surgery centers and other specialty care service centers. All Children’s Health System, Inc. (“ACHS”) ACHS is a not-for-profit Florida corporation established to manage the integrated children’s health care services in and among the surrounding counties of St. Petersburg, Florida. Through its wholly owned not-for-profit affiliates, ACHS operates two pediatric physician practice groups, a home infusion and pharmaceutical services organization, and an organization that supports laboratory and clinical pediatric research. ACHS also operates the Johns Hopkins All Children’s Hospital Foundation, Inc., established to raise, manage, and hold funds for use by ACHS and JHACH. Howard County Health Services, Inc. (“HSI”) HSI is a for-profit entity organized as a holding company that solely recognizes investment income resulting from its 25% ownership in MedBridge Healthcare. HCGH OB/GYN Associates Series, LLC (“HCGH OBGYN”) HCGH OBGYN is a for-profit Series formed under JH Ventures, LLC, a Delaware limited liability company. HCGH OBGYN provides obstetrics and gynecology services to residents Page 9 of 31 of Howard County, Maryland and surrounding counties. HCGH OBGYN operates its main office located next to HCGH and one in Eldersburg, Maryland. All appropriate births and surgeries are referred to HCGH. Johns Hopkins Medical Management Corporation (“JHMMC”) JHMMC is a Maryland for-profit health care development, management and services corporation that develops, organizes and manages a regional patient delivery system to serve JHUSOM physicians and JHHSC hospitals. JHMMC’s comprehensive regional patient care delivery system seeks to provide quality primary and specialty care within the communities it serves, utilizing full and part-time faculty physicians, affiliated community physicians, and other partners. JHMMC oversees facility planning, site selection, and construction of all ancillary JHHSC, Affiliate and JHUSOM sites. JHMMC also operates a temporary staffing agency that provides qualified clinical and administrative temporary staffing needs for JHHSC and Affiliates, and JHUSOM. Finally, JHMMC includes two commercial supply chain business units. The first business unit is Healthcare Supply Chain Innovations LLC d/b/a Nobilant. Nobilant operates as a national group purchasing organization (“GPO”), with a goal of achieving savings and efficiencies in purchasing, strategic sourcing and supply chain management for its members. The second business unit is a regional collaborative in the Mid-Atlantic geographical market between JHHSC, two local hospitals and three regional hospitals with JHHSC being a majority owner. Ophthalmology Associates, LLC (“OA”) OA is a Maryland limited liability company owned 99.8% by JHHSC and 0.2% by JHU. OA’s multi-specialty surgery center located at Green Spring Station is used to perform ophthalmic, plastic, cosmetic, and pain management procedures utilizing two operating rooms and a procedure room. OA is also home to the Wilmer Laser Vision Center. Physicians using this facility perform vision correcting refractive surgery utilizing state-ofthe-art equipment to perform LASIK surgery. Johns Hopkins Employer Health Programs, Inc. (“JHEHP”) JHEHP is a Maryland for-profit corporation that provides administrative services and access to provider networks to self-insured employers. Other Partially Owned Affiliates The following Affiliates are accounted for under the equity method of accounting, with earnings included in the results of JHHSC. Johns Hopkins Home Care Group, Inc. (“JHHCG”) JHHCG is a not-for-profit Maryland corporation owned 50% by JHHSC and 50% by JHU, and has three operating subsidiaries: Johns Hopkins Home Health Services, Inc., Johns Hopkins Pharmaquip, Inc., and Johns Hopkins Pediatrics at Home, Inc. JHHCG serves as a holding company for the operating subsidiaries that provide home health services such as visits by nurses, home health aides, social workers, and physical, occupational, and speech therapists. Johns Hopkins Pharmaquip, Inc. also provides patients with durable medical and respiratory equipment and supplies, home infusion therapy and pharmaceuticals in a home setting in support of and in accordance with the mission of JHHSC, its other Affiliates and JHUSOM. Johns Hopkins Pharmaquip manages nine outpatient pharmacies, owned by JHH (seven) and JHBMC (two). Page 10 of 31 Johns Hopkins Medicine International, LLC (“JHI”) JHI is owned 50% by JHHSC and 50% by JHU, and coordinates activities for over 4,500 international patients annually, as well as facilitating the global development of JHHSC and JHUSOM research, educational and clinical services. Among other initiatives, JHI manages two hospitals in Abu Dhabi, an oncology program in Singapore, and a joint-venture in Saudi Arabia – Johns Hopkins Aramco Healthcare (“JHAH”). The primary objective of JHAH is to further improve the quality of care and expand the scope of services offered to Saudi Aramco’s eligible medical recipients. Following the initial phase, JHAH can make these healthcare services available to non-Saudi Aramco patients. Ownership interests in projects undertaken by JHI are generally allocated between JHHSC and JHU on a project-by-project basis. Maryland Health Services Cost Review Commission The State of Maryland has been granted a waiver by the federal government exempting the State from national Medicare and Medicaid reimbursement principles. JHH, JHBMC, HCGH and SHI charges for inpatient as well as outpatient and emergency services performed at the hospitals are regulated by the Maryland Health Services Cost Review Commission (“HSCRC”). JHHS’ management has made all submissions required by the HSCRC and believes JHHS is in compliance with HSCRC requirements. Management believes that the waiver and HSCRC regulation will remain in effect through December 31, 2018. Effective January 1, 2014, with retroactive application to revenues generated by services provided after June 30, 2013, the HSCRC and the Center for Medicare and Medicaid Services entered into a new demonstration model for the Maryland waiver. The agreement will remain in effect through December 31, 2018. The new demonstration model moved from a Medicare per admission methodology to a per capita population health based methodology. The methodology also includes a waiver test, under which growth in revenue per capita is limited to a rate of 3.58% for the State of Maryland in total. To facilitate the goals of the new demonstration model, the HSCRC and Maryland hospitals entered into Global Budget Revenue Agreements (“GBR”). The agreements set a hospital’s revenue base annually under a global budget arrangement, whereby revenue would be fixed regardless of changes in volume and patient mix for Maryland residents. Hospital revenue for Maryland residents receiving care at Maryland hospitals is subject to this global budget. However, JHH and JHBMC have the opportunity to receive additional rate authority for any growth in the volume of out of state patients receiving care at those hospitals. When the hospitals’ out of state volume exceeds a revenue floor established by the HSCRC, the hospitals will be allowed to recognize incremental revenues at a 50% variable cost factor. This variable cost factor can then increase to 75% when that out of state revenue increases to a certain level. For HCGH and SHI, out of state volume is currently included in their global budget; therefore, all in state and out of state volumes are subject to their global budget.. Under the HSCRC reimbursement methodology, amounts collected for services to patients under the Medicare and Medicaid programs are computed at approximately 94% of HSCRC approved charges. Other payors are eligible to receive up to a 2.25% discount on prompt payment of claims. Page 11 of 31 Hospitals outside the State of Maryland SMH operates in the District of Columbia. JHACH operates in the State of Florida. SMH and JHACH have agreements with third-party payers that provide for payments to each hospital at amounts different from its established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges and per diem payments. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payers, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payers. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered, and adjusted through net patient service revenue in future periods, as final settlements are determined. SMH’s inpatient acute care services rendered to Medicare program beneficiaries are paid at prospectively determined rates per discharge. These rates vary according to a patient classification system that is based on clinical, demographic, diagnostic, and other factors. Outpatient hospital services rendered to Medicare beneficiaries are paid at prospectively determined rates based upon procedures performed. Inpatient psychiatric services are paid based on prospectively determined rates. SMH continues to be reimbursed for medical education on a cost based methodology. SMH is reimbursed for cost reimbursable items at a tentative rate with final settlement determined after submission of annual cost reports by SMH and audits thereof by the Medicare fiscal intermediary. SMH's classification of patients under the Medicare program and the appropriateness of their admission are subject to an independent review by a quality improvement organization under contract with SMH. SMH’s inpatient services rendered to Medicaid program beneficiaries are reimbursed based on diagnosis related groupings at a predetermined specified rate for each discharge, based on a patient's diagnosis. Outpatient services are reimbursed based upon a fee schedule maintained by the Medical Assistance Administration. SMH inpatient services provided to Blue Cross subscribers are paid at prospectively determined rates per discharge according to a patient classification system that is based on clinical, demographic, diagnostic, and other factors. Outpatient services are reimbursed based upon a schedule or other agreed upon discount. Final settlements for inpatient and outpatient services are in accordance with an agreement entered into with Blue Cross requiring SMH to provide services to Blue Cross members at the lowest contracted rate between SMH and any other significant commercial insurance carriers, health maintenance organizations and/or preferred provider organizations. JHACH inpatient services rendered to Medicaid program beneficiaries are reimbursed based on diagnosis related groupings at a predetermined specified rate for each discharge, based on a patient’s diagnosis. The rate may be subject to additional outlier payment amounts. JHACH’s outpatient services rendered to Medicaid program beneficiaries are reimbursed based on allowable costs included in the most recent filed cost report with final settlement determined after submission of the annual cost reports and audits. Retrospective settlements may take several years to finalize. Page 12 of 31 SMH and JHACH have also entered into payment agreements with other commercial insurance carriers. The basis for payment to SMH and JHACH under these agreements includes prospectively determined rates per discharge, fee schedules, discounts from established charges and prospectively determined daily rates. Page 13 of 31 JHHSC and Affiliates Consolidated Financial Statements Johns Hopkins Health System Corporation and Affiliates Consolidated Balance Sheets (in thousands) (Unaudited) Assets December 31, 2017 June 30, 2017 Cash and cash equivalents Short-term investments AWUIL used for current liabilities Patient accounts receivable, net of estimated uncollectibles Due from others, current portion Due from affiliates, current portion Inventories of supplies Prepaid expenses and other current assets Total current assets Liabilities and net assets December 31, 2017 June 30, 2017 Current liabilities: Current assets: $ 461,034 158,758 6,156 $ 566,331 152,434 14,183 580,390 110,766 37,297 116,733 107,695 1,578,829 539,552 93,437 30,917 112,809 114,394 1,624,057 853 31,173 114,081 606,030 25,472 777,609 853 34,912 103,696 626,180 26,018 791,659 Investments 2,927,032 2,740,332 Property, plant and equipment Less: allowance for depreciation and amortization Total property, plant, and equipment, net 5,068,153 (2,169,680) 2,898,473 4,971,701 (2,081,138) 2,890,563 109,321 122,216 96,390 120,611 Current portion of long-term debt and capital leases Accounts payable and accrued liabilities Medical claims reserve Deferred revenue Due to affiliates, current portion Accrued vacation Advances from third-party payors Current portion of estimated malpractice costs $ Total current liabilities 287,686 577,691 112,075 126,489 12,483 76,077 117,482 46,973 1,356,956 $ 542,775 561,591 119,631 129,124 12,905 78,272 139,507 47,244 1,631,049 Assets whose use is limited: By donors or grantors for: Future campus development Pledges receivable Other By Board of Trustees Other Total assets whose use is limited LT debt and capital leases, net of current portion Estimated malpractice costs, net of current portion Net pension liability Other long-term liabilities Total liabilities 1,817,799 132,754 784,677 279,216 4,371,402 1,588,282 130,057 761,439 285,729 4,396,556 3,850,995 128,524 62,559 4,042,078 3,683,545 123,248 60,263 3,867,056 Net assets: Due from affiliates, net of current portion Other assets Total assets $ 8,413,480 $ 8,263,612 Unrestricted Temporarily restricted Permanently restricted Total net assets Total liabilities and net assets Page 14 of 31 $ 8,413,480 $ 8,263,612 Johns Hopkins Health System Corporation and Affiliates Consolidated Statements of Operations and Changes in Net Assets (in thousands) (Unaudited) Three months ended December 31, 2017 December 31, 2016 $ 1,421,180 (27,750) 1,393,430 193,569 24,822 3,653 1,615,474 $ 585,369 635,897 262,564 14,471 69,000 1,567,301 48,173 560,116 603,129 250,242 12,454 70,100 1,496,041 47,028 (5,399) 9,357 65,881 (17,990) (8,063) 91,959 4,783 96,742 (6,223) 80,295 (13,077) (14,670) (14,060) 79,293 1,617 80,910 4 $ 1,367,816 (28,227) 1,339,589 173,588 25,485 4,407 1,543,069 (329) 718 74 (4,783) 92,755 3,018 1,665 (1,617) 83,647 7,580 5,695 (718) (3,653) 3,209 (3,018) (4,407) (644) (2,374) 519 519 96,483 3,945,595 4,042,078 $ 142 142 81,415 3,552,293 3,633,708 Balance Sheet Six months ended December 31, 2017 December 31, 2016 Operating revenues: Net patient service revenue before provision for bad debts Provision for bad debts Net patient service revenue Other revenue Investment income Net assets released from restrictions used for operations Total operating revenues $ Operating expenses: Salaries, wages and benefits Purchased services Supplies and other Interest Depreciation and amortization Total operating expenses Income from operations Non-operating revenues and expenses: Interest expense on swap agreements Change in market value of swap agreements Realized and unrealized gains on investments Other components of net periodic pension cost Other Excess of revenues over expenses before NCI Noncontrolling interests Excess of revenues over expenses (12,541) 83,149 49,014 (29,340) (20,045) 159,857 (1,644) 158,213 5 $ 2,729,118 (54,587) 2,674,531 337,753 38,445 6,968 3,057,697 1,114,224 1,202,302 493,834 21,582 136,135 2,968,077 89,620 (10,877) 9,722 137,871 (35,946) (16,343) 166,302 13,493 179,795 Changes in temporarily restricted net assets: Gifts, grants and bequests Net assets released from restrictions used for purchase of property, plant, and equipment Net assets released from restrictions used for operations Other Increase (decrease) in temporarily restricted net assets Page 15 of 31 $ 1,166,033 1,256,177 518,878 28,921 138,238 3,108,247 81,875 Contributions from (to) affiliates Net assets released from restrictions used for purchase of property, plant and equipment Other Noncontrolling interests Increase in unrestricted net assets Changes in permanently restricted net assets: Gifts, grants and bequests Increase in permanently restricted net assets Increase in net assets Net assets at beginning of period Net assets at end of period 2,821,237 (57,046) 2,764,191 376,942 43,150 5,839 3,190,122 13,049 1,442 (299) (13,493) 167,450 14,808 1,748 1,644 189,462 12,557 11,277 (1,442) (5,839) 5,276 (14,808) (6,968) 232 (10,267) 2,296 2,296 175,022 3,867,056 4,042,078 $ 442 442 179,637 3,454,071 3,633,708 Johns Hopkins Health System Corporation and Affiliates Consolidated Statements of Cash Flows (in thousands) (Unaudited) Six months ended December 31, 2017 December 31, 2016 Operating activities: Change in net assets: Adjustments to reconcile change in net assets to net cash and cash equivalents provided by operating activities: Depreciation and amortization Provision for bad debts Net realized and changes in unrealized (gains) losses on investments Changes in market value of swap agreements Restricted contributions and investment income received Gains on and returns of equity investments Other operating activities Change in assets and liabilities: Patient accounts receivable Inventories of supplies, prepaid expenses and other current assets Due from affiliates, net Pledges receivable Other assets Accounts payable, accrued liabilities and accrued vacation Medical claims payable Deferred revenue Advances from third-party payors Accrued pension benefit costs Estimated malpractice costs Other long-term liabilities Net cash and cash equivalents provided by operating activities Investing activities: Purchases of property, plant and equipment Return of (investment in) equity investments, net Purchases of investment securities Sales of investment securities Payments received on Affiliate notes Advances on Affiliate notes Other investing activites Net cash and cash equivalents used in investing activities Financing activities: Proceeds from restricted contributions and investment income received Proceeds from long-term borrowings Repayments of long-term debt Other financing activities Net cash and cash equivalents (used in) provided by financing activities Increase in cash and cash equivalents Cash and cash equivale nts at beginning of period Cash and cash equivale nts at end of period Page 16 of 31 $ $ 175,022 $ 179,637 137,630 57,046 (137,901) (9,722) (9,966) (6,694) (1,633) 135,285 54,587 (49,014) (83,149) (4,011) (10,072) (15,428) (97,883) (7,411) (6,546) 3,819 (7,718) (1,006) (7,556) (3,000) (22,025) 21,647 1,954 3,047 81,104 (103,896) (2,050) 3,909 837 58,595 56,228 13,855 100,952 8,396 (22,095) 3,865 3,285 329,716 (128,111) (3,956) (739,620) 714,243 6,917 (20,649) (280) (171,456) (162,230) 355 (1,190,707) 699,069 7,277 (2,216) (250) (648,702) 9,966 265,825 (291,115) 379 (14,945) (105,297) 566,331 461,034 4,011 499,520 (25,913) 13,029 490,647 171,661 425,801 597,462 $ Management’s Discussion and Analysis of Consolidated Operations and Financial Performance Three months ended December 31, 2017 compared to the three months ended December 31, 2016 Three months ended In thousands (except for ratios) Operating revenues Income from operations Excess of revenues over expenses EBIDA Operating margin percentage Total margin percentage Operating cash flow margin percentage December 31, 2017 $ $ $ $ 1,615,474 48,173 96,742 131,644 3.0% 6.0% 8.1% December 31, 2016 $ $ $ $ 1,543,069 47,028 80,910 129,582 3.0% 5.2% 8.4% Change $ $ $ $ 72,405 1,145 15,832 2,062 0.0% 0.8% -0.3% % 4.7% 2.4% 19.6% 1.6% 0.0% 15.4% -3.6% Operating revenues for the three months ended December 31, 2017 were $1.615 billion, compared to $1.543 billion for the three months ended December 31, 2016, an increase of $72.4 million, or 4.7%. Income from operations, defined as operating revenues less operating expenses, was $48.2 million and $47.0 million for the three months ended December 31, 2017 and 2016, respectively. Excess of revenues over expenses was $96.7 million for the three months ended December 31, 2017, compared to excess of revenues under expenses of $80.9 million for the three months ended December 31, 2016. Excess of revenues over expenses includes operating revenues and several non-operating revenues and expenses below income from operations that significantly affect the volatility of this key performance indicator. Non-operating revenues and expenses include interest expense on swap agreements, change in market value of swap agreements, realized and unrealized gains (losses) on investments classified as trading, and noncontrolling interests. EBIDA, defined as income from operations plus interest, depreciation and amortization, was $131.6 million for the three months ended December 31, 2017 compared to $129.6 million for the three months ended December 31, 2016. Interest, depreciation and amortization expenses that are excluded from EBIDA amounted to $83.5 and $82.6 million for the three months ended December 31, 2017 and 2016, respectively. Operating margin percentage, defined as operating revenues less operating expenses divided by operating revenues, was 3.0% for the three months ended December 31, 2017 and 2016. Operating margin percentage remained flat quarter over quarter. Total margin percentage, defined as excess of revenues over expenses divided by operating revenues, was 6.0% and 5.2% for the three months ended December 31, 2017 and 2016, respectively. Total margin is affected by interest expense on swap agreements, the change in market value of swap agreements, non-service cost components of net periodic pension cost, realized and unrealized gains (losses) on investments classified as trading, and noncontrolling interests. Operating cash flow margin percentage, defined as EBIDA divided by operating revenues, was 8.1% and Page 17 of 31 8.4% for the three months ended December 31, 2017 and 2016, respectively. Operating cash flow margin percentage decreased as operating revenues increased at a faster rate than EBIDA compared to prior year. Six months ended December 31, 2017 compared to the six months ended December 31, 2016 Six months ended In thousands (except for ratios) Operating revenues Income from operations Excess of revenues over expenses EBIDA Operating margin percentage Total margin percentage Operating cash flow margin percentage December 31, 2017 $ $ $ $ 3,190,122 81,875 179,795 249,034 2.6% 5.6% 7.8% December 31, 2016 $ $ $ $ 3,057,697 89,620 158,213 247,337 2.9% 5.2% 8.1% Change $ $ $ $ 132,425 (7,745) 21,582 1,697 -0.3% 0.4% -0.3% % 4.3% -8.6% 13.6% 0.7% -10.3% 7.7% -3.7% Operating revenues for the six months ended December 31, 2017 were $3.190 billion, compared to $3.058 billion for the six months ended December 31, 2016, an increase of $132.4 million, or 4.3%. Operating revenues increased principally due to increased enrollment at Priority Partners and Hopkins Health Advantage within JHHC, increased Maryland hospital revenues, driven by the annual HSCRC update factor under the GBR model, and increased volume-driven revenues at SMH. See further discussion of Priority Partners’ operating results below. Other revenues increased $39.2 million principally due to an increase in discharge pharmacy and other ancillary revenues. The increased discharge pharmacy revenue is partially offset by increased supply costs related to these pharmaceuticals (see below). Provision for bad debts, displayed as a deduction to arrive at net patient service revenue increased $2.5 million. Provision for bad debts as a percentage of net patient service revenues, excluding JHHC’s managed care revenues, increased slightly to 2.69% from 2.66% for the six months ended December 31, 2017 and 2016, respectively. JHHSC determines an account to be a bad debt if a patient has the ability to pay, but is not willing to pay. JHHSC estimates the amount of bad debts at the time of service. Patients who meet certain charity care criteria are those who do not have the means to pay, and are provided care without charge, or at amounts less than established rates. These patients are identified based on information obtained from the patients and may be recorded at the time of service, or upon subsequent analysis. From period to period, the amount of bad debts and charity care can differ based on final assessment of criteria. Income from operations was $81.9 million and $89.6 million for the six months ended December 31, 2017 and 2016, respectively. The decrease of ($7.7) million was mainly driven by decreased profitability at Priority Partners. Priority Partners has incurred operating losses in fiscal year 2018 driven by increased inpatient and outpatient medical expenses. In addition, increased enrollment in the Medicaid expansion population is having an unfavorable impact as capitation rates received have not yet sufficiently adjusted for the risks associated with the complex health profile of this population. This decrease was partially offset by improved profitability at SMH due to favorable net patient service revenue driven by higher inpatient and outpatient volumes across several areas, including oncology and surgical cases. Page 18 of 31 Operating expenses were $3.108 billion and $2.968 billion for the six months ended December 31, 2017 and 2016, respectively. The operating expense increase of $140.2 million is composed of the following: Salaries, wages and benefits increased $51.8 million. Salaries and wages have increased due to higher FTE’s, and annual and market-driven wage increases. Benefit costs, including employee medical benefits, also increased at some affiliates. Purchased services increased $53.9 million. The most significant portion of the purchased services increase was due to JHHC experiencing growth in its inpatient and outpatient medical expenses related to increased enrollment, primarily at Priority Partners. Supplies and other increased $25.0 million, principally due to pharmaceutical costs at JHH and volume-driven supply and drug costs at SMH. Interest expense related directly to the debt instruments is recorded in the operating section, and net settlement interest expense related to the swap agreements is presented in the nonoperating section of the Consolidated Statements of Operations and Changes in Net Assets. Interest expense included in the operating section was $28.9 million and $21.6 million for the six months ended December 31, 2017 and 2016, respectively. The increase of $7.3 million is due to interest costs associated with the new patient tower at SMH, and with the $500 million taxable borrowing that occurred in November 2016. Net settlement interest expense on the swap agreements was $10.9 million for the six months ended December 31, 2017, and $12.5 million for the six months ended December 31, 2016. Depreciation and amortization increased $2.1 million year over year, primarily due to the new SMH patient tower that was completed in September 2016. JHH, JHBMC, HCGH, SHI, and JHACH have collectively entered into fourteen fixed payor interest rate swap agreements. The notional amount of all fourteen swap agreements totals $1.026 billion as of December 31, 2017. Each of the swap agreements pays a fixed annual rate ranging from 3.3265% to 4.1330%, in return for the receipt of a floating rate of interest based on the one-month LIBOR (one tranche at 68% of LIBOR, ten tranches at 67% of LIBOR, two tranches at 62.2% of LIBOR plus 0.27%, and one tranche at 61.8% of LIBOR plus 0.25%). The value of the swap agreements are adjusted to market value monthly based upon quotations from market makers. The net settlements of interest expense and the change in market value, if any, are each recorded in the Consolidated Statements of Operations below income from operations as a separate component of excess of revenues over (under) expenses. The total amount recorded due to changes in the market value of the swap agreements was a gain of $9.7 million and $83.1 million for the six months ended December 31, 2017 and 2016, respectively. The volatility in the market value of these swap agreements is dependent on changes in longterm interest rates. The market value of the swap agreements will increase as long-term interest rates increase, and decrease as long-term interest rates decrease. Additionally, most swap agreements have certain collateral thresholds whereby, on a daily basis, if the market value of a swap agreement declines such that its devaluation exceeds the threshold, cash must be deposited with the swap counterparty for the difference between the threshold amount and the market value. Collateral is exchanged on a daily basis depending on the market value. The collateral is recorded as an other long-term asset on the Balance Sheets and cannot be used by Page 19 of 31 JHHSC for operations. All cash deposited as collateral earns interest that inures to JHHSC. As of December 31, 2017 and June 30, 2017, there was a total of $45.0 million and $46.1 million, respectively, deposited as collateral with one swap counterparty. Excess of revenues over expenses was $179.8 million for the six months ended December 31, 2017, compared to excess of revenues over expenses of $158.2 million for the six months ended December 31, 2016. Excess of revenues over expenses includes operating revenues and several non-operating revenues and expenses below income from operations that significantly affect the volatility of this key performance indicator. Income from operations decreased ($7.7) million as described above. The positive change in market value of the swap agreements was $73.4 million higher at December 31, 2016 as described above. Realized and unrealized gains on investments classified as trading were $88.9 million higher as the broader investment markets performed more favorably in the six months ended December 31, 2017 compared to the prior year. The noncontrolling interests’ share of operating income (losses) was $13.5 million for the six months ended December 31, 2017 compared to ($1.6) million in the prior year, a net change of $15.1 million, primarily related to Priority Partners. Noncontrolling interests represent the minority shareholders’ portions of income (losses) from consolidated joint ventures where JHHSC has control. EBIDA was $249.0 million for the six months ended December 31, 2017 compared to $247.3 million for the six months ended December 31, 2016. Interest, depreciation and amortization expenses that are excluded from EBIDA amounted to $167.2 and $157.7 million for the six months ended December 31, 2017 and 2016, respectively. Operating margin percentage was 2.6% and 2.9% for the six months ended December 31, 2017 and 2016, respectively. Operating margin percentage decreased for the six months ended December 31, 2017 compared to the six months ended December 31, 2016 as income from operations decreased year-over-year. Total margin percentage was 5.6% and 5.2% for the six months ended December 31, 2017 and 2016, respectively. Total margin is affected by interest expense on swap agreements, the change in market value of swap agreements, non-service cost components of net periodic pension cost, realized and unrealized gains (losses) on investments classified as trading, and noncontrolling interests. Operating cash flow margin percentage was 7.8% and 8.1% for the six months ended December 31, 2017 and 2016, respectively. Operating cash flow margin percentage decreased as operating revenues increased while EBIDA was flat compared to prior year. Page 20 of 31 Liquidity and Capital Resources In thousands (except for ratios) December 31, 2017 Cash and cash equivalents Short and long-term investments Unrestricted investments - Board of Trustees Total debt Max annual debt service coverage Debt to cash flow $ $ $ $ 461,034 3,085,790 606,030 2,105,485 3.28 4.78 June 30, 2017 $ $ $ $ 566,331 2,892,766 626,180 2,131,057 3.20 4.97 Change $ $ $ $ (105,297) 193,024 (20,150) (25,572) 0.08 (0.19) % -18.6% 6.7% -3.2% -1.2% 2.5% -3.8% Long-term investments include investments in joint ventures. Cash and cash equivalents, liquid short and long-term investments (not including investments in joint ventures), and unrestricted investments set aside by the Boards of Trustees totaled $3.887 billion and $3.824 billion as of December 31, 2017 and June 30, 2017, respectively. Total unrestricted cash, liquid investments, and Board designated investments increased $63.0 million and included the following cash flow activities during the six months ended December 31, 2017: $81.1 million of cash from operating activities, $137.9 million of realized and unrealized gains on investments and ($128.1) million for purchases of property, plant and equipment. Net cash and cash equivalents provided by operating activities were $81.1 million and $329.7 million for the six months ended December 30, 2017 and 2016, respectively. Cash and cash equivalents provided by operating activities decreased ($248.6) million principally due to the timing of a $101 million monthly June capitation payment for JHHC received in July 2016, $56.7 million of swap collateral return in the prior fiscal year and timing of payments on accounts payable and third party payor advances. Net cash and cash equivalents used in investing activities were ($171.5) million and ($648.7) million for the six months ended December 31, 2017 and 2016, respectively. Cash and cash equivalents used in investing activities for the six months ended December 31, 2017 were primarily composed of ($128.1) million of purchases of property, plant and equipment and ($25.4) million of net purchases of investment securities. Cash and cash equivalents used in investing activities for the six months ended December 31, 2016 were primarily composed of ($162.2) million of purchases of property, plant and equipment, and ($491.6) million of net purchases of investment securities. Net cash and cash equivalents (used in) provided by financing activities were ($14.9) million for the six months ended December 31, 2017, compared to $490.6 million for the six months ended December 31, 2016. Net cash and cash equivalents used in financing activities for the six months ended December 31, 2017 were primarily composed of ($291.1) million of repayments of long-term debt and $265.8 million of long-term debt proceeds. Net cash and cash equivalents provided by financing activities for the six months ended December 31, 2016 were primarily composed of $497.7 million taxable borrowing. Maximum annual debt service coverage, defined as EBIDA divided by the maximum annual debt service, increased to 3.28 as of December 31, 2017 from 3.20 as of June 30, 2017. Maximum annual debt service coverage increased due to annualized EBIDA increasing at a faster rate than the maximum annual debt service versus prior year. Page 21 of 31 Debt to cash flow, defined as debt divided by operating income plus depreciation and amortization, decreased to 4.78 as of December 31, 2017 from 4.97 as of June 30, 2017. Debt to cash flow decreased as total debt has decreased. Page 22 of 31 Consolidated Key Statistics The Johns Hopkins Hospital Admissions Outpatient observation cases (2) Inpatient Days Outpatient Visits Outpatient Surgeries Inpatient Surgeries ER Visits Births EIPAs (1) ECMADs (3) - MD hospitals only Average Length of Stay Available Beds Inpatient Utilization of Available Beds Full-time Equivalents Johns Hopkins Bayview Medical Center, Inc. Admissions Outpatient observation cases (2) Inpatient Days Outpatient Visits Outpatient Surgeries Inpatient Surgeries ER Visits Births EIPAs (1) ECMADs (3) - MD hospitals only Average Length of Stay Available Beds Inpatient Utilization of Available Beds Full-time Equivalents Howard County General Hospital, Inc. Admissions Outpatient observation cases (2) Inpatient Days Outpatient Visits Outpatient Surgeries Inpatient Surgeries ER Visits Births EIPAs (1) ECMADs (3) - MD hospitals only Average Length of Stay Available Beds Inpatient Utilization of Available Beds Full-time Equivalents Three months ended December 31, 2017 December 31, 2016 11,209 11,111 3,447 3,344 76,140 75,690 139,529 140,192 10,878 10,822 4,970 5,449 24,296 25,111 627 562 18,767 18,968 33,475 36,201 Six months ended December 31, 2017 December 31, 2016 22,700 22,987 6,851 6,272 155,653 150,684 277,227 270,385 22,227 22,354 10,942 10,893 49,671 47,954 1,237 1,143 37,755 38,145 67,421 70,461 6.6 6.5 1,003 986 84.3% 81.1% 10,496 10,469 Suburban Hospital, Inc. Admissions Outpatient observation cases (2) Inpatient Days Outpatient Visits Outpatient Surgeries Inpatient Surgeries ER Visits Births EIPAs (1) ECMADs (3) - MD hospitals only Average Length of Stay Available Beds Inpatient Utilization of Available Beds Full-time Equivalents Three months ended December 31, 2016 December 31, 2017 4,590 4,783 1,240 1,204 23,571 24,164 52,382 53,569 1,230 1,232 1,286 1,247 14,397 14,603 308 302 8,172 8,619 10,451 10,941 Six months ended December 31, 2017 December 31, 2016 9,423 9,654 2,633 2,438 47,364 47,767 105,698 107,297 2,479 2,491 2,599 2,419 29,208 29,266 657 627 16,815 17,315 21,240 21,449 5.0 5.0 350 355 73.5% 73.1% 2,935 2,909 Sibley Memorial Hospital, Inc. Admissions Outpatient observation cases Inpatient Days Outpatient Visits Outpatient Surgeries Inpatient Surgeries ER Visits Births EIPAs (1) ECMADs (3) - MD hospitals only Average Length of Stay Available Beds Inpatient Utilization of Available Beds Full-time Equivalents Three months ended December 31, 2016 December 31, 2017 4,091 4,379 1,553 1,021 16,290 17,614 12,882 16,681 1,961 2,273 730 834 19,652 19,615 875 869 6,557 7,144 6,881 7,510 Six months ended December 31, 2017 December 31, 2016 8,038 8,693 3,058 2,176 31,763 34,137 25,901 32,932 4,046 4,455 1,520 1,650 38,784 38,464 1,782 1,841 12,865 14,227 13,449 14,601 4.0 3.9 238 244 70.7% 76.0% 1,536 1,524 Johns Hopkins All Children's Hospital, Inc. Admissions Outpatient observation cases Inpatient Days Outpatient Visits Outpatient Surgeries Inpatient Surgeries ER Visits Births EIPAs (1) ECMADs (3) - MD hospitals only Average Length of Stay Available Beds Inpatient Utilization of Available Beds Full-time Equivalents (1) Equivalent inpatient admissions ("EIPAs") are calculated by dividing total gross revenues by gross inpatient revenues and multiplying the result by inpatient admissions. (2) Includes extended recovery. (3) Equivalent casemix adjusted discharges ("ECMADs") is a critical volume metric considered by the HSCRC in its evaluations of GBR for hospitals in the State of Maryland. All Hospitals Combined Admissions Outpatient observation cases Inpatient Days Outpatient Visits Outpatient Surgeries Inpatient Surgeries ER Visits Births EIPAs (1) ECMADs (3) - MD hospitals only Full-time Equivalents Page 23 of 31 Three months ended December 31, 2017 December 31, 2016 3,556 3,416 2,048 2,195 15,201 15,258 4,365 4,663 1,091 1,539 1,457 1,604 11,566 11,966 5,732 5,785 7,667 8,067 Six months ended December 31, 2017 December 31, 2016 6,993 6,801 4,133 4,212 29,947 30,004 9,181 9,467 2,241 2,930 2,962 3,089 23,038 23,654 11,292 11,302 15,439 15,618 4.3 4.4 211 208 78.0% 78.0% 1,430 1,411 Three months ended December 31, 2017 December 31, 2016 2,915 2,688 749 686 11,599 10,652 22,490 18,049 2,109 2,010 756 694 9,161 10,074 969 860 5,966 7,014 - Six months ended December 31, 2017 December 31, 2016 5,754 5,415 1,412 1,373 22,950 21,161 42,237 35,165 4,042 3,927 1,468 1,351 19,502 19,152 1,960 1,782 13,407 12,020 4.0 3.9 202 193 61.6% 59.7% 1,706 1,688 Three months ended December 31, 2017 December 31, 2016 1,732 1,785 793 754 13,512 15,236 73,240 69,477 1,631 1,800 548 547 12,615 12,515 2,947 2,869 - Six months ended December 31, 2017 December 31, 2016 3,344 3,500 1,417 1,526 27,055 30,208 139,561 140,010 3,237 3,586 1,091 1,146 23,234 23,966 5,620 5,598 8.1 8.1 259 259 57.0% 58.0% 2,565 2,439 Three months ended December 31, 2017 December 31, 2016 28,093 28,162 Six months ended December 31, 2017 December 31, 2016 56,252 57,050 9,755 156,313 304,888 18,900 9,747 92,600 2,779 49,189 58,474 9,279 158,614 302,631 19,676 10,375 92,971 2,593 49,351 62,719 19,504 314,732 599,805 38,272 20,582 181,400 5,636 97,754 117,549 20,656 17,997 313,961 595,256 39,743 20,548 184,493 5,393 98,607 122,129 20,452 Inpatient Payor Mix Six Months Ended December 31, 2016 Six Months Ended December 31, 2017 (JHH, JHBMC, HCGH, SHI, SMH and JHACH only) Blue Cross Medicare Medicaid/Medicaid MCO Self Pay/MA Pending Commercial HMO Other Gross Revenue 16.72% 33.04% 24.89% 0.79% 6.76% 15.29% 2.51% 100.00% Page 24 of 31 Days 14.98% 35.11% 25.48% 0.78% 6.76% 15.06% 1.83% 100.00% Gross Revenue 16.69% 32.69% 23.72% 0.99% 7.16% 16.18% 2.57% 100.00% Days 14.68% 34.81% 24.86% 1.03% 7.17% 15.46% 1.99% 100.00% Other Significant Events JHHS 2017B Series Tax-Exempt Revenue Bonds (“2017B Bonds”) In October 2017, JHHSC closed the Series 2017B tax-exempt bond issuance of $165.8 million to refund its JHH 2012C and JHH 2012D series revenue bonds. The Series 2017B bond is subject to mandatory purchase in October 2024. The bond pays principal annually and interest monthly based on a floating rate equal to 69.5% of one-month LIBOR plus 47 basis points. JHHS 2012E/2017C Series Tax-Exempt Revenue Bonds (“2012E/2017C Bonds”) On November 1 2017, JHHSC closed on a transaction that amended certain terms relating to the Series 2012E Bonds pursuant to which the 2012E Bonds were re-designated as the 2012E/2017C Bond. The principal amount outstanding of the 2012E/2017C Bond shall not at any one time exceed the principal amount of $100 million. On November 1, an initial advance of the proceeds of the 2012E/2017C Bond in the principal amount of $60.75 million was made. A second advance of proceeds of the 2012E/2017C Bond, in the amount of $39.25 million, was made on November 16. The Series 2012E/2017C Bond is subject to mandatory purchase in November 2022. Interest is due monthly based on a floating rate equal to 67% of one-month LIBOR plus 45 basis points. New Accounting Standards In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments in this Update require employers to report the service cost component of pension expense in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost, such as interest cost, amortization of prior service cost, and gains or losses on pension plan assets, are required to be presented separately, outside of net operating income. JHHSC adopted this new accounting standard in fiscal 2017. The adoption of this accounting standard had no impact to Excess of revenues over expenses on the Consolidated Statements of Operations and Changes in Net Assets or to the Consolidated Balance Sheets or Statements of Cash Flows. Page 25 of 31 Consolidating Financial Statements Supplementary Consolidating Financial Statements The Johns Hopkins Health System Corporation and Affiliates Supplemental Consolidating Balance Sheets As of December 31, 2017 (in thousands) (Unaudited) JHH Current Assets: Cash and cash equivalents Short-term investments AWUIL used for current liabilities Patient accounts receivable, net of est uncollectibles Due from others, current portion Due from affiliates, current portion Inventories of supplies Prepaid expenses and other current assets $ Total current assets Assets whose use is limited: By donors or grantors for: Construction funds Future campus development Pledges receivable Other By Board of Trustees Interest in net assets of HHF/ACF Other Total assets whose use is limited Investments Property, plant and equipment Less: allowance for depreciation and amortization Total property, plant and equipment, net Due from affiliates, net of current portion Due from others, net of current portion Other assets Total assets Current liabilities: Current portion of long-term debt and capital leases Accounts payable and accrued liabilities Medical claims reserve Deferred revenue Due to affiliates, current portion Accrued vacation Advances from third-party payors Current portion of estimated malpractice costs Total current liabilites LT debt and capital leases, net of current portion Estimated malpractice costs, net of current portion Net pension liability Due to affiliates, net of current portion Other long-term liabilities Total liabilities Net assets: Unrestricted Temporarily restricted Permanently restricted Total net assets Total liabilities and net assets JHBMC 74,741 4,677 313,154 48,333 20,465 66,645 35,539 $ HCGH 9,853 150 65,364 7,296 191 10,839 5,021 $ SHI 6,865 49 35,620 598 818 4,660 2,617 $ SMH 11,514 204 1,479 31,976 3,159 2,130 11,514 5,923 $ JHACH 29,996 942 34,839 5,075 5,482 6,208 $ JHHSC 15,127 100 65,991 9,099 37,847 12,368 10,847 $ SHHS 154,159 157,184 5,174 67,888 4,859 4,584 $ Eliminations 115 15 134 178 162 376 563,554 98,714 51,227 67,899 82,542 151,379 393,848 980 853 938 68,180 7,583 161 7,744 48,847 956 23,988 18,752 133 6,852 25,752 21,855 32 11,136 54,449 426,541 - 129 7,047 15,754 70,089 - 16,346 222 77,554 1,007,821 57,708 77,867 42,873 141,391 54,491 333,520 492,126 409,842 93,019 418,031 16,346 253,167 2,296,412 (1,003,547) 521,183 (316,491) 275,819 (129,981) 303,733 (149,839) 634,827 (130,815) 605,741 (198,329) 1,292,865 204,692 145,838 153,894 504,012 147,715 591 2,603 2,473 734 - - - - 28,078 2,432 952 - $ (50,677) - JHHC 302,370 158,629 6,156 546,959 78,868 78,840 116,529 71,115 $ 115,203 55,784 24,078 37,734 29,847 $ Eliminations 43,461 129 15,886 7,820 65,056 204 6,733 $ Combined JHHSC & Affiliates - $ (38,239) (144,333) - 461,034 158,758 6,156 580,390 110,766 37,297 116,733 107,695 262,646 139,289 (182,572) 1,578,829 - 853 19,216 94,992 605,165 88,841 25,272 200 11,957 19,089 865 - (88,841) - 853 31,173 114,081 606,030 25,472 222 24,781 - 834,339 2,666,420 200 208,393 31,911 163,190 (88,841) (110,971) 777,609 2,927,032 151,043 (83,052) 79,540 (41,663) - 4,868,298 (2,053,717) 69,553 (30,004) 130,302 (85,959) 407,412 67,991 37,877 - 2,814,581 39,549 44,343 549 1,412,470 - 155,988 - 1,081 - - - - - - - - - - 782 15,111 5,535 8,409 1,561 - 62,860 8,784 50,571 1 122,216 $ 1,504,367 $ 1,075,925 $ 2,152,231 $ 65,421 $ $ $ $ 1,830 487 1,310 77 - $ 442,004 $ 384,884 $ 613,059 $ $ 6,268 50,108 5,949 7,000 6,247 15,317 3,086 $ 20,445 361 9,686 6,678 10,347 1,171 $ 40,080 129 5,626 7,234 7,283 949 49,331 1,362 6,458 9,414 2,597 1,975 38,922 1,263 60,356 4,567 6,019 7,880 257,452 85,513 375 4,340 15,737 - (50,677) All Other Affiliates 1,359,466 $ 3,117,587 19,799 173,134 32,333 20,573 78,516 26,640 $ JHHS Obligated Group Subtotal (1,411,147) - 5,068,153 (2,169,680) - 2,898,473 (47,748) 109,321 $ (1,461,824) $ 7,893,654 $ 519,572 $ 430,385 $ (430,131) $ 8,413,480 $ $ 362 68,499 151,886 115,412 22,819 - $ 51,172 1,638 55,992 5,550 4,650 $ - $ (39,811) (142,760) - - $ (50,677) - 287,324 458,020 9,439 76,432 70,527 117,482 42,323 287,686 577,691 112,075 126,489 12,483 76,077 117,482 46,973 350,995 152,887 73,914 397,251 604,183 192,746 93,975 60,095 11,469 164,452 57,767 8,193 48,688 3,973 1,712 171,416 17,935 61,301 1,961 4,102 138,250 3,490 69,162 8,492 303,780 13,272 120,982 89,925 19,734 129,370 29,496 363,417 1,487,301 217,160 6,380 3,150 3,704 26,924 239 (50,677) (1,411,147) - 1,061,547 1,817,132 119,543 784,677 (1) 268,521 358,978 667 1,781 3,674 119,002 13,211 47,541 5,448 (182,571) (47,748) - 1,356,956 1,817,799 132,754 784,677 1,573 277,643 1,771,976 395,951 243,724 209,104 394,706 389,507 2,077,408 30,867 (1,461,824) 4,051,419 365,100 185,202 (230,319) 4,371,402 1,317,836 27,775 - 38,147 3,382 4,524 128,560 9,200 3,400 373,212 18,809 11,934 1,061,969 34,066 13,626 667,078 5,476 13,864 71,256 3,567 - 34,554 - - 3,692,612 102,275 47,348 154,472 - 121,793 93,118 30,272 (117,882) (66,869) (15,061) 3,850,995 128,524 62,559 - 3,842,235 (199,812) 4,042,078 1,345,611 $ 3,117,587 46,053 $ 442,004 141,160 $ 384,884 $ 403,955 1,109,661 686,418 74,823 613,059 $ 1,504,367 $ 1,075,925 $ 2,152,231 Page 26 of 31 34,554 $ 65,421 $ (1,461,824) $ 7,893,654 154,472 $ 519,572 245,183 $ 430,385 $ (430,131) $ 8,413,480 The Johns Hopkins Health System Corporation and Affiliates Supplemental Consolidating Balance Sheets As of June 30, 2017 (in thousands) (Extracted from audited Financial Statements) JHH Current Assets: Cash and cash equivalents Short-term investments AWUIL used for current liabilities Patient accounts receivable, net of est uncollectibles Due from others, current portion Due from affiliates, current portion Inventories of supplies Prepaid expenses and other current assets $ Total current assets Assets whose use is limited: By donors or grantors for: Future campus development Pledges receivable Other By Board of Trustees Interest in net assets of HHF/ACF Other Total assets whose use is limited Investments Property, plant and equipment Less: allowance for depreciation and amortization Total property, plant and equipment, net Due from affiliates, net of current portion Due from others, net of current portion Other assets Total assets Current liabilities: Current portion of long-term debt and capital leases Accounts payable and accrued liabilities Medical claims reserve Deferred revenue Due to affiliates, current portion Accrued vacation Advances from third-party payors Current portion of estimated malpractice costs Total current liabilites LT debt and capital leases, net of current portion Estimated malpractice costs, net of current portion Net pension liability Due to affiliates, net of current portion Other long-term liabilities Total liabilities Net assets: Unrestricted Temporarily restricted Permanently restricted Total net assets Total liabilities and net assets JHBMC 85,367 12,704 305,228 46,006 16,398 64,250 35,470 $ HCGH 6,828 150 57,155 6,683 1,899 10,695 4,704 $ SHI 7,445 49 30,675 791 336 4,661 2,542 $ SMH 11,202 204 1,479 30,007 3,850 2,364 10,297 4,539 $ JHACH 37,147 1,048 27,785 5,554 5,315 6,301 $ JHHSC 28,050 300 53,520 3,344 1,941 12,326 12,927 $ SHHS 216,326 150,256 4,772 59,209 4,899 2,499 $ Eliminations 73 38 136 236 162 73 565,423 88,114 46,499 63,942 83,150 112,408 437,961 718 853 1,288 67,941 9,311 161 7,752 43,492 930 30,000 18,079 133 6,331 21,312 36,905 281 12,325 49,221 427,361 - 177 7,059 19,616 69,619 - 14,973 190 79,393 939,266 52,335 94,623 48,212 136,809 64,829 312,720 488,907 360,595 96,471 424,656 14,973 197,282 2,307,144 (980,519) 513,157 (303,157) 268,035 (123,639) 284,929 (147,427) 595,000 (114,548) 583,312 (185,577) 1,326,625 210,000 144,396 137,502 480,452 153,871 436 320 2,537 543 - - - - 28,078 2,432 945 853 34,912 103,696 626,180 26,018 190 22,882 - 845,310 2,488,833 200 196,975 33,847 148,697 (87,698) (94,173) 791,659 2,740,332 148,133 (78,162) 79,743 (40,514) - 4,779,453 (1,973,543) 65,600 (24,247) 126,648 (83,348) 397,735 69,971 39,229 - 2,805,910 41,353 43,300 405 1,152,349 - 145,336 - 1,329 - - - - - - - - - - 777 13,694 5,535 6,556 1,465 - 59,482 9,322 51,807 - 120,611 $ 1,427,341 $ 1,037,210 $ 1,879,092 $ 64,484 $ $ $ $ 1,706 501 145 $ 20,399 401 10,143 $ 32,986 170 5,558 35,691 1,577 7,090 1,900 41,596 2,322 34,818 247,288 102,185 375 5,197 20,511 91,478 26,640 6,282 21,045 3,086 6,528 10,305 1,171 7,837 7,658 949 11,476 2,597 4,934 9,021 7,984 15,908 - 89 - 615,112 165,241 72,986 382,682 353,133 199,726 96,986 65,995 10,133 161,234 57,767 9,036 48,947 3,918 1,649 175,764 18,310 55,158 1,934 4,487 138,250 3,621 58,431 8,304 303,780 11,041 102,575 91,900 19,734 131,720 30,316 370,953 1,236,503 211,387 4,712 3,590 2,441 27,860 219 1,788,880 401,151 248,588 203,450 381,556 376,245 1,827,145 30,520 1,277,176 26,600 - 38,876 3,389 4,524 116,246 8,947 3,400 351,214 16,709 10,934 999,023 33,171 13,591 642,152 5,431 13,382 49,499 2,448 - 33,964 - $ 566,331 152,434 14,183 539,552 93,437 30,917 112,809 114,394 (87,698) - 5,838 46,894 5,966 7,875 128,593 - $ (39,311) (85,269) - 14,630 18,352 865 - $ 377,181 $ 200 $ $ 47,351 427 17,881 6,547 42,402 204 6,425 853 20,282 85,344 625,315 87,698 25,818 582,307 46,789 $ - $ 447,940 126,542 56,574 15,754 30,195 38,914 1,624,057 377,181 $ $ (124,580) $ 1,303,776 392,438 152,007 14,183 504,408 71,136 43,589 112,605 69,055 Eliminations 121,237 447,940 378,857 1,045,785 660,965 51,947 582,307 $ 1,427,341 $ 1,037,210 $ 1,879,092 Page 27 of 31 33,964 $ 64,484 (38,794) JHHC Combined JHHSC & Affiliates 267,979 $ $ 3,092,656 - $ (38,794) - All Other Affiliates 1,359,421 $ 3,092,656 285,464 168,460 22,559 $ JHHS Obligated Group Subtotal (1,165,125) $ 515,829 $ 400,217 $ $ $ 579 58,767 161,207 117,232 19,874 $ 54,112 1,081 21,444 $ - 542,196 448,712 10,811 54,591 4,971,701 (2,081,138) - 2,890,563 (50,275) $ (1,203,919) $ 7,704,292 - $ (38,794) - 96,390 (356,726) $ 8,263,612 - $ (41,576) (83,004) 73,565 139,507 42,427 - 4,707 4,817 (38,794) (1,165,125) - 1,311,809 1,587,499 117,009 761,439 1 275,859 357,659 783 2,025 3,638 86,161 13,048 49,650 4,831 (124,580) (50,275) - 1,631,049 1,588,282 130,057 761,439 1,401 284,328 (1,203,919) 4,053,616 364,105 153,690 (174,855) 4,396,556 - 3,508,150 96,695 45,831 151,724 - 124,022 93,457 29,048 (100,351) (66,904) (14,616) 3,683,545 123,248 60,263 - 3,650,676 (181,871) 3,867,056 $ (1,203,919) $ 7,704,292 151,724 $ 515,829 - 542,775 561,591 119,631 129,124 12,905 246,527 $ 400,217 $ 78,272 139,507 47,244 (356,726) $ 8,263,612 The Johns Hopkins Health System Corporation and Affiliates Supplemental Consolidating Statements of Operations and Changes in Net Assets For the Three Months Ended December 31, 2017 (in thousands) (Unaudited) JHH JHBMC HCGH SHI SMH JHACH JHHSC JHHS Obligated Eliminations Group Subtotal SHHS All Other Affiliates JHHC Eliminations Combined JHHSC & Affiliates Operating revenues: Net patient service revenue before provision for bad debts Provision for bad debts 509,316 $ (10,537) 147,613 $ (5,070) 69,532 $ (1,643) 69,594 $ (1,818) 86,529 $ (2,063) 109,437 $ (3,389) 498,779 142,543 67,889 67,776 84,466 106,048 - 90,512 13,501 1,484 4,730 10,065 12,560 90,040 2,478 5,356 17 966 180 974 109 1,850 439 4,728 628 4,261 97 14,106 - 87 - 594,664 157,190 70,456 74,795 99,887 122,966 104,146 3,280 Salaries, wages and benefits 205,412 65,463 32,873 32,319 38,390 53,915 47,724 400 Purchased services 177,458 56,190 19,029 16,918 17,027 32,796 35,051 1,068 Supplies and other 154,266 25,963 9,872 18,602 24,231 17,880 1,985 4,429 31,057 889 7,438 1,503 3,392 943 4,004 3,215 8,039 992 6,371 Total operating expenses 572,622 155,943 66,669 72,786 90,902 Income (loss) from operations 22,042 1,247 3,787 2,009 8,985 Net patient service revenue Other revenue Investment income Net assets rel fr restrictions used for operations Total operating revenues $ - $ 716 $ (1) 715 - $ 992,737 $ (24,521) 493,661 $ (1,178) 176,753 $ (2,051) (241,971) $ - 1,421,180 (27,750) - 968,216 492,483 174,702 (241,971) 1,393,430 (64,504) 160,866 32,959 47,962 (48,218) 193,569 - 32,328 1,470 729 - 1,582 2,183 (9,817) - 24,822 3,653 1,162,880 526,171 226,429 (300,006) 1,615,474 (64,504) Operating expenses: Interest Depreciation and amortization - 476,496 34,229 77,596 (2,952) 585,369 (54,225) 301,312 481,079 140,708 (287,202) 635,897 468 - 253,267 2,035 7,262 - 11,926 3,299 640 728 (10,279) - 14,258 64,328 152 3,115 96 1,557 (35) - 14,471 69,000 111,954 99,985 3,304 (64,504) 227,219 (290,189) 1,567,301 11,012 4,161 (9,817) 48,173 (5,399) 1,109,661 520,610 (24) - 53,219 5,561 (790) 262,564 Non-operating revenues and expenses: Interest expense on swap agreements Change in market value of swap agreements Realized and unrealized gains on investments Other components of net periodic pension cost Other (3,934) (375) (307) (118) - - - - (5,399) - - - 5,900 692 430 166 - 2,169 - - - 9,357 - - - 9,357 17,593 1,431 1,673 7,662 28,936 7,636 (1,458) 352 - 63,825 (509) 2,565 - 65,881 (10,064) (2,805) (3,301) - 144 (1,408) (2,985) (2,614) (1,509) - - (15,871) (8,432) (945) - (1,174) 4 (123) 275 87 - (665) 365 (17,990) (8,063) Excess of revenues over (under) expenses before NCI Noncontrolling interests 28,732 - (306) - 5,735 - 9,806 - 36,657 - 17,167 - (1,420) - 328 - - 96,699 - 4,107 3,761 605 327 (9,452) 695 91,959 4,783 Excess of revenues over (under) expenses 28,732 (306) 5,735 9,806 36,657 17,167 (1,420) 328 - 96,699 7,868 932 (8,757) 96,742 - - 17,300 - - 398 (1,278) (394) 1,278 - 4 4 - 718 159 - (3,761) 244 (327) 455 (8,503) 92,755 2,022 (304) 7,580 Contributions (to) from affiliates (17,000) - 97 1 - - 131 - 587 2 - - - 149 - 5,963 10,395 36,657 17,172 15,884 477 - 97,974 2,829 326 3,065 1,452 88 177 - - 5,862 - 4 Net assets released from restrictions used for purchase of property, plant, and equipment Other Noncontrolling interests Increase (decrease) in unrestricted net assets (306) 11,732 - - (329) (695) 718 74 (4,783) Changes in temporarily restricted net assets: Gifts, grants and bequests 605 149 Net assets released from restrictions used for purchase of property, plant, and equipment (131) (587) (17) - (180) - (109) - (439) - Increase (decrease) in temporarily restricted net assets 588 (31) 86 Changes in permanently restricted net assets: Gifts, grants and bequests - - Increase in permanently restricted net assets - - Net assets rel fr restrictions used for operations Other Increase (decrease) in net assets Net assets at beginning of period Net assets at end of period - - 12,320 1,333,291 $ 1,345,611 (337) 46,390 $ 46,053 - - - - (718) - - (628) - (97) - - - - (1,470) - - (2,183) (240) 2,039 824 (9) 177 - - 3,674 - - - 35 203 - - - 238 - - 35 203 - - - 238 12,434 391,521 37,516 1,072,145 17,366 669,052 16,061 58,762 477 34,077 - 101,886 3,740,349 403,955 $ 1,109,661 6,049 135,111 $ 141,160 $ - $ 686,418 Page 28 of 31 $ 74,823 $ 34,554 $ - $ 3,842,235 (718) 240 (3,653) - (401) (64) 3,209 - 467 (186) 519 - 467 (186) 519 521 244,662 (8,753) (191,059) 96,483 3,945,595 (199,812) $ 4,042,078 2,829 151,643 $ - 154,472 $ 245,183 $ The Johns Hopkins Health System Corporation and Affiliates Supplemental Consolidating Statements of Operations and Changes in Net Assets For the Three Months Ended December 31, 2016 (in thousands) (Unaudited) JHH JHBMC HCGH SHI SMH JHACH JHHSC JHHS Obligated Eliminations Group Subtotal SHHS All Other Affiliates JHHC Eliminations Combined JHHSC & Affiliates Operating revenues: Net patient service revenue before provision for bad debts Provision for bad debts Net patient service revenue Other revenue Investment income Net assets rel fr restrictions used for operations Total operating revenues $ 496,906 $ (10,798) 146,806 $ (5,258) 67,509 $ (1,575) 69,463 $ (1,787) 70,840 $ (2,524) 105,173 $ (853) - $ 2,560 $ (6) - 486,108 141,548 65,934 67,676 68,316 104,320 - 2,554 79,634 12,576 1,367 5,310 8,680 11,936 80,233 1,987 4,460 39 666 267 1,338 - 1,578 386 4,621 3,282 2,044 205 15,784 - 89 - - 570,241 155,057 68,639 74,950 84,899 118,505 96,017 4,630 $ 959,257 $ (22,801) 460,930 $ (1,590) 168,902 $ (3,836) (221,273) $ - 1,367,816 (28,227) - 936,456 459,340 165,066 (221,273) 1,339,589 (57,157) 144,566 29,697 41,706 (42,381) 173,588 30,580 4,179 276 - 3,438 228 (8,809) - 25,485 4,407 1,115,781 489,313 210,438 (272,463) 1,543,069 (57,157) Operating expenses: Salaries, wages and benefits 196,428 65,593 31,316 31,642 39,232 51,686 42,390 1,145 - 459,432 32,073 71,369 (2,758) 560,116 Purchased services 171,460 51,491 17,403 17,449 18,028 27,969 36,246 1,819 (49,745) 292,120 438,307 133,598 (260,896) 603,129 Supplies and other 147,792 26,257 10,839 18,138 19,182 16,884 616 629 - 240,337 2,345 7,560 - 250,242 4,781 32,928 787 7,349 1,417 3,297 508 3,352 2,638 7,643 1,129 6,700 7,795 4,336 674 766 (7,412) - 12,317 66,371 101 2,032 36 1,697 - 12,454 70,100 Total operating expenses 553,389 151,477 64,272 71,089 86,723 104,368 91,383 5,033 (57,157) 1,070,577 474,858 214,260 Income (loss) from operations 16,852 3,580 4,367 3,861 (1,824) 14,137 4,634 45,204 14,455 Interest Depreciation and amortization (403) - (3,822) (263,654) 1,496,041 (8,809) 47,028 Non-operating revenues and expenses: Interest expense on swap agreements (4,418) Change in market value of swap agreements 60,088 (492) (356) 2,334 5,825 (173) - 366 - 11,682 (784) - - - (6,223) - - - (6,223) - - - 80,295 - - - 80,295 Realized and unrealized gains on investments (3,907) (1,023) (1,056) (1,439) (1,063) (1,522) (2,796) (27) - (12,833) - (244) - (13,077) Other components of net periodic pension cost Other (7,860) (2,109) (3,057) 33 (153) 44 (96) 58 234 (19) (4,426) (2,163) (1,168) - - (13,095) (7,587) (588) (6,458) (987) (15) - (14,670) (14,060) Excess of revenues over (under) expenses before NCI Noncontrolling interests 58,646 - 1,375 - 8,671 - 2,577 - (2,672) - 19,087 - (1,493) - (430) 25 - 85,761 25 7,409 1,615 (5,068) 192 (8,809) (215) 79,293 1,617 Excess of revenues over (under) expenses 58,646 1,375 8,671 2,577 (2,672) 19,087 (1,493) (405) - 85,786 9,024 (4,876) (9,024) 80,910 - - - - 1,761 390 - - 1,749 (2) (2,076) - - 98 - - - 65 - 2,790 - 65 (21) - (58) (25) - 3,018 (79) (25) (1,615) 1,744 (192) 23,638 (1,059) (488) - 90,449 7,407 (5,400) 482 (1) - 4,933 - Contributions (to) from affiliates (402) (329) Net assets released from restrictions used for purchase of property, plant, and equipment Other Noncontrolling interests Increase (decrease) in unrestricted net assets 58,646 1,473 8,269 2,577 (2,607) 211 115 1,336 1,008 1,782 215 3,018 1,665 (1,617) (8,809) 83,647 1,207 5,695 Changes in temporarily restricted net assets: Gifts, grants and bequests - (445) Net assets released from restrictions used for purchase of property, plant, and equipment (98) - (65) (2,790) (65) - - (3,018) - - (3,018) (39) - (267) - - (386) - (3,282) - (205) - (644) - - (4,179) (644) - (228) - - (4,407) (644) Increase (decrease) in temporarily restricted net assets 172 (250) 1,336 622 (1,565) (2,513) (710) - - (2,908) - (673) 1,207 (2,374) Changes in permanently restricted net assets: Gifts, grants and bequests - - - 1 - (61) - - - (60) - 141 61 Increase in permanently restricted net assets - - - 1 - (61) - - - (60) - 141 61 (1,769) 87,345 (488) 35,967 - Net assets rel fr restrictions used for operations Other Increase (decrease) in net assets Net assets at beginning of period Net assets at end of period - 58,818 1,118,340 $ 1,177,158 1,223 20,921 $ 22,144 - 9,605 111,468 $ 121,073 3,200 346,318 $ 349,518 (4,172) 1,001,203 $ 997,031 21,064 619,111 $ Page 29 of 31 640,175 $ 85,576 $ 35,479 $ - 87,481 3,340,673 $ 3,428,154 - 7,407 124,147 $ 131,554 (5,932) 214,598 $ 208,666 $ 142 142 (7,541) (127,125) 81,415 3,552,293 (134,666) $ 3,633,708 The Johns Hopkins Health System Corporation and Affiliates Supplemental Consolidating Statements of Operations and Changes in Net Assets For the Six Months Ended December 31, 2017 (in thousands) (Unaudited) JHH JHBMC HCGH SHI SMH JHACH JHHSC JHHS Obligated Eliminations Group Subtotal SHHS All Other Affiliates JHHC Consolidated JHHSC & Affiliates Eliminations Operating revenues: Net patient service revenue before provision for bad debts Provision for bad debts Net patient service revenue Other revenue Investment income Net assets rel fr restrictions used for operations Total operating revenues $ 1,022,830 $ (19,938) 295,359 $ (10,727) 139,829 $ (3,488) 139,835 $ (4,060) 165,526 $ (4,747) 214,157 $ (7,000) - $ 1,002,892 284,632 136,341 135,775 160,779 207,157 176,192 26,371 2,568 9,512 18,638 25,145 179,859 4,830 9,048 27 1,671 344 1,716 215 3,011 768 7,709 1,152 6,531 271 29,937 - 142 - 1,188,159 313,018 140,840 149,066 188,278 239,104 209,796 6,417 - 1,445 - $ 1,445 - $ 1,978,981 $ (49,960) 984,530 $ (2,710) 345,924 $ (4,376) (488,198) $ 2,821,237 (57,046) 1,929,021 981,820 341,548 (488,198) 2,764,191 315,644 62,726 94,327 (95,755) 376,942 59,765 2,777 1,612 - 2,447 3,062 (20,674) - 43,150 5,839 2,307,207 1,046,158 441,384 (604,627) 3,190,122 951,731 67,633 152,434 (5,765) 1,166,033 596,742 959,840 277,711 (578,116) 1,256,177 - 501,282 4,155 13,441 (127,471) (127,471) Operating expenses: Salaries, wages and benefits 409,199 131,541 65,122 64,735 76,762 108,561 95,001 810 Purchased services 353,910 111,164 38,476 34,008 34,146 62,824 67,856 2,077 Supplies and other 308,605 51,182 20,103 36,699 45,150 35,283 3,311 949 8,879 62,571 1,751 15,182 3,005 6,343 1,779 7,862 6,116 16,268 2,063 12,821 23,445 6,382 1,289 1,474 (19,752) - 28,575 128,903 264 6,294 Total operating expenses 1,143,164 310,820 133,049 145,083 178,442 221,552 195,995 6,599 (127,471) Income (loss) from operations 44,995 2,198 7,791 3,983 9,836 17,552 13,801 (1,339) - Interest Depreciation and amortization (107,719) - 518,878 154 3,041 (72) - 28,921 138,238 446,781 2,207,233 1,038,186 (583,953) 3,108,247 - 99,974 7,972 (5,397) (20,674) 81,875 - - (10,877) - - - (10,877) - - 9,722 - - - 9,722 6,068 - 137,871 932 (35,946) (16,343) (182) Non-operating revenues and expenses: Interest expense on swap agreements Change in market value of swap agreements Realized and unrealized (losses) gains on investments Other components of net periodic pension cost Other (7,928) (618) (237) - 7,201 1,012 (755) 478 285 - 38,700 3,418 4,203 16,707 (20,128) (5,180) (6,602) - (247) 159 148 - 746 54,522 15,663 (1,603) 766 - 132,376 (573) 341 (1,753) (7,700) (5,042) (2,807) - - (31,530) (17,281) (1,805) - (2,611) 6 Excess of revenues over (under) expenses before NCI Noncontrolling interests 57,660 - (729) - 11,766 - 20,886 - 62,946 - 24,922 - 4,349 - 584 - - 182,384 - 5,594 11,358 (1,934) 563 (19,742) 1,572 166,302 13,493 Excess of revenues over (under) expenses 57,660 (729) 11,766 20,886 62,946 24,922 4,349 584 - 182,384 16,952 (1,371) (18,170) 179,795 17,400 - - 617 (2,846) (612) 2,846 - - (11,358) 317 (563) (635) (1,572) 1,442 (299) (13,493) 2,748 (2,229) (17,531) 167,450 3,269 (511) 12,557 Contributions from (to) affiliates (17,000) - 217 - - - - - 331 - 1,111 1 - - 4 8 6 - - - - 1,442 19 - 12,314 21,998 62,946 24,926 21,757 590 - 184,462 799 3,979 2,047 316 1,119 - - 9,799 - (331) (1,111) (215) - (768) - 5 Net assets released from restrictions used for purchase of property, plant, and equipment Other Noncontrolling interests Increase (decrease) in unrestricted net assets 40,660 (729) 1,202 337 Changes in temporarily restricted net assets: Gifts, grants and bequests Net assets released from restrictions used for purchase of property, plant, and equipment Net assets rel fr restrictions used for operations Other Increase in temporarily restricted net assets - - (27) - (344) (7) 1,175 - - (1,152) - - - - (1,442) - - - (1,442) (271) - - - - (2,777) - - (3,062) (546) 546 (5,839) - (339) 35 5,276 2,296 253 2,100 895 45 1,119 - - 5,580 - Changes in permanently restricted net assets: Gifts, grants and bequests - - - 1,000 35 482 - - - 1,517 - 1,224 (445) Increase in permanently restricted net assets - - - 1,000 35 482 - - - 1,517 - 1,224 (445) 2,296 25,098 378,857 63,876 1,045,785 25,453 660,965 22,876 51,947 590 33,964 - 191,559 3,650,676 (17,941) (181,871) 175,022 3,867,056 403,955 $ 1,109,661 Increase (decrease) increase in net assets Net assets at beginning of period Net assets at end of period 41,835 1,303,776 $ 1,345,611 (736) 46,789 $ 46,053 12,567 128,593 $ 141,160 $ $ Page 30 of 31 686,418 $ 74,823 $ 34,554 $ - $ 3,842,235 2,748 151,724 $ 154,472 (1,344) 246,527 $ 245,183 $ (199,812) $ 4,042,078 The Johns Hopkins Health System Corporation and Affiliates Supplemental Consolidating Statements of Operations and Changes in Net Assets For the Six Months Ended December 31, 2016 (in thousands) (Unaudited) JHH JHBMC HCGH SHI SMH JHACH JHHSC JHHS Obligated Eliminations Group Subtotal SHHS All Other Affiliates JHHC Consolidated JHHSC & Affiliates Eliminations Operating revenues: Net patient service revenue before provision for bad debts Provision for bad debts 997,235 $ (18,085) 290,181 $ (8,691) 135,005 $ (3,155) 136,041 $ (3,054) 141,473 $ (5,278) 207,104 $ (5,332) Net patient service revenue 979,150 281,490 131,850 132,987 136,195 201,772 Other revenue 159,014 26,374 2,331 10,393 17,099 25,690 159,339 4,194 7,324 158 950 433 1,711 - 2,236 743 7,087 3,793 3,692 277 29,006 - 134 - 1,145,646 309,247 135,892 146,359 164,174 231,431 188,345 9,400 Investment income Net assets rel fr restrictions used for operations Total operating revenues $ - $ - 5,081 $ (9) 5,072 - $ (113,324) (113,324) 1,912,120 $ (43,604) 923,259 $ (2,995) 339,211 $ (7,988) (445,472) $ 2,729,118 (54,587) 1,868,516 920,264 331,223 (445,472) 2,674,531 291,110 46,663 84,410 (84,430) 337,753 52,140 5,404 441 - 4,343 1,564 (18,479) - 38,445 6,968 2,217,170 967,368 421,540 (548,381) 3,057,697 Operating expenses: Salaries, wages and benefits 395,938 129,237 63,315 63,031 76,960 103,369 84,544 2,184 - 918,578 60,706 140,447 (5,507) 1,114,224 Purchased services 347,556 103,564 35,359 33,802 34,960 55,431 70,223 3,614 (99,759) 584,750 870,246 271,701 (524,395) 1,202,302 Supplies and other 294,031 51,477 21,261 34,912 36,741 34,743 1,240 1,290 - 475,695 4,303 13,836 - 493,834 9,431 65,280 1,498 14,847 2,662 6,469 635 6,504 3,860 13,249 2,070 13,370 13,463 7,959 1,356 1,518 (13,565) - 21,410 129,196 101 3,724 71 3,215 - 21,582 136,135 Total operating expenses 1,112,236 300,623 129,066 138,884 165,770 208,983 177,429 9,962 (113,324) 429,270 Income (loss) from operations 33,410 8,624 6,826 7,475 22,448 10,916 Interest Depreciation and amortization (1,596) (562) 2,129,629 939,080 - 87,541 28,288 (7,730) (529,902) 2,968,077 (18,479) 89,620 (12,541) Non-operating revenues and expenses: Interest expense on swap agreements (8,897) (1,004) (354) - (1,570) - - - (12,541) - - - Change in market value of swap agreements 61,978 3,033 5,857 602 - 11,679 - - - 83,149 - - - 83,149 Realized and unrealized gains on investments 12,764 25 635 5,927 20,607 7,936 (2,383) 458 - 45,969 - 3,045 - 49,014 (7,307) (4,327) (1,918) - - (26,191) (13,568) (1,177) (6,458) (1,972) (19) - (29,340) (20,045) Other components of net periodic pension cost Other (716) (15,721) (4,409) (6,115) 33 Excess of revenues over (under) expenses before NCI Noncontrolling interests 79,125 - 4,596 - 12,291 - 13,516 - 19,461 - 33,186 - 2,288 - (104) 25 - 164,359 25 20,653 56 (6,676) 505 (18,479) (2,230) 159,857 (1,644) Excess of revenues over (under) expenses 79,125 4,596 12,291 13,516 19,461 33,186 2,288 (79) - 164,384 20,709 (6,171) (20,709) 158,213 - - - - 1,761 1,926 - - 3,293 13,439 (3,683) - 13,049 120 - 8,015 - 2,790 - (58) (25) - 14,808 35 (25) 1,713 (505) 2,230 14,808 1,748 1,644 (162) - 182,495 34,092 (8,646) (18,479) 189,462 - 8,471 - 1,024 1,782 11,277 Contributions (to) from affiliates (305) (6) (192) 58 (394) 469 (19) Net assets released from restrictions used for purchase of property, plant, and equipment Other Noncontrolling interests Increase (decrease) in unrestricted net assets 3,840 - 103 - - 82,965 4,699 11,897 13,636 27,476 37,737 1,091 277 1,934 1,835 2,516 818 60 (27) 4,247 (56) Changes in temporarily restricted net assets: Gifts, grants and bequests - - Net assets released from restrictions used for purchase of property, plant, and equipment Net assets rel fr restrictions used for operations Other (Decrease) increase in temporarily restricted net assets (3,840) (103) - (158) - (433) - - (2,907) (259) 1,934 (743) 1,092 (8,015) (2,790) (60) - - (14,808) - - - (14,808) (3,793) - (277) - 232 - - (5,404) 232 - (1,564) - - (6,968) 232 (9,292) (2,249) 172 - - (11,509) - (540) 1,782 (10,267) Changes in permanently restricted net assets: Gifts, grants and bequests - - - 1 - 46 - - - 47 - 436 (41) Increase in permanently restricted net assets - - - 1 - 46 - - - 47 - 436 (41) 442 4,419 81,157 (162) 35,641 - 171,033 3,257,121 (16,738) (117,928) 179,637 3,454,071 Increase (decrease) in net assets Net assets at beginning of period Net assets at end of period 80,058 1,097,100 $ 1,177,158 4,440 17,704 $ 22,144 13,831 107,242 $ 121,073 14,729 334,789 $ 349,518 18,184 978,847 $ 997,031 35,534 604,641 $ Page 31 of 31 640,175 $ 85,576 $ 35,479 $ - $ 3,428,154 34,092 97,462 $ 131,554 (8,750) 217,416 $ 208,666 $ 442 (134,666) $ 3,633,708