Northwell

Health
Northwell Health, Inc.

ANNUAL FINANCIAL INFORMATION AND OPERATING DATA

FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

Contents

Financial Highlights ...................................................................................................... 1

Management’s Discussion and Analysis of Recent Financial Performance ................. 2

Utilization Statistics – Northwell Health Obligated Group ....................................... 16

Payer Mix – Northwell Health Obligated Group ....................................................... 17

Long-Term Debt Service Coverage Ratio – Northwell Health Obligated Group ....... 18
Financial Highlights

Year Year
Financial Results Ended Ended
($’s In Millions) December 31, December 31,
2018[3] 2019[3]

Operating revenue [1] $11,507 $12,487

Operating income $134 $188
Operating margin 1.2% 1.5%
Operating cash flow margin 6.5% 6.8%

Selected Other Information December 31, December 31,

($’s In Millions) 2018[3] 2019[3]

Unrestricted cash and investments $3,051 $3,322

Days cash on hand 102 103
Total outstanding debt $3,542 $4,103
Unrestricted cash to debt [2] 91.0% 87.2%
Debt to capitalization 48.5% 47.6%
Long-term debt service coverage 3.3x 3.3x

[1] Excludes operating revenue of the health insurance companies.

[2] Unrestricted cash for this ratio includes management designated sinking funds. Refer to Liquidity and Capital Resources
section herein for further information.

[3] Derived from the Audited Consolidated Financial Statements.

1
Management’s Discussion and Analysis of Recent Financial Performance

Northwell Health, Inc. (“Northwell”), together with its member corporations and affiliated
entities, constitutes an integrated health care delivery system serving the greater New York metropolitan
area, and is comprised of 19 owned hospitals, three long-term care facilities, four certified home health
care agencies, a hospice network, over 750 ambulatory and physician practice locations, The Feinstein
Institutes for Medical Research, joint ventures and other entities (collectively referred to as “Northwell”).

Management’s Discussion and Analysis of Recent Financial Performance contains “forward-

looking statements” within the meaning of the United States Private Securities Litigation Reform Act of
1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of
the United States Securities Act of 1933, as amended. The achievement of certain results or other
expectations contained in such forward-looking statements involves known and unknown risks,
uncertainties and other factors which may cause actual results, performance or achievements described
to be materially different from any future results, performance or achievements expressed or implied by
such forward-looking statements. Northwell expressly disclaims any obligation or undertaking to issue any
updates or revisions to those forward-looking statements if or when their expectations change, or events,
conditions or circumstances on which such statements are based occur.

Management’s Discussion and Analysis of Recent Financial Performance is based upon the
consolidated financial results of Northwell. The members of the Northwell Health Obligated Group (the
“Obligated Group”) represented 83.6% of the total consolidated operating revenue and 83.1% of the total
consolidated assets of Northwell for the year ended and as of December 31, 2019. Accordingly, the
discussion below includes the financial results of entities that are not members of the Obligated Group.
Refer to the Audited Consolidated Financial Statements of Northwell for the years ended December 31,
2019 and 2018 (the “Audited Consolidated Financial Statements”) for the consolidating and combining
schedules of Northwell and the Obligated Group.

Due to the global outbreak of Coronavirus Disease 2019 (COVID-19) in 2020, there have been
resulting effects which could negatively impact Northwell’s financial condition. These include significant
volatility in the investment markets, widespread temporary business closures and event cancellations,
and other economic and societal effects resulting from the national response to the COVID-19 pandemic,
including the deferral of elective surgeries and non-emergent procedures and the disruption of other
medical treatments and services at Northwell and throughout the U.S. health care system. Management
continues to closely monitor the operational and financial impact of COVID-19 in many respects, and is
pursuing opportunities for Federal and any other funding that is or will become available, including from
the Federal Coronavirus Aid, Relief and Economic Security Act, the Federal Emergency Management
Agency and other sources. While planning for and managing through the COVID-19 pandemic, in
partnership with New York State, operations across the continuum have been disrupted, however,
Northwell is currently preparing for the recovery of operations post the COVID-19 crisis. The ultimate
impact of these various matters to Northwell and its financial condition is presently unknown. The
consolidated financial statements as of and for the year ended December 31, 2019 do not reflect the
effects of these subsequent events.

Effective January 1, 2019, Northwell adopted Accounting Standards Update No. (“ASU”) 2016-02,
Leases, which requires the rights and obligations arising from lease contracts to be recognized as assets
and liabilities in the statement of financial position for both finance leases (formerly capital leases) and
operating leases. The most significant impact of adoption of ASU 2016-02 is the recognition of right-of-
use leased assets and obligations pertaining to operating leases, as well as enhanced disclosures related
to leases. The accounting for finance leases remains substantially unchanged as a result of adoption. Refer
to Notes 2 and 7 to the Audited Consolidated Financial Statements for additional information.
2
 As a result of Northwell’s 2017 decision to exit the health insurance business, the net operating
results of the health insurance companies are separately reported within the consolidated statements of
operations for the years ended December 31, 2019 and 2018 in the Audited Consolidated Financial
Statements, below the operating results from Northwell’s continuing operations. Refer to Note 1 to the
Audited Consolidated Financial Statements for additional information.

Introduction

For the year ended December 31, 2019, Northwell’s operating income[a] and operating margin
were $188.4 million and 1.5%, respectively, compared to $134.4 million and 1.2% for the year ended
December 31, 2018. Operating cash flow margin was 6.8% for the year ended December 31, 2019,
compared to 6.5% for the year ended December 31, 2018. Operating revenue grew by $980.3 million or
8.5% for the year ended December 31, 2019 compared to the year ended December 31, 2018, while
operating expenses increased $958.1 million or 8.4%, excluding the health insurance companies.

Operating revenue growth was primarily attributable to increases in volume (primarily associated
with inpatient discharges and the ambulatory and physician network expansion including investments in
the Northwell Health Cancer Institute[b] and clinical joint ventures), inpatient case mix and payment rates,
as well as continued revenue cycle initiatives.

The increase in operating expenses was partially attributable to incremental costs associated with
the increased patient volume, routine cost of living wage adjustments and the impact of inflation on
supply and expense price trends. In addition, continued investments in the following areas contributed to
the growth of total operating expenses: (1) facilities and programs to enhance capacity and rebuild
infrastructure; (2) investments in population health management and to further prepare for the expansion
of value-based payment models; (3) safety, quality and patient experience initiatives; (4) ambulatory and
physician network expansion; (5) information technology (“IT”), including investments in electronic health
records, digital health technology and telehealth services; and (6) mission-driven investments in medical
research, education and behavioral health services. Expense reductions as a result of the implementation
of productivity and efficiency efforts, program consolidation, and supply chain initiatives (including the
continuous review of programs to improve standardization, distribution, utilization and contracting),
helped control the growth rate of expenses.

The health insurance companies reported operating income of $10.0 million for the year ended
December 31, 2019, compared to an operating loss of ($21.7) million for the year ended December 31,
2018. The operating income in 2019 was primarily due to decreases in estimated liabilities needed for the
remaining wind-down costs of the health insurance companies.

[a]
Total excess of operating revenue over operating expenses in the consolidated statements of operations is referred to as
“operating income” for purposes of Management’s Discussion and Analysis of Recent Financial Performance.
[b]
Cancer care throughout Northwell was recently branded as the Northwell Health Cancer Institute with centralized leadership.

3
 Northwell’s net income[c] and net margin for the year ended December 31, 2019 were $672.3
million and 5.2%, respectively, compared to a net loss of ($118.6) million and a net margin of (1.0%) for
the year ended December 31, 2018. Investment income, including net realized gains and losses and the
change in net unrealized gains and losses and change in value of equity method investments, which
totaled $572.9 million and ($198.9) million for the year ended December 31, 2019 and 2018, respectively,
affected the net income amounts reported for each of these periods.

In 2019, management continued to focus on i) patient experience, safety and quality

improvements, ii) market share growth, iii) population health management, iv) medical research and
education, and v) diversifying revenue streams within the Northwell business model, including entering
into joint venture arrangements with various partners. Maintaining the balance sheet and improving
operating results also remain top management priorities so that Northwell can continue to invest in
people, programs and facilities to successfully adapt and respond to changes in the health care industry
while continuing to meet the needs of patients and families in all the communities it serves.

[c]
Excess of revenue and gains and losses over expenses in the consolidated statements of operations is referred to as “net
income (loss)” for purposes of Management’s Discussion and Analysis of Recent Financial Performance with the following
exceptions:
 2019 net income excludes the $0.5 million loss on refunding of long-term debt
 2018 net loss excludes the $75.8 million non-cash contribution received in the acquisition of Mather
 2018 net loss excludes the $65.7 million gain on sale of property

4
Operations and Net Income Overview

Operating Income, Operating Cash Flow and Net Income

The following table presents a summary of key operating performance results and measures for
Northwell for the years ended December 31, 2018 and 2019.

Year Ended Year Ended

($’s In Millions) December 31, 2018[2] December 31, 2019[2]

Operating income $134 $188

Operating margin 1.2% 1.5%
Operating cash flow [1] $756 $852
Operating cash flow margin 6.5% 6.8%
Net (loss) income ($119) $672
Net margin (1.0%) 5.2%

[1] Total operating income before interest and depreciation and amortization.
[2] Derived from the Audited Consolidated Financial Statements.

Operating Revenue and Volume

For the year ended December 31, 2019, operating revenue excluding the health insurance
companies increased by $980.3 million or 8.5%, compared to the year ended December 31, 2018.

The following table presents consolidated Northwell operating revenue and certain volume
statistics for the years ended December 31, 2018 and 2019.

Year Ended Year Ended

($’s In Millions) December 31, 2018[4] December 31, 2019[4]
Operating Revenue: [1]
Net patient service revenue $8,762 $9,500
Physician practice revenue $1,855 $2,093
Total patient revenue $10,617 $11,593
Other operating revenue $827 $834
Net assets released from restrictions used for operations $63 $60
Total operating revenue $11,507 $12,487
Volume: [2]
Discharges (excluding nursery) 301,608 303,729
Ambulatory surgery visits 220,095 221,580
Emergency room visits (treated and released) 672,784 669,635
Health center visits (includes GoHealth urgent care
centers) [3] 1,428,190 1,518,199
Home care admissions 54,431 55,856
Other outpatient visits 2,133,565 2,221,953

[1] Excludes operating revenue of the health insurance companies.

[2] Volume statistics for both periods exclude physician practice visits, but include statistics from Northwell entities,
including clinical joint ventures, that are not members of the Obligated Group.
[3] Health center visits for the year ended December 31, 2018 were restated to conform to the 2019 presentation.
[4] Dollar amounts are derived from the Audited Consolidated Financial Statements.

5
 Northwell’s core business revenue consists of net patient service revenue and physician practice
revenue (collectively referred to as “total patient revenue”). For the year ended December 31, 2019,
Northwell’s total patient revenue increased by $976.4 million or 9.2%, compared to the year ended
December 31, 2018. The increase occurred primarily as a result of increases in volume (primarily related
to inpatient discharges and the continued growth in physician and ambulatory services), growth in
inpatient case mix, increases in payment rates, the impact of new medications and therapies advancing
cancer care, and revenue cycle initiatives. The growth in physician and ambulatory services resulted from
continued physician recruitment efforts in a wide range of specialties including anesthesiology and
oncology, and the acquisition of existing and the opening of new ambulatory centers providing
ambulatory surgery, cancer care and imaging services including several majority-owned ambulatory
surgery centers with joint venture partners. Revenue growth was negatively affected by an increase in
inpatient denial activity from managed care payers.

Uncompensated care represents services rendered to patients without insurance or with balances
after insurance who meet the eligibility requirements of Northwell’s financial assistance policy or who
otherwise are unable to pay for the care rendered. For the year ended December 31, 2019, the estimated
cost of uncompensated care was approximately 3% of total patient revenue, which is consistent with prior
year. Financial assistance is one aspect of the multitude of community benefit programs provided by
Northwell. Refer to page 58 of Northwell’s 2018 annual report available via the attached link, for
additional information on community benefit programs provided by Northwell. The 2019 annual report
should be available on the Northwell website in June.

https://www.northwell.edu/sites/northwell.edu/files/2019-08/Northwell-Health-2018-Annual-
Report.pdf

6
 The major components of other operating revenue are laboratory services, grants and contracts,
specialty and retail pharmacy sales, rental income and health plan risk pool revenue (unrelated to the
health insurance companies). Other operating revenue increased by $6.7 million or 0.8% for the year
ended December 31, 2019 compared to the year ended December 31, 2018. Other operating income in
2018 included $104.1 million received from the Medical Liability Mutual Insurance Company (MLMIC)
demutualization transaction, compared to $10.9 million in 2019 (see Note 12 to the Audited Consolidated
Financial Statements for further information). Excluding the change in MLMIC revenue, the remaining
increase in other operating revenue was primarily the result of increased revenue from laboratory services
and specialty and retail pharmacy sales.

Operating Expenses

Operating expenses excluding the health insurance companies for the year ended December 31,
2019 increased by $958.1 million or 8.4% from the year ended December 31, 2018.

Summarized below are the consolidated Northwell operating expenses for the years ended
December 31, 2018 and 2019.

Year Ended Year Ended

($’s In Millions) December 31, 2018[2] December 31, 2019[2]
Operating Expenses: [1]
Salaries and employee benefits $7,200 $7,857
Supplies and expenses $3,530 $3,789
Depreciation and amortization $474 $511
Interest expense $147 $152
Total operating expenses $11,351 $12,309

[1] Excludes operating expenses of the health insurance companies.

[2] Derived from the Audited Consolidated Financial Statements.

For the year ended December 31, 2019, salaries and employee benefits increased by $657.6
million or 9.1%, compared to the year ended December 31, 2018. The increase was due to staffing
investments associated with the volume increases and the continued investments in strategic initiatives
related to the changes in health care delivery and payment models. These investments included adding
physicians and staff to support program expansion within the hospitals and the ambulatory network, and
to support population health initiatives. Wage increases and staffing investments in IT, medical research
and various safety, quality and patient experience initiatives throughout Northwell also contributed to
the growth in salaries and employee benefits. Productivity and efficiency efforts, including savings from
the consolidation of certain services and functions, helped to control the increase in salaries and employee
benefits.

Supplies and expenses for the year ended December 31, 2019 increased by $258.5 million or 7.3%,
compared to the year ended December 31, 2018. The increase was primarily due to medical supply and
pharmaceutical costs associated with the increase in volume and inpatient case mix and the cost of new
implantable medical devices and medications. Investments in safety, quality and patient experience
initiatives, IT, and new physician practices and ambulatory centers also contributed to the increase. Supply
chain improvement efforts (which include standardization, distribution, utilization and contracting
initiatives) along with productivity and efficiency efforts, helped control the growth rate of supplies and
expenses including the impact of inflation. In addition, the mild winter of 2019 resulted in a decrease in
snow removal and utility costs.
7
 Depreciation and amortization for the year ended December 31, 2019 increased by $36.1 million
or 7.6%, compared to the year ended December 31, 2018. The increase was primarily due to continued
investments in IT, facilities and programs.

The increase in interest expense of $5.8 million or 8.4% from the year ended December 31, 2018
to the year ended December 31, 2019 was primarily due to the 2019 bond transactions referred to in the
Debt section herein, partially offset by the effect of scheduled principal payments on existing debt.

Non-Operating Gains and Losses

The following table presents a summary of non-operating gains and losses for Northwell for the
years ended December 31, 2018 and 2019.

Year Ended Year Ended

($’s In Millions) December 31, 2018[1] December 31, 2019[1]
Non-Operating Gains and Losses:
Investment income $130 $172
Change in net unrealized gains and losses and
change in value of equity method
investments ($329) $401
Change in fair value of interest rate swap
agreements designated as derivative
instruments $0.4 ($0.5)
Non-operating net periodic benefit cost ($13) ($58)
Loss on refunding of long-term debt - ($0.5)
Contribution received in the acquisition of John
T. Mather Memorial Hospital $76 -
Gain on sale of property $66 -
Other non-operating gains and losses ($42) ($31)
Total non-operating gains and losses ($112) $483

[1] Derived from the Audited Consolidated Financial Statements.

Due to the changes in the investment markets during the years ended December 31, 2019 and
2018, Northwell’s net unrealized gains and losses relating to investments have fluctuated. Refer to the
Audited Consolidated Financial Statements for more information on Northwell’s investments.

Refer to Note 10 to the Audited Consolidated Financial Statements for further information on the
non-operating net periodic benefit cost related to Northwell’s pension and other postretirement benefit
plans.

Refer to the Debt section herein for further information on the refunding transaction related to
the 2019 bond issue.

On January 1, 2018, Northwell acquired John T. Mather Memorial Hospital (“Mather”) by means
of an inherent contribution where no consideration was transferred by Northwell. Northwell accounted
for the business combination by applying the acquisition method, and accordingly, the inherent
contribution is valued as the excess of Mather’s assets over liabilities. In determining the inherent
contribution received, all assets and liabilities were measured at their fair values as of the acquisition date.
The fair value of the net assets acquired without donor restrictions of $75.8 million was recorded as a
contribution within non-operating gains and losses in the consolidated statement of operations for the
year ended December 31, 2018. Refer to Note 1 to the Audited Consolidated Financial Statements for
additional information.
8
 Northwell held title to a remainder interest in a property located in Brea, California that was
donated in a prior year. In June 2018, the property was sold, and Northwell recognized a $65.7 million
gain on sale of property for its share of the sale proceeds received.

Other Changes in Net Assets Without Donor Restrictions

For a complete list of other changes in net assets without donor restrictions for the years ended
December 31, 2019 and 2018, refer to the Audited Consolidated Financial Statements.

Pension and Other Postretirement Liability Adjustments

Northwell maintains several defined benefit pension and other postretirement plans for its
employees. For the year ended December 31, 2019, Northwell recorded an increase in net assets without
donor restrictions of $9.1 million, compared to a decrease of $31.2 million for the year ended December
31, 2018, associated with pension and other postretirement liability adjustments. These adjustments
relate to changes in discount rates and other actuarial assumptions affecting the projected benefit
obligations, as well as investment gains and losses on pension plan assets, and were made in accordance
with the provisions of the Accounting Standards Codification Topic 715, Compensation - Retirement
Benefits, which requires Northwell to recognize the funded status (the difference between the projected
benefit obligations and the fair value of plan assets) of its defined benefit pension and other
postretirement plans in the consolidated statements of financial position with a corresponding
adjustment to net assets without donor restrictions.

The combined fair value of plan assets at December 31, 2019 and 2018 as a percentage of the
projected benefit obligations of Northwell’s non-contributory defined benefit pension plans was 88% and
69%, respectively. The increase was primarily due to an additional pension contribution made in 2019 for
$364.0 million as discussed in the Liquidity and Capital Resources section herein, as well as the investment
gains earned on plan assets in 2019.

Refer to Note 10 to the Audited Consolidated Financial Statements for more information on
Northwell’s pension and other postretirement benefit plans.

9
Fundraising

For the years ended December 31, 2019 and 2018, Northwell received $92.8 million and $102.4
million, respectively, in new net pledges and cash donations. Of the $92.8 million received during 2019,
$53.9 million was in pledges and $38.9 million was in cash. Of the $102.4 million received during 2018,
$54.5 million was in pledges and $47.9 million was in cash.

Cash and pledges are generally received by the Northwell Health Foundation (the “Foundation”),
which was formed to solicit, receive and administer funds to be used for major modernization projects,
capital acquisitions, special programs and other health care services for the benefit of the members of the
Obligated Group and other affiliated tax-exempt organizations of Northwell. The Foundation is not a
member of the Obligated Group.

Statement of Financial Position Overview

Liquidity and Capital Resources

Unrestricted cash and investments increased to $3.32 billion as of December 31, 2019 compared
to $3.05 billion as of December 31, 2018, resulting in 103 days cash on hand as of December 31, 2019, an
increase of 1 day from December 31, 2018, primarily attributable to gains in the investment markets. Total
unrestricted cash and investments are comprised of cash and cash equivalents, marketable securities and
other investments. Refer to Note 4 to the Audited Consolidated Financial Statements for more
information.

10
 The following chart presents the total unrestricted cash and investments, in millions, used in the
days cash on hand calculation and the days cash on hand at December 31, 2017, 2018 and 2019.

Total Unrestricted Cash and Investments and Days Cash on Hand

$3,500 105 103 110

102

$3,250 90

$3,000 70

- Unrestricted cash and

investments [1]

-+- Days Cash on Hand

$2,750

$2,500
$2,983
$3,051
$3,322
50

30

$2,250 10
12/31/17 12/31/18 12/31/19

[1] Refer to Note 4 to the Audited Consolidated Financial Statements for more information.

In order to provide for future repayment of debt with bullet maturities, management has
established sinking funds amounting to $257.6 million, $171.0 million and $92.7 million at December 31,
2019, 2018 and 2017, respectively. These sinking fund amounts are excluded from total unrestricted cash
and investments and the days cash on hand calculation reflected in the above chart. Also excluded are
funds designated by management to pay malpractice and other self-insurance liabilities, as well as
unspent taxable bond proceeds and other funds designated by management to fund future capital
expenditures and investments.

Northwell’s cash to debt ratio decreased to 87.2% at December 31, 2019 from 91.0% at December
31, 2018, primarily due to the 2019 bond transactions referred to in the Debt section. The cash to debt
ratio has been calculated for both periods including the management designated sinking funds with the
unrestricted cash and investments, but excluding the other management designated funds noted in the
paragraph above.

In September 2019, $364.0 million of management designated malpractice and other self-
insurance assets were transferred to the Northwell Health Cash Balance Plan, a noncontributory defined
benefit pension plan, which resulted in certain financial benefits and cash flow savings including the
avoidance of $15.0 million in variable rate Pension Benefit Guarantee Corporation premiums in 2019.

Patient Accounts Receivable

Days of total patient revenue in patient accounts receivable were 48.5 days as of December 31,
2019 compared to 46.0 days at December 31, 2018.

11
Property, Plant and Equipment

Management monitors and manages capital spending in relation to operations, capital market
conditions affecting investments, fundraising and debt capacity. Capital additions (including assets
acquired under finance lease obligations) totaled $762.2 million and $827.7 million for the years ended
December 31, 2019 and 2018, respectively.

Net assets released from restrictions for capital asset acquisitions totaled $47.1 million and $44.2
million for the years ended December 31, 2019 and 2018, respectively.

Capital expenditures as a percentage of depreciation and amortization were 146% and 174% for
the years ended December 31, 2019 and 2018, respectively.

Accounts Payable

Days of supplies and expenses in accounts payable were 93 days and 94 days as of December 31,
2019 and 2018, respectively.

Debt

The following table presents a summary of Northwell’s total outstanding debt, debt to
capitalization, long-term debt to cash flow and long-term debt service coverage ratio as of and for the
years ended December 31, 2018 and 2019.

($’s In Millions) 12/31/18[4] 12/31/19[4]

Total outstanding debt[1] $3,542 $4,103

Debt to capitalization[2] 48.5% 47.6%
Long-term debt / cash flow[3] 4.9x 5.0x
Long-term debt service coverage 3.3x 3.3x

[1] Total outstanding debt includes long-term debt, finance lease obligations and short-term borrowings.
[2] Capitalization is defined as the sum of total outstanding debt and total net assets, excluding those related to permanent
endowments.
[3] Long-term debt includes long-term debt and finance lease obligations, net of current portions. Cash flow is defined as net
income before all items defined in footnote [d] on the following page, except for interest expense.
[4] Derived from the Audited Consolidated Financial Statements.

In September 2019, Northwell Healthcare, Inc. (HCI), a member of the Obligated Group, issued
$447.7 million of taxable Northwell Health Series 2019A bonds. The Series 2019A taxable bonds were
issued by HCI as a joint and several general obligation of the Obligated Group. The Series 2019A taxable
bonds bear interest at a fixed rate, payable semi-annually, with a maturity date of November 1, 2049. The
proceeds from the Series 2019A taxable bonds will primarily be used for capital investments. The Series
2019A taxable bond issue was increased by an amount equal to the previously anticipated 2020 borrowing
needs in order to take advantage of historically favorable interest rates at the time of the issuance.

12
 In September 2019, the Obligated Group issued $41.1 million of tax-exempt revenue bonds
through the Dormitory Authority of the State of New York (DASNY) Series 2019A bonds. The DASNY Series
2019A bonds were sold at a premium of $4.3 million and bear interest at a fixed rate, payable semi-
annually, with a final maturity date of May 1, 2033. The proceeds from the DASNY Series 2019A bonds,
along with existing trustee-held Series 2009E debt service funds, were used to refund $49.9 million in
Series 2009E bonds of the Obligated Group. The refunding transaction resulted in an overall net present
value savings to the Obligated Group of approximately $5.4 million.

In September 2019, the Obligated Group also issued $161.2 million of tax-exempt revenue bonds
through the DASNY Series 2019B bonds. The DASNY Series 2019B bonds were sold at a premium of $20.9
million and bear interest at a fixed rate, payable semi-annually through May 1, 2048, with mandatory
purchase dates ranging from May 1, 2022 through May 1, 2026. The proceeds from the DASNY Series
2019B bonds were and will be used to finance capital projects for certain members of the Obligated
Group.

Northwell’s total debt profile as of December 31, 2019 was comprised of 4.6% variable rate debt
and 95.4% fixed rate debt. However, as most of the long-term variable rate debt is hedged under interest
rate swap agreements, the effective variable and fixed rate debt is 3.2% and 96.8%, respectively, of the
total outstanding debt. Total outstanding debt increased by $560.8 million from December 31, 2018 to
December 31, 2019, primarily due to the 2019 bond transactions discussed above, partially offset by
principal payments on debt.

Debt to capitalization improved to 47.6% at December 31, 2019, compared to 48.5% at December
31, 2018. Long-term debt to cash flow increased slightly to 5.0x at December 31, 2019, compared to 4.9x
at December 31, 2018, primarily due to the 2019 bond transactions discussed above.

The long-term debt service coverage ratio remained at 3.3x for the years ended December 31,
2019 and 2018. For the December 31, 2019 and 2018 calculations, maximum annual debt service was
$281.8 million and $248.8 million, respectively, and occurs in 2022 for the December 31, 2019 calculation
and 2019 for the December 31, 2018 calculation. Income available for debt service [d] for the years ended
December 31, 2019 and 2018 was $935.0 million and $831.8 million, respectively.

Northwell primarily uses its short-term borrowings under revolving credit facilities to bridge
capital expenditures to be paid with donations and/or bond issues. Short-term borrowings were $95.0
million and $103.5 million as of December 31, 2019 and 2018, respectively, and the total credit currently
available under such arrangements is $292.0 million, including amounts outstanding.

Interest Rate Swap Agreements

Certain members of Northwell have entered into various interest rate swap agreements with
financial institutions, matched or related to the term and rate of various bond issues or debt agreements.
As of December 31, 2019 and 2018, the aggregate fair value of the interest rate swap agreements was a
liability of $6.1 million and $4.9 million, respectively.

Swap agreements expose Northwell to credit risk in the event of nonperformance by the
counterparties. Northwell believes that the risk of material impact to its consolidated financial statements
arising from nonperformance by the counterparties is low.

[d]
Net income as defined in footnote [c] before depreciation and amortization, interest expense, the change in net unrealized
gains and losses and change in value of equity method investments, and the change in fair value of interest rate swap agreements
designated as derivative instruments.
13
Commitments and Contingencies

For information on commitments and contingencies, refer to Note 14 to the Audited Consolidated
Financial Statements.

Summary

Revenue growth associated with increased volume, inpatient case mix and payment rates,
revenue cycle initiatives and growth in physician and ambulatory services, coupled with expense
reductions from supply chain and other productivity and efficiency initiatives, partially offset by
investments, including those related to ambulatory and physician network growth, patient experience,
quality and safety initiatives, medical research and education, behavioral health services and population
health management, all contributed to the operating results for Northwell for the year ended December
31, 2019.

Despite the challenges and factors pressuring operating margins, including the impact of the
COVID-19 pandemic, Northwell continues to focus on improving operating performance, as evidenced by
past decisions to wind down the health insurance companies and withdraw from New York State’s
insurance markets.

Management is focused on recovery from the pandemic which includes a continued focus on
creating additional revenue opportunities through new and enhanced facilities, building a more
diversified business model (including expanding joint venture partnerships), physician recruitment efforts,
the on-going expansion of value-based payment models associated with population health management,
and revenue cycle initiatives, as well as operating expense reductions with operational efficiency efforts,
program consolidation and supply chain initiatives.
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 Northwell continues to invest in strategic capital projects and technology, including electronic
health records, digital health technology and telehealth services, to maintain what management believes
is a competitive advantage regarding patient and physician satisfaction and retention, and to improve
clinical outcomes, patient experience, and operational processes. In addition, Northwell is making
strategic investments in physicians who support key clinical service lines and staff to support the growth
in the physician and ambulatory network, and in various other safety, quality and service initiatives.
Management continues to monitor strategic capital needs in relation to operations, capital market
conditions affecting investment returns, fundraising and debt capacity, so that Northwell can continue to
invest in people, programs and facilities in order to successfully adapt and respond to changes in the
health care industry while continuing to meet the needs of the patients and families in all the communities
it serves.

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Northwell Health Obligated Group
Utilization Statistics

Year Ended
December 31,
2018 2019
Inpatient
Discharges (excl. Nursery) 257,983 261,120
Patient Days (excl. Nursery) 1,443,183 1,458,686
Average Length of Stay (in Days) 5.59 5.59
Average Daily Census 3,954 3,996
Licensed Beds (excl. Nursery) 5,260 5,260
Beds Available (excl. Nursery) (1) 4,442 4,471
Occupancy Percentage (1) 89.0% 89.2%
Normal Newborn Discharges 25,796 25,345
Total Discharges 283,779 286,465

Outpatient
Emergency Room Visits (2) (3) 571,651 568,242
Emergency Room Admissions 168,329 169,492
Total ER Encounters 739,980 737,734
Health Center Visits 805,432 810,999
Ambulatory Surgery Visits 139,761 140,625
Home Care Admissions 46,458 46,620
Other Outpatient Visits and Encounters (4) 1,265,994 1,321,520

(1) Beds Available, which vary primarily based upon need, are reported as the number of beds at the end of each reporting period.
Occupancy Percentage is calculated using the average beds available for the reporting period.

(2) Includes observation room.

(3) The slight decline in Emergency Room Visits is primarily due to a more severe flu season in 2018 compared to 2019.

(4) The increase in Other Outpatient Visits and Encounters is primarily related to an increase in volume at the Northwell Health Obligated Group's
Imaging and Cancer Centers.

NOTE: The utilization statistics presented above only include statistics for members of Northwell Health that are in the Obligated Group. Refer to
Management's Discussion and Analysis of Recent Financial Performance for the total utilization statistics for all Northwell Health entities.

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Northwell Health Obligated Group
Payer Mix
Percent of Gross Revenue (Inpatient & Outpatient)

Year Ended
December 31,
2018 2019
(1)
Medicare 44% 44%
Medicaid (2) 21% 21%
Commercial 30% 30%
Self Pay 2% 2%
Other 3% 3%
Total 100% 100%

(1) Includes Medicare Managed Care.

(2) Includes Medicaid Managed Care.

NOTE: The payer mix information presented above only includes members of Northwell Health that are
in the Obligated Group.

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NORTHWELL HEALTH OBLIGATED GROUP
LONG-TERM DEBT SERVICE COVERAGE RATIO (LTDSCR)
($'s in thousands)

Year Ended
Long-Term Debt Service Coverage Ratio Calculation: December 31, 2019

INCOME AVAILABLE FOR DEBT SERVICE: (1)

Excess of revenue and gains and losses over expenses $ 720,451
Add: Interest 146,401
Add: Depreciation and amortization 425,663
Subtract: Change in net unrealized gains and losses and change in value of
equity method investments (336,972)
Subtract: Change in interest in acquired entities (13,422)
Add: Loss on refunding of long-term debt 519
Income Available for Debt Service (A) $ 942,640

DEBT SERVICE:
Maximum Annual Principal & Interest (2) 262,281
Total Debt Service (B) $ 262,281

Ratio (A) / (B) 3.6 : 1.0

(1) Calculated in accordance with the Third Supplement to the Master Trust Indenture ("MTI") dated September 1, 2011.

(2) Maximum annual debt service occurs in 2022. In accordance with the MTI, outstanding debt with bullet maturities are
amortized over a thirty-year period in the calculation of maximum annual debt service.

NOTE: The LTDSCR above is presented for the Northwell Health Obligated Group pursuant to Section 3 of the Agreement to Provide
Continuing Disclosure, and as such, the components of the calculation differ from the LTDSCR disclosed in Management's Discussion and
Analysis of Recent Financial Performance, which is based on the consolidated financial results of Northwell Health, Inc.

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