PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 19, 2019 NEW ISSUE RATING: S&P: “A” (negative outlook)* BOOK-ENTRY ONLY In the opinion of Bond Counsel, under existing law and assuming compliance with certain covenants, interest on the Series 2019 Bonds is excludable from gross income for federal income tax purposes, and interest on the Series 2019 Bonds is not an item of tax preference for purposes of the federal alternative minimum tax. In Bond Counsel’s further opinion, under existing law, the Series 2019 Bonds and interest thereon are exempt from all state, county and municipal taxation in the State of Arkansas. See the caption “TAX MATTERS” herein. $94,840,000** ARKANSAS DEVELOPMENT FINANCE AUTHORITY HEALTHCARE REVENUE BONDS (BAPTIST HEALTH) TAX EXEMPT SERIES 2019 Dated: Date of Delivery Due: December 1, as shown on inside cover The Healthcare Revenue Bonds (Baptist Health), Tax Exempt Series 2019 (the “Series 2019 Bonds”), are being issued by the Arkansas Development Finance Authority (the “Issuer”) pursuant to the Arkansas Development Finance Authority Act, Title 15, Chapter 5, Subchapter 3 of the Arkansas Code of 1987 Annotated, as amended from time to time, for the purpose of (i) providing permanent financing for a portion of the costs of acquiring, furnishing and equipping certain assets owned and operated by Baptist Health, an Arkansas nonprofit corporation (the “Corporation”), and its affiliates, and (ii) paying certain expenses in connection with the issuance of the Series 2019 Bonds. See the captions “PLAN OF FINANCING” and “ESTIMATED SOURCES AND USES OF FUNDS” herein. The Series 2019 Bonds are issuable as fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee of

f an offer to buy nor shall there be any sale of these securities in The Depository Trust Company (“DTC”), New York, New York, to which principal, premium, if any, and interest payments on the Series 2019 Bonds will be made so long as Cede & Co. is the registered owner of the Series 2019 Bonds. Individual purchases of the Series 2019 Bonds will be made only in book-entry form, in denominations of $5,000 and any integral multiple thereof. Individual purchasers of the Series 2019 Bonds (“Beneficial Owners”) will not receive physical delivery of bond certificates. See the caption “BOOK-ENTRY ONLY SYSTEM” herein. Interest on the Series 2019 Bonds is payable each June 1 and December 1, commencing June 1, 2020. All such interest payments shall be payable to the person in whose name such Series 2019 Bond is registered on the bond registration books maintained by Regions Bank with offices in Little Rock, ities may not be sold nor offers to buy accepted prior the time Official Arkansas, as trustee (the “Trustee”), as of the close of business on the fifteenth day of the calendar month immediately preceding the interest payment date on which interest is due. Principal of and premium, if any, on the Series 2019 Bonds shall be payable at the designated corporate trust office of the Trustee. So long as DTC or its nominee is the registered owner of the Series 2019 Bonds, disbursement of such payments to DTC or its nominee is the responsibility of the Trustee. Disbursement of such payments to DTC Participants is the responsibility of DTC, and disbursement of such payments to Beneficial Owners is the responsibility of DTC Participants or Indirect Participants, as more fully described herein. The Series 2019 Bonds shall be payable (except to the extent payable from proceeds of the Series 2019 Bonds and the investment income therefrom and, in certain circumstances, from the proceeds of insurance and condemnation awards and the proceeds of the sale or other disposition of the Facility) as to principal, premium, if any, and interest from the revenues and receipts to be derived by the Issuer under a Loan Agreement and Security Agreement to be dated as of the date of delivery of the Series 2019 Bonds (the “Loan Agreement”) between the Issuer and the Corporation, on behalf of itself and as representative of the Obligated Group (as defined herein). The Series 2019 Bonds are being issued pursuant to a Trust Indenture to be dated as of the date of delivery of the Series 2019 Bonds (the “Indenture”), between the Issuer and the Trustee. Pursuant to the Indenture, the Issuer will assign to the Trustee all of its right, title and interest in and to the Loan Agreement, including the payments required to be made by the Obligated Group under the Loan Agreement. The Series 2019 Bonds will be secured on a parity basis with (i) certain outstanding bonds and other indebtedness and the Obligations (as defined herein) evidencing such bonds and indebtedness, and (ii) any Obligations subsequently issued or incurred by any Member of the Obligated Group (as defined herein). See the caption “SECURITY FOR THE BONDS AND OBLIGATIONS” for a description of the parity obligations and indebtedness of the Obligated Group. The obligations of the Obligated Group with respect to the Series 2019 Bonds will be secured by the Gross Revenues and/or Accounts of the Obligated Group (as defined herein), and otherwise, as provided in and pursuant to the Master Trust Indenture dated as of December 1, 2014, as supplemented (the “Master Indenture”), by and between the Obligated Group and Regions Bank, with offices in Little Rock, Arkansas, as master trustee (the “Master Trustee”). The Series 2019 Bonds are special obligations only of the Issuer. No covenant or agreement in the Indenture or in the Series 2019 Bonds and no obligation therein imposed upon the Issuer and no breach thereof shall constitute or give rise to or impose upon the Issuer a general liability or a charge upon its general credit or property other than the Trust Estate. In no event shall the Series 2019 Bonds nor any agreement of the Issuer be construed to constitute an indebtedness of the State or any political subdivision thereof within the meaning of any constitutional or statutory limitation or an indebtedness for which the faith and credit of the State or any political subdivision thereof or any of their revenues are

uld be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. pledged or an indebtedness secured by a lien on or a security interest in any property of the State or any political subdivision thereof. See the caption “SECURITY FOR THE BONDS AND OBLIGATIONS” herein. The Series 2019 Bonds are subject to redemption prior to maturity as described under the caption “THE SERIES 2019 BONDS - Redemption” herein. The Series 2019 Bonds are offered, subject to prior sale, when, as, and if issued and received by the Underwriters, subject to the approval of validity by Friday, Eldredge & Clark, LLP, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed upon for the Underwriters by Kutak Rock LLP, counsel to the Underwriters, and for the Corporation by its counsel, Quattlebaum, Grooms & Tull PLLC. It is expected that the Series 2019 Bonds will be available for delivery through the facilities of DTC in New York, New York, on or about December 19, 2019. final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation o

The date of this Official Statement is December __, 2019. * See the caption “RATING” herein. ** Preliminary; subject to change. This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These secur Statement is delivered in jurisdiction in which such offer, solicitation or sale wo MATURITY SCHEDULE*

$94,840,000 ARKANSAS DEVELOPMENT FINANCE AUTHORITY HEALTHCARE REVENUE BONDS (BAPTIST HEALTH) TAX EXEMPT SERIES 2019

Maturity Principal Interest (December 1) Amount Rate Yield CUSIP** 2032 $1,245,000 % % 2033 $1,310,000

$ 9,085,000 _____% Term Bond due December 1, 2039 Yield: _____% CUSIP: ______** $ 9,395,000 _____% Term Bond due December 1, 2044 Yield: _____% CUSIP: ______** $73,805,000 _____% Term Bond due December 1, 2049 Yield: _____% CUSIP: ______**

______* Preliminary; subject to change. ** CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by the CUSIP Service Bureau, operated by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the Issuer and are included solely for the convenience of the registered owners of the Series 2019 Bonds. The Issuer and the Underwriters are not responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness by the Issuer on the Series 2019 Bonds and by the Underwriters on the Series 2019 Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Series 2019 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Series 2019 Bonds. NO DEALER, BROKER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED BY THE ISSUER, THE OBLIGATED GROUP OR THE UNDERWRITERS TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS OFFICIAL STATEMENT, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FOREGOING. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE SERIES 2019 BONDS BY ANY PERSON IN ANY STATE IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE. THE INFORMATION AND EXPRESSIONS OF OPINION HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE, AND NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER OR THE OBLIGATED GROUP SINCE THE DATE HEREOF. NO REGISTRATION STATEMENT RELATING TO THE SERIES 2019 BONDS HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE SERIES 2019 BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. THE INFORMATION SET FORTH HEREIN HAS BEEN FURNISHED BY THE ISSUER, THE OBLIGATED GROUP AND FROM OTHER SOURCES THAT ARE BELIEVED TO BE RELIABLE. THE UNDERWRITERS HAVE REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, THEIR RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITERS DO NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2019 BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

TABLE OF CONTENTS Page No. Summary Statement ...... i Introduction ...... 1 The Series 2019 Bonds...... 3 Security for the Bonds and Obligations...... 8 Book-Entry Only System...... 10 Estimated Sources and Uses Of Funds ...... 13 Plan of Financing...... 13 Estimated Debt Service Requirements...... 18 Obligated Group Historical Pro Forma Debt Service Coverage Ratios ...... 19 System Historical Pro Forma Debt Service Coverage Ratios ...... 19 The Issuer ...... 19 Risk Factors ...... 21 Regulation of the Health Care Industry ...... 41 Summary of Portions of the Loan Agreement...... 52 Summary of Portions of the Indenture...... 55 Summary of Portions of the Master Indenture...... 59 Summary of Portions of the Continuing Disclosure Agreement...... 68 Underwriting...... 74 Tax Matters...... 75 Rating ...... 77 Legal Matters...... 78 Litigation ...... 78 Financial Advisor...... 78 Independent Auditors ...... 78 Miscellaneous ...... 79

Appendix A –Baptist Health and Certain Related Entities ...... A-1 Appendix B - Definitions...... B-1 Appendix C – Audited Consolidated Financial Statements of Baptist Health as of and for the fiscal years ended December 31, 2017 and December 31, 2018...... C-1 Appendix D – Unaudited Consolidated Financial Statements of Baptist Health as of and for the eight- month periods ended August 31, 2018 and August 31, 2019...... D-1 Appendix E- Form of Bond Counsel Opinion ...... E-1 [This Page Intentionally Blank] SUMMARY STATEMENT

This Summary Statement is subject in all respects to the more complete information contained in this Official Statement. The offering of the Series 2019 Bonds to potential investors is made only by means of the entire Official Statement, including the inside cover page and Appendices hereto. No person is authorized to detach this Summary Statement or otherwise to use it without the entire Official Statement. Definitions of certain words and terms used in this Summary Statement are set forth in Appendix B to this Official Statement. The Offering The offering consists of Healthcare Revenue Bonds (Baptist Health), Tax Exempt Series 2019 (the “Series 2019 Bonds”) in the aggregate principal amount of $94,840,000, such Series 2019 Bonds to be issued by the Arkansas Development Finance Authority (the “Issuer”). The Series 2019 Bonds will be dated as set forth on the cover page hereof. The Issuer is a body corporate and politic and a public instrumentality of the State of Arkansas with full power and authority to issue the Series 2019 Bonds pursuant to the Constitution and laws of the State of Arkansas. See the caption “THE ISSUER” herein. Purpose The proceeds of the sale of the Series 2019 Bonds, excluding any accrued interest, will be loaned by the Issuer to Baptist Health, an Arkansas nonprofit corporation (the “Corporation”), Baptist Health Regional Hospitals, an Arkansas nonprofit corporation (“BHRH”), and any other entity which may from time to time be added as a Member of the Obligated Group (collectively, the “Obligated Group”), pursuant to a Loan Agreement and Security Agreement to be dated as of the date of delivery of the Series 2019 Bonds (the “Loan Agreement”), by and between the Issuer and the Corporation (on its own behalf and as representative of the Obligated Group). The Obligated Group will utilize the proceeds of the Series 2019 Bonds (i) to provide permanent financing for a portion of the costs of the acquisition by the Obligated Group of the assets of Sparks Health System in Fort Smith and Van Buren, Arkansas (the “Sparks Hospital Assets”), (ii) to provide permanent financing for a portion of the costs of acquiring and installing furnishings and equipment for the Sparks Hospital Assets (the “Sparks Improvements”), and (iii) to pay the costs of issuing the Series 2019 Bonds. The costs of the acquisition of the Sparks Hospital Assets and the costs of acquisition and installation of furnishings and equipment for the Sparks Improvements to be partially financed with proceeds of the Series 2019 Bonds shall be hereinafter referred to as the “Project.” Certain costs of the Project to be paid with proceeds of the Series 2019 Bonds will be reimbursed to the Obligated Group and utilized by the Obligated Group to repay a portion of the amount owed by the Obligated Group to Bank of America, N.A. pursuant to an interim loan, the proceeds of which were utilized to acquire the Sparks Hospital Assets and to pay for the Sparks Improvements. See the captions “ESTIMATED SOURCES AND USES OF FUNDS” and “PLAN OF FINANCING” herein. The Corporation and BHRH Baptist Health (the “Corporation”), a Member of the Obligated Group and the Obligated Group Representative, is an Arkansas nonprofit charitable membership corporation headquartered in Little Rock, Arkansas. The Corporation and its affiliated entities (the “System”) constitute the largest health care delivery system in the State of Arkansas. The System provides a full continuum of health care delivery and support services through ownership or control of nine acute care hospitals, a rehabilitation hospital, a long-term acute care hospital, medical practices, an accredited nursing school, outpatient care facilities, a charitable foundation and other health care related facilities. Baptist Health Regional Hospitals (“BHRH”), a wholly-owned affiliate of the Corporation and a Member of the Obligated Group,

 Preliminary; subject to change.

i is an Arkansas nonprofit charitable membership corporation headquartered in Little Rock, Arkansas. BHRH was incorporated as of April 18, 2018, for the purpose of acquiring and operating the Sparks Hospital Assets. The Corporation and BHRH are each organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), exempt from the payment of federal income taxes under Section 501(a) of the Code. For a more detailed discussion of the Corporation, BHRH and other entities owned or affiliated therewith, see “APPENDIX A–BAPTIST HEALTH AND CERTAIN RELATED ENTITIES” attached hereto. Security for the Bonds The Series 2019 Bonds are special limited obligations of the Issuer, payable (except to the extent payable from proceeds of the Series 2019 Bonds and the investment income therefrom and, in certain circumstances, from the proceeds of insurance and condemnation awards and the proceeds of the sale or other disposition of the Facility) as to principal, premium, if any, and interest from the revenues and receipts to be derived by the Issuer under the Loan Agreement. The Series 2019 Bonds are being issued pursuant to a Trust Indenture to be dated as of the date of delivery of the Series 2019 Bonds (the “Indenture”), between the Issuer and Regions Bank, with offices in Little Rock, Arkansas, as trustee (the “Trustee”). Pursuant to the Indenture, the Issuer will assign to the Trustee all of its right, title and interest in and to the Loan Agreement, including the payments required to be made by the Obligated Group under the Loan Agreement. The obligations of the Obligated Group with respect to the Series 2019 Bonds will be secured on a parity basis with the Obligated Group’s obligations relating to (i) $138,910,000(1) outstanding principal amount of Pulaski County Public Facilities Board Healthcare Revenue Bonds (Baptist Health), Series 2014 (the “Series 2014 Bonds”), which Series 2014 Bonds are evidenced and secured by Obligation No. 1, (ii) $30,105,000(1) outstanding principal amount of the Issuer’s Healthcare Revenue Refunding Bonds (Baptist Health), Series 2015A (the “Series 2015A Bonds”), which Series 2015A Bonds are evidenced and secured by Obligation No. 2, (iii) $48,770,000(1) outstanding principal amount of a line of credit from Bank of America, N.A. incurred on September 27, 2016 (the “2016 Line of Credit”), which 2016 Line of Credit is evidenced and secured by Obligation No. 4, (iv) $48,770,000(1) outstanding notional amount of an interest rate swap agreement with J.P. Morgan Chase Bank, N.A. dated November 21, 2016 (the “2016 Derivative Agreement”), which 2016 Derivative Agreement is evidenced and secured by Obligation No. 5, (v) the Series 2019 Baptist Health Corporate Bonds (as defined herein), which are being issued contemporaneously with the issuance of the Series 2019 Bonds, which Series 2019 Baptist Health Corporate Bonds are evidenced and secured by Obligation No. 8, and (vi) any other Obligations (as defined herein) subsequently issued or incurred by any Member (as defined herein) of the Obligated Group. See the captions “SECURITY FOR THE BONDS AND OBLIGATIONS” and “PLAN OF FINANCING” for information regarding the Obligations. The obligations of the Obligated Group with respect to the Series 2014 Bonds, the Series 2015A Bonds, the 2016 Line of Credit, the 2016 Derivative Agreement, the Series 2019 Bonds, the Series 2019 Baptist Health Corporate Bonds and any other Obligations are and will be secured by the Gross Revenues and/or Accounts of the Obligated Group pursuant to the Master Trust Indenture dated as of December 1, 2014, as amended and supplemented by the Supplemental Indenture for Obligation No. 5 dated as of November 21, 2016, and the First Supplement to Master Trust Indenture dated as of October 2, 2018, and as further amended or supplemented from time to time (the “Master Indenture”), by and between the Obligated Group (as defined herein) and Regions Bank, with offices in Little Rock, Arkansas, as master trustee (the “Master Trustee”). The Corporation and BHRH are currently the only Members of the Obligated Group.

(1) Principal balance as of December 19, 2019, the anticipated delivery date of the Series 2019 Bonds, after application of the proceeds of the Series 2019 Bonds and the Series 2019 Baptist Health Corporate Bonds as described under the caption “PLAN OF FINANCING” herein. ii The Series 2019 Bonds are special obligations only of the Issuer. No covenant or agreement in the Indenture or in the Series 2019 Bonds and no obligation therein imposed upon the Issuer and no breach thereof shall constitute or give rise to or impose upon the Issuer a general liability or a charge upon its general credit or property other than the Trust Estate. In no event shall the Series 2019 Bonds nor any agreement of the Issuer be construed to constitute an indebtedness of the State or any political subdivision thereof within the meaning of any constitutional or statutory limitation or an indebtedness for which the faith and credit of the State or any political subdivision thereof or any of their revenues are pledged or an indebtedness secured by a lien on or a security interest in any property of the State or any political subdivision thereof. Redemption The Series 2019 Bonds are subject to optional, mandatory and extraordinary redemption prior to maturity as set forth in the Official Statement under the caption “THE SERIES 2019 BONDS - Redemption” herein. Special Considerations Payment of principal of, premium, if any, and interest on the Series 2019 Bonds is primarily dependent upon revenues derived by the Obligated Group from the operation of its facilities. See the captions “RISK FACTORS” and “REGULATION OF THE HEALTH CARE INDUSTRY” herein. See also “APPENDIX A – BAPTIST HEALTH AND CERTAIN RELATED ENTITIES” hereto for a description of the Obligated Group and its operations. Pending Litigation and Other Potential Liability There is not now pending, nor to the knowledge of the Issuer or the Obligated Group, threatened, any litigation restraining or enjoining the issuance of the Series 2019 Bonds or the proceedings or authority under which they are to be issued. The Corporation and BHRH are parties to various litigation and audit matters described under the heading “Litigation” in Appendix A attached to this Official Statement. The Corporation and BHRH have no litigation or proceedings pending, or, to their knowledge, threatened, against them which may not be adequately covered by the Corporation’s and BHRH’s reserves and insurance policies, or which, in the opinion of the Corporation, BHRH and their defense counsel, could have a material adverse effect on the Corporation’s or BHRH’s business or financial position.

[Remainder of this page intentionally blank]

iii [This Page Intentionally Blank] OFFICIAL STATEMENT

$94,840,000* ARKANSAS DEVELOPMENT FINANCE AUTHORITY HEALTHCARE REVENUE BONDS (BAPTIST HEALTH) TAX EXEMPT SERIES 2019

INTRODUCTION

The purpose of this Official Statement, including the cover page and the Appendices hereto, is to provide certain information concerning $94,840,000* Healthcare Revenue Bonds (Baptist Health), Tax Exempt Series 2019 (the “Series 2019 Bonds”), to be issued by the Arkansas Development Finance Authority (the “Issuer”). Definitions of certain capitalized terms used in this Official Statement are set forth in Appendix B to this Official Statement. The Issuer is a body corporate and politic and a public instrumentality of the State of Arkansas (the “State”). The Issuer was created pursuant to the Arkansas Development Finance Authority Act, Title 15, Chapter 5, Subchapter 3 of the Arkansas Code of 1987 Annotated (as amended, the “Act”). The Act authorizes the Issuer to issue its bonds from time to time in such principal amounts as the Issuer determines shall be necessary to provide sufficient funds to carry out its purposes and powers, including the financing and refinancing of “healthcare facilities” and to fund “healthcare project costs.” The Series 2019 Bonds are being issued pursuant to the Act and a Trust Indenture to be dated as of the date of delivery of the Series 2019 Bonds (the “Indenture”), by and between the Issuer and Regions Bank, with offices in Little Rock, Arkansas, as trustee and paying agent (the “Trustee”). See the caption “SUMMARY OF PORTIONS OF THE INDENTURE” herein. The Issuer will lend the proceeds of the Series 2019 Bonds to Baptist Health, an Arkansas nonprofit corporation (the “Corporation”), Baptist Health Regional Hospitals, an Arkansas nonprofit corporation (“BHRH”), and any other entity which may from time to time be added as a Member of the Obligated Group (collectively, the “Obligated Group”), pursuant to a Loan Agreement and Security Agreement to be dated as of the date of delivery of the Series 2019 Bonds (the “Loan Agreement”). The Obligated Group’s obligation to repay such loan (the “Obligation No. 9”) will be equal in aggregate principal amount to the aggregate principal amount of the Series 2019 Bonds. The Loan Agreement and Obligation No. 9 require that payments be made by the Obligated Group to the Trustee for the account of the Issuer in amounts and at times sufficient to pay the principal, premium, if any, and interest requirements on the Series 2019 Bonds. To secure the payments due under Obligation No. 9, the Obligated Group has pledged and granted a security interest in the Gross Revenues and/or Accounts of its Members pursuant to a Master Trust Indenture dated as of December 1, 2014, as amended and supplemented by the Supplemental Indenture for Obligation No. 5 dated as of November 21, 2016, and the First Supplement to Master Trust Indenture dated as of October 2, 2018, and as further amended and supplemented from time to time (the “Master Indenture”), by and between the Obligated Group and Regions Bank, with offices in Little Rock, Arkansas, as master trustee (the “Master Trustee”). Obligation No. 9 is issued pursuant to and under the terms of a Supplemental Indenture for Obligation No. 9 to be dated as of the date of delivery of the Series 2019 Bonds (the “Supplement”), by and between the Obligated Group and the Master Trustee. The Corporation and BHRH are currently the only Members of the Obligated Group. Such pledge and security interest are subject to Permitted Encumbrances. See the captions “SUMMARY OF PORTIONS OF THE LOAN AGREEMENT” and “SUMMARY OF PORTIONS OF THE MASTER INDENTURE” herein. ______* Preliminary; subject to change. Baptist Health (the “Corporation”), a Member of the Obligated Group and the Obligated Group Representative, is an Arkansas nonprofit charitable membership corporation headquartered in Little Rock, Arkansas. The Corporation and its affiliated entities (the “System”) constitute the largest health care delivery system in the State of Arkansas. The System provides a full continuum of health care delivery and support services through ownership or control of nine acute care hospitals, a rehabilitation hospital, a long-term acute care hospital, medical practices, an accredited nursing school, outpatient care facilities, a charitable foundation and other health care related facilities. Baptist Health Regional Hospitals (“BHRH”), a wholly-owned affiliate of the Corporation and a Member of the Obligated Group, is an Arkansas nonprofit charitable membership corporation headquartered in Little Rock, Arkansas. BHRH was incorporated as of April 18, 2018, for the purpose of acquiring and operating the Sparks Hospital Assets. The Corporation and BHRH are each organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), exempt from the payment of federal income taxes under Section 501(a) of the Code. For a more detailed discussion of the Corporation, BHRH and other entities owned or affiliated therewith, see “APPENDIX A– BAPTIST HEALTH AND CERTAIN RELATED ENTITIES” attached hereto. The Series 2019 Bonds are special obligations only of the Issuer. No covenant or agreement in the Indenture or in the Series 2019 Bonds and no obligation therein imposed upon the Issuer and no breach thereof shall constitute or give rise to or impose upon the Issuer a general liability or a charge upon its general credit or property other than the Trust Estate. In no event shall the Series 2019 Bonds nor any agreement of the Issuer be construed to constitute an indebtedness of the State or any political subdivision thereof within the meaning of any constitutional or statutory limitation or an indebtedness for which the faith and credit of the State or any political subdivision thereof or any of their revenues are pledged or an indebtedness secured by a lien on or a security interest in any property of the State or any political subdivision thereof. See the caption “SECURITY FOR THE BONDS AND OBLIGATIONS” herein. The Obligated Group will utilize the proceeds of the Series 2019 Bonds (i) provide permanent financing for a portion of the costs of the acquisition by the Obligated Group of the assets of Sparks Health System in Fort Smith and Van Buren, Arkansas (the “Sparks Hospital Assets”), (ii) to provide permanent financing for a portion of the costs of acquiring and installing furnishings and equipment for the Sparks Hospital Assets (the “Sparks Improvements”), and (iii) to pay the costs of issuing the Series 2019 Bonds. Certain costs of the Project to be paid with proceeds of the Series 2019 Bonds will be reimbursed to the Obligated Group and utilized by the Obligated Group to repay a portion of the amount owed by the Obligated Group to Bank of America, N.A. pursuant to an interim loan, the proceeds of which were utilized to acquire the Sparks Hospital Assets and to pay for the Sparks Improvements. See the captions “ESTIMATED SOURCES AND USES OF FUNDS” and “PLAN OF FINANCING” herein. In the Indenture, the Issuer has reserved the right to issue additional bonds (the “Additional Bonds”) upon satisfaction of the terms and conditions set forth in the Indenture. In addition, the Corporation and any other Members of the Obligated Group may, under certain circumstances set forth in the Master Indenture, issue additional Obligations secured by the Gross Revenues and/or Accounts of the Obligated Group on a parity basis with Obligation No. 9. See the subcaptions “THE SERIES 2019 BONDS – Additional Bonds,” “Master Indenture Indebtedness” and “Other Permitted Indebtedness” herein. This Official Statement and the Appendices hereto contain brief descriptions of, among other things, the Issuer, the Corporation, BHRH, the Series 2019 Bonds, the Loan Agreement, the Indenture, the Master Indenture, the Supplement, Obligation No. 9, and a Continuing Disclosure Agreement to be dated as of the date of delivery of the Series 2019 Bonds (the “Continuing Disclosure Agreement”), by and between the Corporation and BHRH and Regions Bank, with offices in Little Rock, Arkansas, as dissemination agent. Such descriptions do not purport to be comprehensive or definitive. All references in this Official Statement to documents are qualified in their entirety by reference to such documents, and references to the Series 2019 Bonds herein are qualified in their entirety by reference to the forms of the

2 Series 2019 Bond contained in the Indenture. Information concerning the Issuer has been supplied by the Issuer and concerning the Corporation, BHRH and the Obligated Group has been supplied by the Corporation. Until the issuance and delivery of the Series 2019 Bonds, copies of the Loan Agreement, Indenture, Master Indenture, Supplement, Obligation No. 9 and Continuing Disclosure Agreement may be obtained at the offices of Crews & Associates, Inc., 521 President Clinton Avenue, Suite 800, Little Rock, Arkansas 72201. Copies of these documents may be obtained from the Trustee after delivery of the Series 2019 Bonds at the expense of the requesting party.

THE SERIES 2019 BONDS Description The Series 2019 Bonds are being issued as fully registered bonds in minimum denominations of $5,000 or any integral multiple thereof. The Series 2019 Bonds will bear interest from the date of their delivery at the rates and mature in the amounts and on the dates as set forth on the inside cover page of this Official Statement. Interest on the Series 2019 Bonds is payable semiannually on June 1 and December 1 of each year, commencing June 1, 2020. Principal of and premium, if any, on the Series 2019 Bonds are payable at the corporate trust office of the Trustee in Little Rock, Arkansas, or at the offices of any additional or successor paying agent. All principal, premium and interest payments on the Series 2019 Bonds shall be payable to the persons in whose names such Series 2019 Bonds are registered as of the applicable Record Date on the bond registration books maintained by the Trustee. As used herein, “Record Date” is for all purposes that date which is the fifteenth day of the month then next preceding that date for payment of principal, premium, if any, or interest, whether by scheduled maturity or by optional or mandatory redemption, on the Series 2019 Bonds held by the Holder to which such Record Date is applicable. All of the Series 2019 Bonds, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), to which principal, premium and interest payments on the Series 2019 Bonds will be made so long as DTC or its nominee is the registered owner of the Series 2019 Bonds. See the caption “BOOK-ENTRY ONLY SYSTEM” herein. Redemption Optional Redemption. The Series 2019 Bonds are subject to redemption prior to maturity at the option of the Issuer (which option shall be exercised only as directed by the Obligated Group Representative), as a whole or in part on December 1, 2029, or on any date thereafter, at a redemption price equal to the principal amount being redeemed, without premium, plus accrued interest to the redemption date. If fewer than all of the Series 2019 Bonds shall be called for optional redemption, the particular maturities to be redeemed shall be selected by the Issuer (as directed by the Obligated Group Representative in its discretion). If fewer than all of the Series 2019 Bonds of any one maturity shall be called for optional redemption, the particular Series 2019 Bonds or portions thereof to be redeemed from such maturity shall be selected by lot by the Trustee in such manner as it shall determine. Extraordinary Redemption. (1) The Series 2019 Bonds are subject to redemption by the Issuer (at the option and direction of the Obligated Group) in whole at any time and in part on any interest payment date, at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued interest to the date fixed for redemption, in the event that substantially all of any health care facility comprising the Facility has been damaged or destroyed or title to any health care facility comprising the Facility is taken under the exercise of, or acquired under the threat of, the power of eminent domain, to such extent that, (i) in the opinion of a Management Consultant, the Income Available for Debt Service will be impacted such that the obligation of the Obligated Group to comply with Section 3.07(a) of the Master Indenture (rate covenant) will be materially adversely affected, and (ii) in the opinion of an Independent Architect, the completion time for repair, rebuilding, replacement or restoration of such portion of the Facility is estimated to extend one year beyond the term of the business

3 interruption insurance carried by the Obligated Group. In addition, in the event that the Obligated Group is required to prepay Obligation No. 1 relating to the Series 2014 Bonds in the event of certain damage, destruction or condemnation of certain of the Obligated Group’s health care facilities (consisting of Baptist Health Medical Center-Little Rock, Baptist Health Rehabilitation Institute and Baptist Health Medical Center-North Little Rock), the Corporation will also be required to prepay Obligation No. 9 in full and redeem the Series 2019 Bonds in whole. See the subcaption “SUMMARY OF PORTIONS OF THE LOAN AGREEMENT – Obligations and Options to Prepay” herein. (2) The Series 2019 Bonds are subject to redemption by the Issuer (at the direction of the Obligated Group) in whole at any time and in part on any interest payment date, at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued interest to the date fixed for redemption, in the event the Obligated Group elects to prepay the ADFA Obligations in the event that (i) as a result of any changes in the Constitution of the State or the Constitution of the United States of America or of legislative or administrative action (whether state or federal) after the decree, judgment or order of any court or administrative body (whether state or federal) entered after the contest thereof by the Obligated Group in good faith, any ADFA Obligation, the Supplement, the Master Indenture or the Loan Agreement shall have become void or unenforceable or impossible of performance in accordance with the intent and purposes of the parties expressed in any ADFA Obligation, the Supplement, the Master Indenture or the Loan Agreement, or (ii) any burden on the Issuer or unreasonable burdens or excessive liabilities, whether direct or indirect, shall have been imposed on the Obligated Group, including, without limitation, federal, state or other ad valorem, property, income or other taxes not being imposed on the date of the Loan Agreement; or (iii) if the Obligated Group is required or ordered, by legislative, judicial or administrative action of the United States or of the State, or any agency, department or subdivision thereof, to operate the Facility in a manner inconsistent with the stated goals, purposes and policies of the Obligated Group, including medical treatment and surgical procedures, and such legislative, judicial or administrative action is applicable to the Obligated Group because the Obligated Group is a party to any ADFA Obligation, the Supplement, the Master Indenture or the Loan Agreement. (3) The Series 2019 Bonds are subject to redemption by the Issuer (at the option and direction of the Obligated Group) in part, the particular maturities to be redeemed to be selected by the Issuer (as directed by the Obligated Group), on any interest payment date, at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued interest to the date fixed for redemption from Net Proceeds of insurance claims or condemnation awards as follows: (a) Amounts that do not exceed 20% of the Book Value of the Property, Plant and Equipment of the Obligated Group received by any Member of the Obligated Group as insurance proceeds with respect to any casualty loss or as condemnation awards may be used in such manner as the recipient, with the approval of the Authorized Representative of the Obligated Group Representative, may determine, including, without limitation, applying such moneys to the payment or prepayment of Obligation No. 9 and the corresponding redemption of Series 2019 Bonds. (b) Amounts that exceed 20% of the Book Value of the Property, Plant and Equipment of the Obligated Group received by any Member of the Obligated Group as insurance proceeds with respect to any casualty loss or as condemnation awards shall be applied to repair or replace the Property (either with Property serving the same function or with other Property that, in the judgment of the Governing Body, is of equal usefulness) to which such proceeds relate or to the payment or prepayment of the ADFA Obligations and the corresponding redemption of the Series 2019 Bonds; provided, however, that such amounts may be used in such manner as the recipient may determine, if the recipient notifies the Master Trustee and within 12 months after the casualty loss or taking, delivers to the Master Trustee:

4 (i) (A) An Officer’s Certificate of the Obligated Group Representative certifying the forecasted Long-Term Debt Service Coverage Ratio for each of the two Fiscal Years following the date on which such proceeds or awards are forecasted to have been fully applied, which Long-Term Debt Service Coverage Ratio for each such period is not less than 1.35 to 1.00, as shown by pro forma financial statements for each such period, accompanied by a statement of the relevant assumptions including assumptions as to the use of such proceeds or awards, upon which such pro forma statements are based; and (B) if the amount of such proceeds or awards received with respect to any casualty loss or condemnation exceeds 30% of the Book Value of the Property, Plant and Equipment of the Obligated Group, a written report of a Consultant confirming such certification; or (ii) A written report of a Consultant stating the Consultant’s recommendations, including recommendations as to the use of such proceeds or awards, to cause the Long-Term Debt Service Coverage Ratio for each of the periods described in subsection (i) above to be not less than 1.20 to 1.00, or, if in the opinion of the Consultant the attainment of such level is impracticable, to the highest practicable level. If any proceeds of insurance or condemnation are received with respect to Property that was financed with the Series 2019 Bonds, no application of such proceeds shall occur until there shall have been filed with the Master Trustee an Opinion of Bond Counsel to the effect that such application of proceeds, in and of itself, will not adversely affect the federal income tax status of the interest on the Series 2019 Bonds. See the subcaption “SUMMARY OF PORTIONS OF THE LOAN AGREEMENT – Obligations and Options to Prepay” herein. Mandatory Sinking Fund Redemption. The Series 2019 Bonds maturing on December 1 in the years 2039, 2044 and 2049, are subject to mandatory sinking fund redemption by lot prior to maturity by lot in such manner as the Trustee shall determine on December 1 in the years and amounts set forth below at a redemption price equal to 100% of the principal amount being redeemed plus accrued interest to the date of redemption, and without premium, as follows: Series 2019 Term Bonds Maturing December 1, 2039* Year Principal Amount 2034 $1,370,000 2035 1,425,000 2036 1,485,000 2037 1,540,000 2038 1,600,000 2039 (maturity) 1,665,000

Series 2019 Term Bonds Maturing December 1, 2044* Year Principal Amount 2040 $1,735,000 2041 1,805,000 2042 1,875,000 2043 1,950,000 2044 (maturity) 2,030,000

______* Preliminary; subject to change.

5 Series 2019 Term Bonds Maturing December 1, 2049* Year Principal Amount 2045 $12,270,000 2046 12,680,000 2047 15,750,000 2048 16,280,000 2049 (maturity) 16,825,000

______* Preliminary; subject to change. At its option, to be exercised on or before the forty-fifth (45th) day next preceding any mandatory redemption date for the Series 2019 Bonds maturing on December 1, 2039, 2044 and 2049 (the “Series 2019 Term Bonds”), the Corporation may (i) deliver to the Trustee for cancellation Series 2019 Term Bonds, or portions thereof ($5,000 or any integral multiple thereof) in any aggregate principal amount desired and (ii) receive a credit in respect of its mandatory sinking fund redemption obligation for said Series 2019 Term Bonds of the same maturity or portions thereof. Each such Series 2019 Term Bond or portion thereof so delivered or previously purchased or redeemed and canceled by the Trustee shall be credited by the Trustee at 100% of the principal amount thereof on the obligation of the Issuer on such mandatory sinking fund redemption date and any excess over such amount shall be credited on future mandatory sinking fund redemption obligations in chronological order. Notice of Redemption. In the event any of the Series 2019 Bonds or portions thereof are called for redemption as aforesaid, notice thereof identifying the Series 2019 Bonds or portions thereof to be redeemed and the date on which they shall be presented for payment shall be given by Trustee by mailing a copy of the redemption notice by first class mail, postage prepaid, or other standard means, including electronic or facsimile communication (or, so long as DTC or its nominee is the sole registered owner of the Series 2019 Bonds, by any other means acceptable to DTC), not less than thirty (30) days prior to the date fixed for redemption to the Holder of each Series 2019 Bond to be redeemed in whole or in part at the address shown on the registration books. Failure to give any such notice by mailing, or any defect therein, shall not affect the validity of the proceedings for the redemption of any Series 2019 Bond or portion thereof with respect to which no such failure has occurred. After the date specified in such notice, the Series 2019 Bonds so called for redemption will cease to bear interest, provided funds for their payment have been deposited with the Trustee; and, except for the purpose of such payment, shall no longer be protected by the Indenture and shall not be deemed to be outstanding under the provisions of the Indenture. Additional Bonds Pursuant to the terms of the Indenture, so long as there shall be no Event of Default continuing under the Indenture, Additional Bonds may be issued for any one or more of the following purposes: (i) financing the acquisition, construction and/or equipping of a healthcare facility; (ii) completing any additional healthcare facility; (iii) refunding or refinancing any Bonds or Obligated Group indebtedness; and (iv) paying the costs of issuance of any such Additional Bonds, funding interest with respect to such Additional Bonds, and providing for a deposit to a debt service reserve. Any such Additional Bonds would be secured by Additional ADFA Obligations on a parity basis with Obligation No. 9 securing the Series 2019 Bonds, Obligation No. 8 securing the Series 2019 Baptist Health Corporate Bonds, Obligation No. 5 securing the 2016 Derivative Agreement, Obligation No. 4 securing the 2016 Line of Credit, Obligation No. 2 securing the Series 2015A Bonds, Obligation No. 1 securing the Series 2014 Bonds, any Additional ADFA Obligations securing Additional Bonds issued under the Indenture, and any other Obligations issued by any current or any future Member of the Obligated Group as permitted by the Master Indenture. See the caption “SECURITY FOR THE BONDS” herein.

6 Additional Bonds to Pay the Cost of Healthcare Facilities. Additional Bonds may be issued for the purpose of providing funds, together with any other available funds, for paying the cost of the acquisition, construction and equipping of any healthcare facility for any Member of the Obligated Group, or any other improvements permitted by the Act, if prior to the authentication and delivery of such Additional Bonds, there shall be filed with the Trustee, among other things, (i) all required health planning approvals, waivers of such approvals or an Opinion of Counsel of the Corporation or another Member of the Obligated Group to the effect that such approvals are not currently required under applicable law, (ii) if the improvements to be financed involve new construction (instead of renovation and/or reconstruction), a written report of an Independent Architect selected by the Obligated Group Representative setting forth the estimated date on which such improvements will be placed in service, (iii) a written report of the Administrator setting forth the amount, if any, to be provided or already provided by the Corporation or another Member of the Obligated Group from sources other than Additional Bonds, to pay the cost of such improvements, (iv) a written report of the Administrator setting forth the estimated cost of such improvements to be financed, and the amount, if any, which will be required to be deposited to the Interest Account to pay interest during the acquisition, construction and equipping of such improvements, (v) a written report of the Administrator stating that the amount of Additional Bonds proposed to be issued, together with other funds available to and committed or reserved by the Corporation or another Member of the Obligated Group for use in connection with financing the acquisition, construction and equipping of the improvements, is not less than the amount required to acquire, construct and equip such improvements and to place the same in service and to pay all Costs of such improvements, and (vi) an Officer’s Certificate of the Obligated Group Representative certifying as to coverage as required by Section 3.06 of the Master Indenture. See the caption “SUMMARY OF PORTIONS OF THE MASTER INDENTURE – Limitations on Indebtedness” herein. Additional Bonds for Completion of Healthcare Facilities. If and to the extent necessary to provide funds for the purpose of completing a healthcare facility, Additional Bonds may be issued under the Indenture for such purpose; provided, however, that prior to the issuance of such Additional Bonds there shall be filed with the Trustee (i) all required health planning approvals, waivers of such approvals or an Opinion of Counsel to the effect that such approvals are not currently required under then applicable law, and (ii) an Officer’s Certificate stating that the Additional Bonds proposed to be issued, together with other funds available to and committed or reserved by the Corporation or another Member of the Obligated Group for use in connection with the cost of completing such facility, is not less than the amount required to complete the acquisition, construction and equipping of the facility and provided, further, that the maximum principal amount of Permitted Indebtedness of the Obligated Group (other than the Obligations issued with respect to such Additional Bonds) may not in the aggregate exceed 10% of the aggregate principal amount of the Outstanding Bonds and Permitted Indebtedness of the Obligated Group (other than the Obligations issued with respect to such Additional Bonds) issued or incurred to finance the cost of such facility to be completed. Additional Bonds for Refunding or Refinancing. Additional Bonds may be issued for the purpose of refunding or refinancing any Bonds or any indebtedness of the Obligated Group. Prior to the authentication and delivery of any Additional Bonds for such purpose, there shall be filed with the Trustee such documents as shall be required by the Trustee to show that provision has been duly made in accordance with the provisions of the Indenture or any instrument securing such indebtedness to be refinanced for the payment or redemption of all of the Outstanding Bonds or indebtedness refunded or refinanced, respectively. Master Indenture Indebtedness The Issuer, on behalf of the Corporation or another Member of the Obligated Group, may incur Permitted Indebtedness (including bonds issued under a separate trust indenture to be secured on a parity with the pledge securing the Bonds). So long as the requirements of Section 3.06 of the Master Indenture are met for the issuance of an Obligation for such Permitted Indebtedness (including the provision of an Officer’s Certificate of the Obligated Group Representative certifying as to coverage), such Permitted

7 Indebtedness so issued by the Issuer may be secured on a parity basis with the Series 2019 Bonds. See the caption “SUMMARY OF PORTIONS OF THE MASTER INDENTURE – Limitations on Indebtedness” for a description of the provisions of the Master Indenture regulating Indebtedness of Members of the Obligated Group. Other Permitted Indebtedness The incurring of Indebtedness by any Member of the Obligated Group (which currently includes only the Corporation and BHRH) shall be controlled by the terms and provisions of the Master Indenture. See the caption “SUMMARY OF PORTIONS OF THE MASTER INDENTURE – Limitations on Indebtedness” for a description of the provisions of the Master Indenture regulating Indebtedness of Members of the Obligated Group.

SECURITY FOR THE BONDS AND OBLIGATIONS

The Series 2019 Bonds are special obligations only of the Issuer. No covenant or agreement in the Indenture or in the Series 2019 Bonds and no obligation therein imposed upon the Issuer and no breach thereof shall constitute or give rise to or impose upon the Issuer a general liability or a charge upon its general credit or property other than the Trust Estate. In no event shall the Series 2019 Bonds nor any agreement of the Issuer be construed to constitute an indebtedness of the State or any political subdivision thereof within the meaning of any constitutional or statutory limitation or an indebtedness for which the faith and credit of the State or any political subdivision thereof or any of their revenues are pledged or an indebtedness secured by a lien on or a security interest in any property of the State or any political subdivision thereof. Obligation Payments. Obligation No. 9 securing the Series 2019 Bonds shall be the joint and several general corporate obligation of each Member of the Obligated Group secured by a lien on and security interest in the Gross Revenues and/or Accounts of the Obligated Group and otherwise as set forth in the Master Indenture, which lien and security interest shall be subject to Permitted Encumbrances, including the lien and security interest securing all other Obligations of the Obligated Group. Pursuant to the Master Indenture, Obligations are secured equally and ratably without preference or priority as to lien or source of payment of any one Obligation over any other Obligation. The Corporation and BHRH are currently the only Members of the Obligated Group. The security interest in Gross Revenues and/or Accounts may be subject to limitations on rights of parties imposed by statute or court order and to the requirement that appropriate filings be made from time to time to maintain the perfection of the security interest. Set forth below is a brief summary of all Obligations currently outstanding under the Master Indenture (prior to application of the proceeds of the Series 2019 Bonds and the Series 2019 Baptist Health Corporate Bonds): (a) Obligation No. 1 dated September 15, 2015, in the outstanding principal amount of $138,910,000(1), evidencing and securing the Obligated Group’s obligations in connection with the Series 2014 Bonds; (b) Obligation No. 2 dated September 15, 2015, in the outstanding principal amount of $30,105,000(1), evidencing and securing the Obligated Group’s obligations in connection with the Series 2015A Bonds;

______(1) Principal balance as of December 19, 2019, the anticipated delivery date of the Series 2019 Bonds.

8 (c) Obligation No. 4 dated September 27, 2016, in the outstanding principal amount of $73,162,500(1), evidencing and securing the Obligated Group’s obligations in connection with a line of credit from Bank of America, N.A. incurred by the Corporation to finance eligible corporate purposes (the “2016 Line of Credit”) See the caption “PLAN OF FINANCING” for information regarding the Obligated Group’s intent to repay a portion of Obligation No. 4; (d) Obligation No. 5 dated November 21, 2016, in the outstanding notional amount of $73,162,500(1), evidencing and securing the Obligated Group’s obligations in connection with an interest rate swap agreement with JPMorgan Chase Bank (the “2016 Derivative Agreement”) executed in connection with the 2016 Line of Credit; (e) Obligation No. 6 dated August 31, 2018, in the outstanding principal amount of $29,265,000(1), evidencing and securing the Obligated Group’s obligations in connection with a credit facility from Bank of America, N.A. to refinance indebtedness of the Corporation incurred to finance eligible corporate purposes of the Corporation. See the caption “PLAN OF FINANCING” for information regarding the Obligated Group’s intent to repay Obligation No. 6 ; and (f) Obligation No. 7 dated October 2, 2018, in the outstanding principal amount of $150,000,000(1), evidencing and securing the Obligated Group’s obligations in connection with an interim loan from Bank of America, N.A. to the Obligated Group which provided interim financing for costs of the acquisition of the Sparks Hospital Assets and for a portion of the costs of the Sparks Improvements. Obligation No. 7 and the indebtedness represented thereby will be retired with proceeds of the Series 2019 Bonds and the Series 2019 Baptist Health Corporate Bonds (hereinafter defined and represented by Obligation No. 8); Obligation No. 8 will evidence and secure the Obligated Group’s obligations in connection with the Series 2019 Baptist Health Corporate Bonds, and will be dated as of the date of delivery of the Series 2019 Baptist Health Corporate Bonds in an amount equal to the initial principal amount thereof. Obligation No. 9 will evidence and secure the Obligated Group’s obligations in connection with the Series 2019 Bonds, and be dated as of the date of delivery of the Series 2019 Bonds in an amount equal to the initial principal amount thereof. See the caption “PLAN OF FINANCING” for information regarding the Obligated Group’s intent to utilize a portion of the proceeds of the Series 2019 Bonds to provide permanent financing of the costs of the Project by repaying a portion of Obligation No. 7, and the Obligated Group’s intent to execute and deliver an Obligation No. 8 relating to the Series 2019 Baptist Health Corporate Bonds and to utilize the proceeds thereof to repay a portion of Obligation No. 4, Obligation No. 6 in full, and the remaining portion of Obligation No. 7. So long as the Obligated Group makes timely payment on its Obligations, Gross Revenues will not be segregated for purposes of payment to the Issuer, and the members of the Obligated Group may utilize the Gross Revenues for any purpose. If an Event of Default shall have occurred under the Master Indenture, and for so long as such Event of Default shall be continuing, the Obligated Group shall pay directly to the Master Trustee for deposit in a revenue fund all Gross Revenues immediately upon receipt. The ability of the Obligated Group to make payments with respect to the Obligations is dependent upon its general financial condition and not solely upon the results of operations of the Facility. See “APPENDIX A –BAPTIST HEALTH AND CERTAIN RELATED ENTITIES” hereto for a description of the Corporation, its affiliates, and their operations. See also the caption “RISK FACTORS” herein.

______(1) Principal balance as of December 19, 2019, the anticipated delivery date of the Series 2019 Bonds, but prior to the application of the proceeds of the Series 2019 Bonds and the Series 2019 Baptist Health Corporate Bonds as described under the caption “PLAN OF FINANCING” herein.

9 Rate Covenant. Each Member of the Obligated Group covenants to set rates and charges for its facilities, services and products such that the Long-Term Debt Service Coverage Ratio, calculated at the end of each Fiscal Year, will not be less than 1.10 to 1.00; provided, however, that in any case where Long-Term Indebtedness has been incurred to acquire or construct capital improvements, the Annual Debt Service with respect thereto shall not be taken into account in making the foregoing calculation until the first Fiscal Year commencing after the occupation or utilization of such capital improvements unless the Annual Debt Service with respect thereto is required to be paid from sources other than the proceeds of such Long-Term Indebtedness prior to such Fiscal Year. If at any time the Long-Term Debt Service Coverage Ratio required by the preceding paragraph, as derived from the most recent Audited Financial Statements, is not met, the Corporation covenants to retain a Consultant within thirty (30) days of the receipt of the Audited Financial Statements for such Fiscal Year to make recommendations to increase such Long-Term Debt Service Coverage Ratio in the following Fiscal Year to the level required or, if in the opinion of the Consultant the attainment of such level is impracticable, to the highest level attainable. Any Consultant so retained shall be required to submit such recommendations within forty-five (45) days after being so retained. So long as a Consultant shall be retained and each Member of the Obligated Group shall follow such Consultant’s recommendations to the extent permitted by law, the covenant described in this paragraph shall be deemed to have been complied with unless the Long-Term Debt Service Coverage Ratio for the following two consecutive Fiscal Years is below the required level but not if the Long Term Debt Service Coverage Ratio is less than 1.00 to 1.00 in each year. The Obligated Group shall not be required to retain a Consultant to make recommendations pursuant to this paragraph more frequently than biennially. If a report of a Consultant is delivered to the Master Trustee, which report shall state that Governmental Restrictions have been imposed which make it impossible for the 1.10 to 1.00 coverage requirement described in the second preceding paragraph to be met, then such coverage requirement shall be reduced to the maximum coverage permitted by such Governmental Restrictions but in no event less than 1.00 to 1.00 and thereafter, for so long as such Governmental Restrictions are in effect, a report of a Consultant stating that Governmental Restrictions which make it impossible for the 1.10 to 1.00 coverage requirement to be met are still in effect shall be delivered to the Master Trustee biennially. Covenant Regarding Encumbrance of Property. In the Master Indenture, each Member of the Obligated Group covenants that it will not pledge or grant a security interest in any of its Property, except for Permitted Encumbrances.

BOOK-ENTRY ONLY SYSTEM

The Series 2019 Bonds will be issued only as one fully registered Series 2019 Bond for each maturity, in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”), as registered owner of all the Series 2019 Bonds. The fully registered Series 2019 Bonds will be retained and immobilized in the custody of DTC.

DTC (or any successor securities depository) or its nominee will be considered by the Issuer, the Obligated Group and the Trustee to be the owner or holder of the Series 2019 Bonds for all purposes under the Indenture. Owners of any book entry interests in the Series 2019 Bonds (the “book entry interest owners”) described below, will not receive or have the right to receive physical delivery of the Series 2019 Bonds, and will not be considered by the Issuer, the Obligated Group and the Trustee to be, and will not have any rights as, owners or holders of the Series 2019 Bonds under the bond proceedings and the Indenture except to the extent, if any, expressly provided thereunder.

10 CERTAIN INFORMATION REGARDING DTC AND DIRECT PARTICIPANTS IS SET FORTH BELOW. THIS INFORMATION HAS BEEN PROVIDED BY DTC. THE ISSUER, THE OBLIGATED GROUP, THE UNDERWRITERS AND BOND COUNSEL ASSUME NO RESPONSIBILITY FOR THE ACCURACY OF SUCH STATEMENTS. DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues and money market instruments (from over 120 countries and territories) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges among Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, the National Securities Clearing Corporation and the Fixed Income Clearing Corporation, all of which are registered agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). The DTC Rules applicable to its Direct and Indirect Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Series 2019 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2019 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2019 Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2019 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2019 Bonds, except in the event that use of the Book-Entry System for the Series 2019 Bonds is discontinued. To facilitate subsequent transfers, all Series 2019 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2019 Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2019 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2019 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Series 2019 Bonds within a maturity are to be redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

11 Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Series 2019 Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the Record Date. The Omnibus Proxy will assign Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2019 Bonds are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Payment of debt service and redemption proceeds with respect to the Series 2019 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Issuer or the Trustee on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and debt service to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. BENEFICIAL OWNERS SHOULD CONSULT WITH THE DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS FROM WHOM THEY PURCHASE A BOOK ENTRY INTEREST TO OBTAIN INFORMATION CONCERNING THE SYSTEM MAINTAINED BY SUCH DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS TO RECORD SUCH INTERESTS, TO MAKE PAYMENTS, TO FORWARD NOTICES OF REDEMPTION AND OF OTHER INFORMATION. THE ISSUER, THE OBLIGATED GROUP AND THE TRUSTEE HAVE NO RESPONSIBILITY OR LIABILITY FOR ANY ASPECTS OF THE RECORDS OR NOTICES RELATING TO, OR PAYMENTS MADE ON ACCOUNT OF, BOOK ENTRY INTEREST OWNERSHIP, OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO THAT OWNERSHIP. The Trustee and the Issuer, so long as a book entry method of recording and transferring interest in the Series 2019 Bonds is used, will send any notice of redemption or of any Indenture amendment or supplement or other notices to Bondholders under the Indenture only to DTC (or any successor securities depository) or its nominee. Any failure of DTC to advise any Direct Participants, or of any Direct Participants or Indirect Participants to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of the Series 2019 Bonds called for redemption, the Indenture amendment or supplement, or any other action premised on notice given under the Indenture. The Issuer, the Obligated Group and the Trustee cannot and do not give any assurances that DTC, Direct Participants, Indirect Participants or others will distribute payments of debt service on the Series 2019 Bonds made to DTC or its nominee as the registered owner of the Series 2019 Bonds, or any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or that DTC will serve and act in a manner described in this Official Statement. DTC may discontinue providing its services as securities depository with respect to the Series 2019 Bonds at any time by giving reasonable notice to the Issuer or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, bond certificates are required to be printed and delivered. In addition, the Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered.

12 ESTIMATED SOURCES AND USES OF FUNDS

The proceeds of the Series 2019 Bonds are expected to be used as follows:

Sources of Funds(1) Series 2019 Bond Par Amount $94,840,000 Net Original Issue Premium 207,349 Total: $95,047,349

Uses of Funds(1) Deposit to Project Fund(2) $94,000,000 Underwriters’ Discount and Other Costs of Issuance 1,047,349

Total: $95,047,349 ______(1) Preliminary; subject to change. (2) Such deposit will be utilized (i) to repay a portion of the Interim Loan (described below under the caption “PLAN OF FINANCING”); (ii) to reimburse the Obligated Group for expenses related to the Sparks Hospital Assets; and (iii) to pay and reimburse for the Sparks Improvements.

PLAN OF FINANCING

Transfer of Series 2019 Bond Proceeds A portion of the proceeds of the Series 2019 Bonds will provide permanent financing for costs of the Project. A portion of such proceeds will be transferred by the Trustee to the Obligated Group as reimbursement for certain costs incurred by the Obligated Group in the acquisition of the assets of Sparks Health System, consisting primarily of Sparks Regional Medical Center in Fort Smith, Arkansas (now known as Baptist Health–Fort Smith), and Sparks Medical Center in Van Buren, Arkansas (now known as Baptist Health–Van Buren) (collectively, the “Sparks Hospital Assets”). Additional proceeds of the Series 2019 Bonds will finance costs of acquiring and installing furnishings and equipment for the Sparks Hospital Assets (collectively, the “Sparks Improvements,”) and some of such proceeds will be transferred by the Trustee to the Obligated Group as reimbursement for certain costs incurred by the Obligated Group for the Sparks Improvements. See the caption “ESTIMATED SOURCES AND USES OF FUNDS” herein. Sparks Hospital Assets and Sparks Improvements The acquisition of the assets of Sparks Health System in November 2018 included the fee acquisition of the facility now known as Baptist Health-Fort Smith (“BH-Fort Smith”) and the assumption of the lease of the facility now known as Baptist Health-Van Buren (“BH-Van Buren”). BH–Fort Smith is a 492 licensed bed general acute care hospital located at 1001 Towson Avenue in Fort Smith, Arkansas. The hospital is approximately 773,000 square feet which is comprised of the Main Hospital (574,261 square feet), Renaissance Building (142,000 square feet) and Ambulatory Surgery Center/Information Systems/Administration (56,656 square feet). Adjacent to BH-Fort Smith is a leased medical plaza of approximately 181,500 square feet. BH-Fort Smith is currently operating 272 of its 492 licensed beds. BH -Van Buren is a 103 licensed bed acute care facility located at 211 Crawford Memorial Drive in Van Buren, Arkansas. The facility is approximately 80,975 square feet and includes clinic space on campus, which is currently home to a physical and pulmonary rehabilitation service. BH-Van Buren is currently operating 35 of its 103 licensed beds.

13 For additional information concerning the Sparks Hospital Assets, see “APPENDIX A– BAPTIST HEALTH AND CERTAIN RELATED ENTITIES” attached hereto. Use of Series 2019 Bonds Proceeds Received by the Obligated Group Upon receipt of the proceeds of the Series 2019 Bonds by the Obligated Group as described above, said amounts will be applied by the Obligated Group on December 19, 2019, to repay a portion of the $150,000,000 outstanding balance of an interim loan from Bank of America, N.A. to the Obligated Group which provided interim financing for costs of the acquisition of the Sparks Hospital Assets and for a portion of the costs of the Sparks Improvements (the “Interim Loan”). The remainder of the outstanding principal amount of the Interim Loan will be repaid with a portion of the proceeds of the Series 2019 Baptist Health Corporate Bonds. The Interim Loan was incurred by the Obligated Group on October 2, 2018, and was evidenced by Obligation No. 7. Series 2019 Baptist Health Corporate Bond Financing Contemporaneously with the issuance of the Series 2019 Bonds, the Corporation intends to issue its Baptist Health Obligated Group Healthcare Revenue Bonds, Taxable Series 2019, in the principal amount of $111,060,000* (the “Series 2019 Baptist Health Corporate Bonds”). Obligation No. 8 issued under the Master Indenture will evidence and secure the Obligated Group’s obligations relating to the Series 2019 Baptist Health Corporate Bonds, Proceeds of the Series 2019 Baptist Health Corporate Bonds will be utilized by the Obligated Group to (i) repay a portion of Obligation No. 4 evidencing and securing the Obligated Group’s obligations relating to the 2016 Line of Credit, (ii) to repay Obligation No. 6 in full, and (iii) to repay the remaining portion of Obligation No. 7 evidencing the Interim Loan not repaid with proceeds of the Series 2019 Bonds.

______* Preliminary; subject to change.

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14 After giving effect to the Obligated Group’s plan of financing described above, including the issuance of the Series 2019 Bonds and the Series 2019 Baptist Health Corporate Bonds and the application of the proceeds thereof, the Corporation and its affiliates will have the following debt outstanding: Pro Forma Debt of Baptist Health Secured Principal By Balance Final Master Outstanding(1) Maturity Indenture Fixed Rate Debt - Publicly Offered Series 2014 Bonds/Obligation No. 1 $138,910,000 2044 Yes Series 2015A Bonds/Obligation No. 2 $ 30,105,000 2031 Yes Series 2019 BH Corporate Bonds/ Obligation No. 8(2) $111,060,000 2049 Yes Series 2019 Bonds/Obligation No. 9(3) $ 94,840,000 2049 Yes

Variable Rate Debt – Directly Placed 2016 Line of Credit/ Obligation No. 4(4) $ 48,770,000 2026 Yes

Other Long-Term Debt 2014 Bank Loan(5) $ 4,276,815 2029 No/Guaranteed Miscellaneous loans(6) 4,590,609 2024 No Miscellaneous capital leases(7) 34,591,911 2029 No Total other $ 43,459,335

Non-Obligated Group Debt(8) $ 7,110,334 2029 No

Total Debt $474,254,669

(1) Principal balance as of December 19, 2019, the anticipated delivery date of the Series 2019 Bonds after application of the proceeds of the Series 2019 Bonds and the Series 2019 Baptist Health Corporate Bonds. (2) Preliminary; subject to change. The Series 2019 Baptist Health Corporate Bonds are expected to be issued contemporaneously with the issuance of the Series 2019 Bonds. See the subcaption “Series 2019 Baptist Health Corporate Bond Financing” under this caption above. (3) Preliminary; subject to change. (4) See “Summary of 2016 Line of Credit” below. (5) See “Summary of the 2014 Bank Loan” below. The 2014 Bank Loan is not an Obligation of the Obligated Group under the Master Indenture. (6) The Corporation has entered into various loans with respect to equipment acquisitions and has assumed responsibility for outstanding debt issued by Hot Spring County, Arkansas for the benefit of the Baptist Health Medical Center – Hot Spring County facility. The loans have final maturity dates ranging from 2020 through 2029. These loans are not Obligations of the Obligated Group under the Master Indenture. (7) The Corporation has entered into various capital leases with respect to building and equipment acquisitions including the lease for the Baptist Health - Van Buren land and building. The capital leases have termination dates ranging from 2020 through 2029. These capital leases are not Obligations of the Obligated Group under the Master Indenture. (8) Affiliates of the Corporation have entered into various capital leases and loans with respect to building and equipment acquisitions with termination or final maturity dates ranging from 2020 through 2029. These capital leases and loans are not Obligations of the Obligated Group under the Master Indenture.

15 Summary of 2016 Line of Credit

In 2016, the Obligated Group entered into a $75,000,000 line of credit with Bank of America, N.A. (the “2016 Line of Credit”). A portion of the 2016 Line of Credit will be refinanced with proceeds of the Series 2019 Baptist Health Corporate Bonds. The 2016 Line of Credit has a final maturity in 2026, and $48,770,000 of the loan amount will remain outstanding following issuance of the Series 2019 Baptist Health Corporate Bonds and application of the proceeds thereof. The interest rate on the 2016 Line of Credit is reset each month based upon the one-month LIBOR and a credit spread. The remaining outstanding principal amount is hedged by an interest rate swap (see “Summary of 2016 Derivative Agreement” below) to generate a fixed interest rate to the final maturity. The 2016 Line of Credit is recognized as “Long-Term Balloon Indebtedness” under the Master Indenture and is secured by Obligation No. 4 issued under the Master Indenture. In addition, the 2016 Line of Credit has covenants and remedies that differ from those in the Master Indenture. These covenants include, among others, the maintenance by the Obligated Group of a maximum annual debt service coverage ratio of not less than 1.10 to 1.00 to be tested semi-annually for the periods ending June 30th and December 31st of each fiscal year, and a requirement that the Corporation maintain at all times a minimum rating of Baa2, BBB or BBB by Moody’s, S&P or Fitch, as applicable, of the current long-term senior non-credit enhanced debt rating of the Corporation. Failure to meet the maximum annual debt service coverage ratio and/or the minimum credit rating is an event of default under the 2016 Line of Credit. Summary of 2016 Derivative Agreement In 2016, the Obligated Group entered into a variable-to-fixed interest rate swap (the “2016 Derivative Agreement”) in the notional amount of $50,000,000 to reduce its variable rate exposure on the 2016 Line of Credit. The 2016 Derivative Agreement is secured by Obligation No. 5 issued under the Master Indenture. Under the 2016 Derivative Agreement, the Obligated Group makes payments to the counterparty at a fixed rate of 2.210% based on the notional amount of the 2016 Derivative Agreement and receives payments based on the same notional amount at a variable rate computed at one-month LIBOR. The counterparty to the 2016 Derivative Agreement is JPMorgan Chase Bank, N.A. The 2016 Derivative Agreement terminates on December 1, 2026, which coincides with the final maturity of the 2016 Line of Credit. The notional amount of the 2016 Derivative Agreement at December 31, 2018 was $50,000,000. Upon the delivery of the 2019 Baptist Health Corporate Bonds, the notional amount of the 2016 Derivative Agreement will be reduced to $48,770,000, which will correspond to the remaining outstanding balance of the 2016 Line of Credit after execution of the plan of finance. The fair value of an interest rate hedge, such as the 2016 Derivative Agreement, is recorded as an asset or liability, depending on whether the termination of the agreement would result in an amount due to the Obligated Group or the swap counterparty. At December 31, 2018 and 2017, the fair value of the 2016 Derivative Agreement represented an asset to the Obligated Group in the amount of $1,104,000 and $218,000, respectively. Under the 2016 Derivative Agreement, the Obligated Group and the swap counterparty are required to post cash collateral in certain circumstances in order to secure their respective obligations under the 2016 Derivative Agreement. The amount of collateral delivered by Obligated Group over the term of the 2016 Derivative Agreement could increase or decrease based upon the Corporation’s credit rating and movements of United States Dollar swap rates and could be substantial. Collateral posting thresholds are based upon the lowest credit rating on the senior, unenhanced debt of the Corporation outstanding at the time of valuation. The collateral posting thresholds for the 2016 Derivative Agreement are as follows:

16 Credit Rating (S&P/Moody’s/Fitch) Collateral Posting Threshold AA+/Aa1/AA+ and above $35,000,000 AA/Aa2/AA $30,000,000 AA-/Aa3/AA- $25,000,000 A+/A1/A+ $20,000,000 A/A2/A $15,000,000 A-/A3/A- $10,000,000 BBB+/Baa1/BBB+ $2,000,000 BBB/Baa2/BBB and below or $0 suspended, withdrawn or unrated At December 31, 2018 and 2017, the Obligated Group was not required to post collateral. Under certain circumstances, the 2016 Derivative Agreement is subject to termination prior to the scheduled termination date. While regular payments to be made under the 2016 Derivative Agreement are secured by Obligation No. 5 issued under the Master Indenture, any termination payment owed by the Obligated Group with respect to the 2016 Derivative Agreement is secured on a subordinate basis to the Obligations under the Master Indenture.

Summary of the 2014 Bank Loan In 2014, Baptist Health Hospitals, Inc. executed a $6,100,000 loan directly with Centennial Bank (the “2014 Bank Loan”). Baptist Health Hospitals, Inc. is not a member of the Obligated Group. To facilitate the issuance of the 2014 Bank Loan, the Corporation provided an unconditional guarantee of the prompt and complete performance by Baptist Health Hospitals, Inc. of its obligations under the terms of the loan. As of the date of this Official Statement, the Corporation has not provided any funds to Baptist Health Hospitals, Inc. under the guarantee for the prior 24 months. Under the terms of the Master Indenture, if no payments have been made under the terms of a guaranty for the prior 24 months, the exposure is excluded from the computation of debt service (see the definition of “Exposure on Guaranteed Debt” in Appendix B hereto). The 2014 Bank Loan is therefore not included in the “Obligated Group Debt Service” category of the “ESTIMATED DEBT SERVICE REQUIREMENTS” table below.

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17 ESTIMATED DEBT SERVICE REQUIREMENTS The following table sets forth (i) the estimated amounts required to pay scheduled principal and interest on the proposed Series 2019 Bonds and Series 2019 Baptist Health Corporate Bonds, (ii) the amounts required to pay principal and interest on the other Obligations and other indebtedness of the Obligated Group following application of the proceeds of the proposed Series 2019 Bonds and Series 2019 Baptist Health Corporate Bonds, and (iii) the amounts required to pay scheduled principal and interest on other indebtedness of Affiliates of the Corporation that are not members of the Obligated Group, in each of the Fiscal Years indicated below.

Series 2019 Bonds(1) Series 2019 BH Corporate Bonds(1) Other Total Obligated Non-Obligated Total Fiscal Obligated Group Group Group Debt Consolidated (4) (5) Year Principal(2) Interest(3) Principal(2) Interest(3) Debt Service Debt Service Service Debt Service

2020 $ -- $ 3,189,975 $ -- $ 4,054,643 $ 25,621,081 $ 32,865,700 $ 998,856 $ 33,864,555 2021 -- 3,357,869 -- 4,268,046 25,297,357 32,923,271 1,059,837 33,983,108 2022 -- 3,357,869 2,410,000 4,268,046 21,266,846 31,302,760 957,298 32,260,058 2023 -- 3,357,869 2,470,000 4,210,688 19,949,720 29,988,276 957,299 30,945,575 2024 -- 3,357,869 2,535,000 4,146,962 18,527,073 28,566,903 947,476 29,514,379 2025 -- 3,357,869 2,605,000 4,077,249 18,479,998 28,520,116 946,007 29,466,123 2026 -- 3,357,869 2,680,000 4,001,704 18,570,141 28,609,713 946,007 29,555,720 2027 -- 3,357,869 2,760,000 3,919,428 18,662,754 28,700,050 946,007 29,646,057 2028 -- 3,357,869 2,850,000 3,831,936 17,977,367 28,017,171 946,007 28,963,178 2029 -- 3,357,869 2,940,000 3,739,026 16,106,746 26,143,640 946,007 27,089,647 2030 -- 3,357,869 3,040,000 3,640,242 14,192,068 24,230,178 443,353 24,673,532 2031 -- 3,357,869 3,155,000 3,527,458 14,198,168 24,238,494 443,353 24,681,848 2032 1,245,000 3,357,869 3,270,000 3,410,408 12,798,980 24,082,256 443,353 24,525,610 2033 1,310,000 3,295,619 3,390,000 3,289,091 12,795,730 24,080,439 443,353 24,523,793 2034 1,370,000 3,230,119 3,515,000 3,163,322 12,798,980 24,077,420 443,353 24,520,774 2035 1,425,000 3,175,319 3,645,000 3,032,915 12,797,730 24,075,964 443,353 24,519,317 2036 1,485,000 3,118,319 3,795,000 2,887,115 12,796,480 24,081,914 443,353 24,525,267 2037 1,540,000 3,058,919 3,945,000 2,735,315 12,799,480 24,078,714 443,353 24,522,067 2038 1,600,000 2,997,319 4,105,000 2,577,515 12,800,730 24,080,564 443,353 24,523,917 2039 1,665,000 2,933,319 4,265,000 2,413,315 12,799,480 24,076,114 443,353 24,519,467 2040 1,735,000 2,866,719 4,440,000 2,242,715 12,799,980 24,084,414 443,353 24,527,767 2041 1,805,000 2,797,319 4,620,000 2,058,455 12,796,230 24,077,004 443,353 24,520,357 2042 1,875,000 2,725,119 4,815,000 1,866,725 12,797,480 24,079,324 73,896 24,153,220 2043 1,950,000 2,650,119 5,015,000 1,666,903 12,797,480 24,079,501 -- 24,079,501 2044 2,030,000 2,572,119 5,220,000 1,458,780 12,800,318 24,081,216 -- 24,081,216 2045 12,270,000 2,490,919 5,440,000 1,242,150 2,641,155 24,084,224 -- 24,084,224 2046 12,680,000 2,076,806 5,665,000 1,013,670 2,641,155 24,076,631 -- 24,076,631 2047 15,750,000 1,648,856 5,905,000 775,740 -- 24,079,596 -- 24,079,596 2048 16,280,000 1,117,294 6,155,000 527,730 -- 24,080,024 -- 24,080,024 2049 16,825,000 567,844 6,410,000 269,220 -- 24,072,064 -- 24,072,064 Totals $94,840,000 $86,806,444 $111,060,000 $84,316,508 $400,510,708 $777,533,661 $15,044,936 $792,578,597

______(1) Preliminary; subject to change. (2) Including mandatory sinking fund redemptions. (3) Assuming a combined true interest cost on the Series 2019 Bonds and Series 2019 Baptist Health Bonds of 3.78% (4) Includes payments due on Obligations Nos. 1 (Series 2014 Bond), No. 2 (Series 2015A Bonds), No. 4 (2016 Line of Credit), and No. 5 (2016 Derivative Agreement), following application of the proceeds of the Series 2019 Bonds and Series 2019 Baptist Health Corporate Bonds as described under the caption “PLAN OF FINANCING” herein and various non-Obligation leases and loans. The remaining $48,770,000 outstanding principal amount of the 2016 Line of Credit not repaid with proceeds of the Series 2019 Baptist Health Corporate Bonds is Balloon Indebtedness under the Master Trust Indenture with a final maturity date of September 27, 2026, at which time a balloon payment of $42,800,000 is due. The Master Trust Indenture allows for the amortization of Balloon Indebtedness to generate level annual debt service over a period of up to thirty (30) years from the date of issuance at the actual interest rate on the debt as of the calculation date (see the definition of “Annual Debt Service” in Appendix B). For purposes of this schedule, the $48,770,000 principal amount of the 2016 Line of Credit is amortized over a twenty-seven (27) year period beginning in Fiscal Year 2020 to generate level annual debt service assuming an interest rate of 2.96%. Level annual debt service amounts assumed on the 2016 Line of Credit would be lower if the Balloon Indebtedness provisions of the Master Trust Indenture were applied. Consequently, Maximum Annual Debt Service for the Obligated Group (which would occur in Fiscal Year 2021) would be lower by $143,385 if the Balloon Indebtedness provisions of the Master Trust Indenture were applied and the 2016 Line of Credit was amortized over a thirty (30) year period. (5) Includes various capitalized leases and loans of non-Obligated Group Affiliates of the Corporation.

18 OBLIGATED GROUP HISTORICAL PRO FORMA DEBT SERVICE COVERAGE RATIOS The following table shows Maximum Annual Debt Service coverage based upon Income Available for Debt Service of the Obligated Group on a historical pro forma basis based upon the provisions of the Master Trust Indenture. (Dollars in Thousands) Fiscal Year 2016 Fiscal Year 2017 Fiscal Year 2018

Obligated Group Income Available for Debt Service (A)(1) $78,281 $80,835 $62,570

Pro Forma Maximum Annual Debt Service (B)(2) $32,780 $32,780 $32,780

Historical Pro Forma Debt Service Coverage Ratio (A/B) 2.39X 2.47X 1.91X

(1) See the definition of “Income Available for Debt Service” in “Appendix B – DEFINITIONS” hereto. (2) See the fiscal year ending December 31, 2021, in the table under the caption “ESTIMATED DEBT SERVICE REQUIREMENTS” herein. See also footnote 4 under such table for a discussion regarding the calculation of Balloon Indebtedness debt service for coverage purposes. As described in such footnote, the pro forma debt service total for the Obligated Group for the fiscal year ending December 31, 2021, as shown above, is calculated in such a manner as to be $143,385 less than the total shown for such fiscal year in the “ESTIMATED DEBT SERVICE REQUIREMENTS” table. SYSTEM HISTORICAL PRO FORMA DEBT SERVICE COVERAGE RATIOS The following table shows Maximum Annual Debt Service coverage based upon Income Available for Debt Service of the Corporation and its Affiliates on a consolidated and historical pro forma basis. (Dollars in Thousands) Fiscal Year 2016 Fiscal Year 2017 Fiscal Year 2018

System Income Available for Debt Service (A)(1) $67,579 $74,177 $62,732

Pro Forma Maximum Annual Debt Service (B)(2) $33,983 $33,983 $33,983

Historical Pro Forma Debt Service Coverage Ratio (A/B) 1.99X 2.18X 1.85X

(1) See the definition of “Income Available for Debt Service” in “Appendix B – DEFINITIONS” hereto. (2) See the fiscal year ending December 31, 2021, in the table under the caption “ESTIMATED DEBT SERVICE REQUIREMENTS” herein.

THE ISSUER Creation and Powers of the Issuer The Arkansas Development Finance Authority (the “Issuer”) is a body corporate and politic and an instrumentality of the State of Arkansas. The Issuer was created pursuant to the Arkansas Development Finance Authority Act, Title 15, Chapter 5, Subchapter 3 of the Arkansas Code of 1987

19 Annotated (as amended, the “Act”). The Act authorizes the Issuer to issue from time to time its bonds, notes and other obligations in such principal amounts as the Issuer determines shall be necessary to provide sufficient funds to carry out its purposes and powers, including the financing and refinancing of “health care project costs.” The powers of the Issuer are vested in its Board of Directors (the “Board”), consisting of the State Treasurer, the Secretary of the Department of Finance and Administration, the Secretary of the Department of Commerce and eleven (11) public members appointed by the Governor with the advice and consent of the State Senate. The Act provides that the Board shall employ a President who shall serve at the pleasure of the Governor. Officers and Directors The names, offices, principal occupations and residences of the current directors of the Board and the dates of expiration of their terms are set forth below. Term Expires Name and Office (January 14) Principal Occupation and Residence

Stan Green, Chair 2023 President, Clean Energy, Inc. and Lindsey-Green Commercial Properties, Fayetteville

Katelyn Busby, Vice Chair 2020 Attorney, Office of Child Support Enforcement, Monticello

Bryan Scoggins, Secretary (Ex-officio, non-voting) President, Arkansas Development Finance Authority, Little Rock

Rod Coleman 2023 Chairman, ERC Holdings, LLC, Fort Smith

Stephanie Garner 2021 Chief Executive Officer, ARVAC, Inc., Dardanelle

Dr. Lillie “Lee” Lane 2022 Retired Engineering Executive, Paris

Seth N. Mims 2020 President, Specialized Real Estate Group, Fayetteville

George O’Connor 2023 Chairman, O’Connor Distributing, Little Rock

Stephen G. Rose 2020 Proprietor, Roseland Farms, Blytheville

Carey Smith 2021 President, C. Smith Holdings, Inc., Little Rock

Gregory Stanfill 2021 Executive Vice President, Arvest Bank, Rogers

20 Term Expires Name and Office (January 14) Principal Occupation and Residence

Denise Sweat 2022 Vice President, Farm Credit Services, Nashville

Larry Walther (Ex-officio) Secretary, Arkansas Department of Finance and Administration, Little Rock

Dennis Milligan (Ex-officio) State Treasurer, Little Rock

Mike Preston (Ex-officio, non-voting) Secretary, Arkansas Department of Commerce The staff of the Issuer consists of approximately 50 full-time employees. Senior officers of the Issuer include: Bryan Scoggins, President; Mark Conine, Chief Financial Officer; and Robert Arrington, Director of Homeownership and Public Finance. The office of the Issuer is located at 900 West Capitol, Suite 310, Little Rock, Arkansas. Its telephone number is (501) 682-5900, and its mailing address is Post Office Box 8023, Little Rock, Arkansas 72203-8023. More information concerning the Authority appears on its website: www.arkansas.gov/adfa. Other Indebtedness of the Issuer The Issuer has outstanding various bond issues which have been issued for single family and multifamily housing, industrial development and higher educational facilities, correctional facilities and other governmental purposes. Such bond issues are secured by other revenues and assets separate and apart from the revenues and assets pledged in the Indenture. No assets or funds of the Issuer, other than those held under the Indenture, are pledged to the payment of the Series 2019 Bonds. Future Financings of the Issuer The Issuer expects during 2019 and 2020 and in future years to issue other bonds for purposes authorized in the Act and to finance other activities as permitted by the Act. Such future bond will be secured by revenues and assets separate and apart from those pledged under the Indenture to secure the Series 2019 Bonds. RISK FACTORS

THE PURCHASE OF THE SERIES 2019 BONDS IS SUBJECT TO CERTAIN INVESTMENT RISKS AND MAY NOT BE SUITABLE FOR SOME INVESTORS. PROSPECTIVE INVESTORS ARE ENCOURAGED TO READ THIS OFFICIAL STATEMENT IN ITS ENTIRETY, INCLUDING THE APPENDICES HERETO. PARTICULAR ATTENTION SHOULD BE GIVEN TO THE FACTORS DESCRIBED BELOW WHICH, AMONG OTHERS, COULD AFFECT THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE SERIES 2019 BONDS, AND COULD ALSO AFFECT THE MARKET PRICE OF THE SERIES 2019 BONDS TO AN EXTENT THAT CANNOT BE DETERMINED. THE FOLLOWING LIST OF RISK FACTORS IS NOT INTENDED TO PROVIDE AN EXHAUSTIVE LIST OF THE GENERAL OR SPECIFIC RISKS RELATING TO THE PURCHASE OF THE SERIES 2019 BONDS. ADDITIONAL RISK FACTORS RELATING TO AN INVESTMENT IN THE SERIES 2019 BONDS ARE DESCRIBED THROUGHOUT THIS OFFICIAL

21 STATEMENT, INCLUDING THE APPENDICES HERETO, WHETHER OR NOT SPECIFICALLY DESIGNATED AS RISK FACTORS.

General The Series 2019 Bonds are special obligations only of the Issuer. No covenant or agreement in the Indenture or in the Series 2019 Bonds and no obligation therein imposed upon the Issuer and no breach thereof shall constitute or give rise to or impose upon the Issuer a general liability or a charge upon its general credit or property other than the Trust Estate. In no event shall the Series 2019 Bonds nor any agreement of the Issuer be construed to constitute an indebtedness of the State or any political subdivision thereof within the meaning of any constitutional or statutory limitation or an indebtedness for which the faith and credit of the State or any political subdivision thereof or any of their revenues are pledged or an indebtedness secured by a lien on or a security interest in any property of the State or any political subdivision thereof. See the caption “SECURITY FOR THE BONDS AND OBLIGATIONS” herein. Except as otherwise noted herein, the Series 2019 Bonds are payable from the loan payments to be made by the Obligated Group under the Loan Agreement, the Supplement and Obligation No. 9. No representation can be made or assurance given that revenues will be realized by the Corporation, BHRH or future Members of the Obligated Group in amounts sufficient to pay maturing principal of and interest on the Series 2019 Bonds. The payments due under the Loan Agreement, the Supplement and Obligation No. 9 are general corporate obligations of Members of the Obligated Group. The ability of the Corporation, BHRH or future Members of the Obligated Group to make such payments is dependent upon their general financial condition and upon many other factors and conditions which may change in the future to an extent and with effects that cannot be determined at this time. Such factors include, in addition to those mentioned below, the capabilities of the management of the Corporation, BHRH and future Members of the Obligated Group, the confidence of physicians in the Corporation and BHRH, changes in the economic conditions of the Corporation’s and BHRH’s service areas, the demand for medical services, levels and methods of federal reimbursement under Medicare, federal and state reimbursement under Medicaid, reimbursement from other third-party payors, competition, rates, demographic changes, malpractice claims, natural disasters, government legislation, regulation and licensing requirements, and future economic and other conditions (including the impact of inflation) which may change in the future and which are not quantified or determinable at this time. There can be no assurance given that the financial condition of the Members of the Obligated Group and/or utilization of the facilities of the Members of the Obligated Group will not be adversely affected by any of such conditions. The Corporation and BHRH are presently the only Members of the Obligated Group. The Corporation and BHRH are health care providers which derive a significant portion of their revenues from Medicare, Medicaid, Blue Cross and Blue Shield of Arkansas and other third-party payor programs. See the caption “Sources of Patient Revenue” in Appendix A to this Official Statement. Federal and State health care legislation and regulatory and judicial actions are profoundly changing many areas of operations and finances of health care providers, including those of the Corporation and BHRH. The receipt of future revenues by the Corporation and BHRH are therefore subject to, among other factors, federal and State policy changes affecting the health care industry and other conditions which are impossible to predict. Such conditions may include difficulties in increasing and collecting fee and charges in amounts sufficient to maintain the scope and quality of health services and changes in reimbursement or prospective payment policies. The effect on the Obligated Group of recently enacted laws and regulations and of changes in federal and State laws and policies cannot be fully or accurately determined at this time.

22 This caption should be read in conjunction with the information concerning the Corporation, BHRH and their related entities contained in Appendix A hereto, and the consolidated financial statements of the Corporation attached hereto as Appendices C and D. The following factors should be considered by prospective purchasers of the Series 2019 Bonds in evaluating the ability of the Corporation, BHRH or future Members of the Obligated Group to meet their obligations under the Loan Agreement, the Supplement and Obligation No. 9 with respect to the Series 2019 Bonds. The discussion of risk factors is not, and is not intended to be, exhaustive. Acquisitions, Affiliations, Mergers and Divestitures The Obligated Group Members and Affiliates may enter into transactions that could materially affect their business, organizational structure and control. Such transactions could include, among others, acquisitions of hospitals and physician organizations, divestitures of affiliates, substantial mew joint ventures and mergers, consolidations or other forms of affiliations in which control of the Obligated Group could be materially changed, or the operating results of the Obligated Group materially affected. Given the pace of change in the health care industry, it is likely that the Obligated Group will be presented with opportunities to enter into transactions of considerable magnitude or significance. The ability of the Obligated Group to generate revenues sufficient to pay debt service on the Series 2019 Bonds may be adversely affected by the decisions of the Corporation’s Board of Trustees and management with respect to any such opportunities. Matters Relating to the Security for the Series 2019 Bonds Obligation No. 9 evidencing the payment obligations of the Obligated Group with respect to the Series 2019 Bonds is secured by the Gross Revenues and/or Accounts of the Obligated Group and otherwise as set forth in the Master Indenture, subject to Permitted Encumbrances. The Series 2019 Bonds are not secured by any real property or equipment and fixtures of the Members of the Obligated Group. See the caption “SECURITY FOR THE BONDS AND OBLIGATIONS” herein. The realization of any rights upon a default will depend upon the exercise of various remedies specified in the Indenture and the Master Indenture. These remedies, in certain respects, may require judicial action which is often subject to discretion and delay. Under existing law, certain of the remedies specified in the Indenture and Master Indenture may not be readily available or may be limited. A court may decide not to order the specific performance of the covenants contained in the Indenture and the Master Indenture. The effectiveness of the Indenture and Master Indenture, including the pledge of the Gross Revenues and/or Accounts of the Obligated Group described therein, may be limited by a number of factors, including: (a) the absence of an express provision permitting assignment of payments due under the Medicare or Medicaid programs or under the contracts between the Corporation, BHRH or future members of the Obligated Group and Blue Cross and other third party payors, and present or future prohibitions against assignment contained in any federal statutes or regulations; (b) statutory liens; (c) rights arising in favor of the United States of America or any agency thereof; (d) constructive trusts, equitable liens or other rights impressed or conferred by a federal or State court in the exercise of its equitable jurisdiction; (e) federal bankruptcy laws that may affect the enforceability of the Indenture or Master Indenture or certain federal statutes and judicial decisions that have cast doubt upon the right of a trustee, in the event of a default, to collect and retain accounts receivable from Medicare, Medicaid and other governmental programs; and (f) rights of third parties in the Corporation’s, BHRH’s or future Obligated Group Members’ revenues converted to cash and not in the possession of the Trustee. The state of insolvency, fraudulent conveyance and bankruptcy laws relating to the enforceability of guaranties or obligations issued by one corporation in favor of the creditors of another is unsettled. In particular, such obligations may be voidable under the Federal Bankruptcy Code or applicable state fraudulent conveyance statutes if the obligation is incurred without "fair" consideration and/or "substantially equivalent" value to the obligor and if the incurrence of the obligation thereby renders the 23 corporation insolvent. The standards for determining fairness of consideration and the manner of determining insolvency are not clear and may vary under the Federal Bankruptcy Code, state fraudulent conveyance statutes and applicable cases. General Economic Conditions: Bad Debt, Indigent Care and Investment Performance Global economic conditions could have a number of negative impacts on the Obligated Group and on the health care industry generally. Health care providers are economically influenced by the environment in which they operate. Any national economic difficulties may constrain corporate and personal spending, limit the availability of credit and increase the national debt and any federal and state government deficits. To the extent that unemployment rates are high, employers reduce their workforces and their budgets for employee health care coverage and private and public insurers may seek to reduce payments to health care providers or curb utilization of health care services, causing health care providers to experience decreases in insured patient volume and reductions in payments for services. In addition, to the extent that state, county or city governments are unable to provide a safety net of medical services, pressure is applied to local health care providers to increase uncompensated care. Economic downturns and lower funding of federal Medicare and state Medicaid (a significant source of income for the Corporation and BHRH) and other state health care programs may increase the number of patients who are unable to pay for their medical and hospital services. These conditions may give rise to increases in health care providers’ uncollectible accounts, or “bad debt,” uninsured discount and charity care and, consequently, to reductions in operating income. Although the Corporation and BHRH have and will continue to maximize payment or reimbursement for the care they provide, they also recognize their obligation to provide uncompensated care to the medically indigent. Obligations to provide uncompensated care can be derived from anti- dumping, emergency care, continuity of care and other laws that might apply to the Corporation and BHRH. Many nonprofit hospitals have been and are subject to litigation attempting to establish obligations to provide uncompensated care based on the tax-exempt status of the hospital under federal or state law. Investments provide the Obligated Group Members an important source of funds to support programs and services. Periodic market declines may adversely affect the Obligated Group’s investment portfolio, including unrealized investment portfolio losses and reduced investment income, although the Corporation has experienced portfolio gains in recent years. Declines in investment portfolio values may reduce or eliminate non-operating revenues. Investment losses (even if unrealized) may trigger debt covenant violations and may jeopardize economic security. See Note 4 to the consolidated financial statements of the Corporation attached as Appendix C to this Official Statement for a description of the Corporation’s investment return for the past two fiscal years and for the eight-month periods ended August 31, 2019 and 2018. No assurances can be given that the market value of the Corporation’s investments will not decline in the future. Any such decline could adversely affect the financial condition of the Obligated Group and its ability to satisfy its payment obligations with respect to the Series 2019 Bonds. Market declines could also limit access to the credit markets and increase borrowing costs for the Members of the Obligated Group. Legislative and Regulatory Changes; Health Care Reform In recent years, health care reform at both the federal and state levels has been identified as a priority by political leaders and candidates, business leaders and public advocates. In 2010, H.R. 3590, the Patient Protection and Affordable Care Act, amended by H.R. 4872, the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”) was enacted. Various aspects of the Affordable Care Act are described below. A significant component of the Affordable Care Act is reformation of the sources and methods by which consumers pay for health care for themselves and their families, and by which employers 24 procure health insurance for their employees and dependents of their employees and, as a consequence, expansion in the overall number of consumers of health care services. The Affordable Care Act was designed, in substantial part, to make available, or subsidize the premium costs of, health care insurance for some of the millions of uninsured (or underinsured) consumers, in particular those who fall below certain income levels. The Affordable Care Act proposed to accomplish that objective through various provisions, including the following: (i) the creation of active markets (referred to as exchanges) in which individuals and small employers can purchase health care insurance for themselves and their families or their employees and dependents; (ii) the provision of means tested subsidies for premium costs to certain individuals and families based upon their income relative to federal poverty levels; (iii) the requirement that individual consumers obtain, and certain employers provide, a minimum level of health care insurance, and the provision of a penalty in the form of taxes on consumers and employers that do not comply with these mandates; (iv) the expansion of private commercial insurance coverage generally through reforms such as prohibition on denials of coverage for pre-existing conditions and elimination of lifetime or annual cost caps; and (v) the expansion of existing public programs for individuals and families, including the Medicaid program. The Affordable Care Act has produced some of the results expected from its passage – an increase in utilization of health care services by those who were avoiding or rationing their health care. Although bad debt expenses and/or charity care may have been reduced as a result of some provisions of the Affordable Care Act, increased utilization has also resulted in increased variable and fixed costs of providing such health care services, which costs may or may not be offset by increased revenues. Most aspects of the Affordable Care Act have taken effect, while others are being phased in over a period of several years. A number of coverage expansion measures are in place, including prohibitions against insurers denying coverage or imposing coverage exclusions on children with pre-existing conditions, provisions permitting young adults to obtain coverage under their parents’ plans, and restrictions on insurance policy coverage limits. An array of coverage expansion, health insurance regulation and tax increase measures are also in effect, including broad insurance coverage mandates for individuals and certain employer mandates. In June 2012, in response to litigation brought by a group of state attorneys general, the U.S. Supreme Court upheld most provisions of the Affordable Care Act while also substantially limiting the law’s expansion of Medicaid, allowing states to choose between participating in the expansion while receiving additional federal payments or foregoing the expansion and retaining existing payments. Instead of fully expanding the Arkansas Medicaid program as envisioned by the Affordable Care Act, the State of Arkansas sought and obtained a waiver from the federal government to instead institute a hybrid approach commonly referred to as the “private option.” Under the current version of the private option, individuals in Arkansas earning less than 138% of the federal poverty level income amount are currently eligible to receive a government subsidy to purchase private insurance through an insurance exchange. The adoption of the State’s private option program by the Arkansas General Assembly, effective June 1, 2014, resulted in insurance coverage to an estimated 285,000 previously uninsured persons and a corresponding decrease in the costs of uncompensated care to Arkansas hospitals. The Arkansas private option program had a significant positive impact on the Corporation’s financial performance in Fiscal Years 2015, 2016, 2017 and 2018. Any repeal or revision of the Affordable Care Act could potentially invalidate the Arkansas private option program, which, in turn, could have a material negative impact on patient revenues of the Members of the Obligated Group and their ability to satisfy their payment obligations with respect to the Series 2019 Bonds. Under State law, the private option program requires annual reauthorization and appropriation by a vote of at least 75% of the senators and representatives in each chamber of the Arkansas General Assembly. Approval in 2018 was accomplished with 27 votes (27 required) in the Senate and 79 votes (75 required) in the House. Reauthorization was obtained in 2016, 2017 and 2018 only after a number of

25 amendments to the program such as (i) requiring the payment of small premiums by persons earning between 100% and 138% of the federal poverty level income amount, (ii) the requirement for able- bodied recipients to work, be engaged in work or education training, or volunteer with a charitable organization (the “Work Requirement”), (iii) reducing the retroactive eligibility standard for Medicare coverage from 90 days before enrollment to 30 days prior to enrollment, and (iv) rebranding of the program as “Arkansas Works.” The amendments have been approved through a waiver process with the Centers for Medicare and Medicaid Services (“CMS”). The Work Requirement, the first of its kind in the nation, became effective in June of 2018, and required non-exempt beneficiaries to report 80 hours each month of work, work training, education or community service. The reporting process, which requires the submission of hours through an online portal, has proven controversial. In August 2018, Arkansas Works had 265,223 total enrollees. By December 2018, 18,000 beneficiaries had been removed from the program. In March of 2019, the Work Requirement was struck down by a federal judge in the United States District Court for the District of Columbia. The decision has been appealed by the Trump Administration and is expected to reach the United States Supreme Court. Because the decision did not grant a stay, the Work Requirement is not currently in effect and individuals who lost eligibility for Arkansas Works coverage are now eligible to reapply. Reauthorization and appropriation of the program for 2019 was impacted as a result; although the bill to fund Arkansas Works passed the Senate, it failed in the House of Representatives, achieving only 58 votes (75 required). Brought before the chamber again, the bill received the 75 votes needed to fund the program for 2019. Given the annual appropriation requirement for Arkansas Works (which is also subject to a lengthy review and approval process by CMS with respect to any changes to the program), as well as the political environment, the long-term status of Arkansas Works cannot be assured. Any repeal or revision of the Arkansas private option program that would reduce the number of Arkansans with insurance coverage could have a material negative impact on patient revenues of the Members of the Obligated Group and their ability to satisfy their payment obligations with respect to the Series 2019 Bonds. Given the annual appropriation requirement for Arkansas Works (which is also subject to a lengthy review and approval process by CMS with respect to any changes to the program), as well as the continuing volatile political environment, the long-term status of Arkansas Works cannot be assured. Any repeal or amendment of the Affordable Care Act (or change in the implementation thereof) or of the Arkansas Works Medicaid expansion could have a material negative impact on revenues of the Members of the Obligated Group and their ability to satisfy their payment obligations under the Loan Agreement with respect to the Series 2019 Bonds. In 2014, the federal and state health insurance exchanges intended to facilitate the purchase of health insurance became operational. The federal exchange and some state exchanges initially experienced widespread technical difficulties and lower than expected enrollment figures. Issues with respect to the exchange have been largely resolved. Health insurance providers participating in the health insurance exchanges are subject to regulation of benefit packages and review of premiums. Purchasers of insurance on these exchanges meeting certain income limitations are eligible for tax credits. The U.S. Supreme Court has upheld United States Treasury Regulations permitting health insurance exchange purchasers to receive tax credit subsidies, regardless of whether the purchase is made through a federal or a state-operated health exchange. In 2015, the employer mandate, after being delayed twice, went into effect for certain employers, and in 2016, the employer mandate for smaller employers became effective. In November 2015, the Bipartisan Budget Act of 2015 repealed a provision of the Affordable Care Act which required employers offering one or more health benefit plans and having more than 200 full-time employees to automatically enroll new full-time employees in a health plan. 26 The Affordable Care Act contains provisions aimed at reducing Medicare and Medicaid reimbursements to providers and reducing projected growth of the Medicare program, including reducing Medicare Advantage payments, reducing reimbursement under the disproportionate share hospital (“DSH”) program, and tying provider payments more closely to efficiency and quality outcomes. Another major component of the Affordable Care Act is its enhanced health care program integrity provisions. The Affordable Care Act contains more than thirty-two sections relating to health care fraud and abuse and federal health care program integrity, as well as significant amendments to existing criminal, civil and administrative anti-fraud statutes, Specially, the Affordable Care Act amended the False Claims Act (“FCA”) (described below under the caption “REGULATION OF THE HEALTH CARE INDUSTRY –Fraud and Abuse Laws and Regulations –Billing and Reimbursement Practices”) regarding the timing of the obligation to reimburse overpayments. Further, the Affordable Care Act authorizes the Secretary of Health and Human Services (“HHS”) to exclude a provider’s participation in the Medicare, Medicaid and the Children’s Health Insurance Program programs, as well as to suspend payments to a provider, pending an investigation of a credible allegation of fraud against the provider. The potential for increased legal exposure due to the Affordable Care Act’s enhanced compliance and regulatory requirements, disclosure and transparency obligations, quality of care expectations and extraordinary enforcement provisions could increase the operating expenses of the Members of the Obligated Group. With expanded health insurance coverage under the Affordable Care Act, the Members of the Obligated Group have benefitted from reduced charity care write-offs and bad debt expenses. A portion of those gains, however, have been offset by the increase in high deductible insurance plans under which insured patients are more likely to fail to make payment. The Members of the Obligated Group have also benefitted from the expansion of the Medicaid program and increased Medicaid reimbursement for services provided by employed physicians. Conversely, the Affordable Care Act has resulted in lower Medicare reimbursements and reduced Medicare and Medicaid DSH funding. The new reimbursement methodologies have resulted in increased pressures for greater operational efficiency. Also, since commercial and managed care insurers have experienced increased regulation and fees, the negotiations of the Members of the Obligated Group with those insurers have become more difficult. New excise taxes on medical equipment could result in increased costs to health care providers such as the Members of the Obligated Group (although such taxes are currently subject to a moratorium through the end of 2019). See also “Nonprofit Health Care Environment” under this caption below as to additional requirements and limitations for nonprofit hospitals under the Affordable Care Act. Many states have also enacted or are considering health care reform measures. Both as a part of recent reform efforts and throughout the preceding decades, numerous legislative proposals have been introduced or proposed in the Arkansas General Assembly aimed at effecting major changes in health care policy and systems. The purpose of much of the statutory and regulatory activity has been to control health care costs, particularly costs paid under the Medicaid program. A significant portion of the revenue of the Members of the Obligated Group is derived from the Medicaid program. It is not known what additional proposals may be proposed or adopted or, if adopted, what effect such proposals would have on the operations or revenue of the Members of the Obligated Group. Legislative Efforts to Repeal, Replace or Amend the Affordable Care Act The content and implementation of the Affordable Care Act has been, and remains, highly controversial. Accordingly, the Affordable Care Act has continually faced legal and legislative challenges, including repeated repeal efforts, since its enactment. Management cannot predict the impact any major modification or repeal of the Affordable Care Act, or any replacement health care reform legislation, might have on the business or financial condition of the Members of the Obligated Group, although such effects could be material. In particular, any legal, legislative or executive action that reduces federal health care program spending, increases the number of individuals without health 27 insurance, reduces the number of people seeking health care, or otherwise significantly alters the health care delivery system or insurance markets could have a material adverse effect on the business or financial condition of the Members of the Obligated Group. Several attempts to repeal and/or replace the Affordable Care Act have been made since its passage. While past attempts have not been successful in gaining the approval of both chambers of Congress to repeal the Affordable Care Act in its entirety, the President and Republican leaders of Congress have repeatedly cited health care reform, and particularly, repeal and replacement of the Affordable Care Act, as a key goal. Certain portions of the Affordable Care Act have been repealed or their implementation delayed. As a result of the passage of the Tax Cuts and Jobs Act of 2017, beginning in 2019, the Affordable Care Act requirement that individuals obtain health insurance or pay a penalty is eliminated. In addition to the potential legislative changes discussed above, Affordable Care Act implementation and the Affordable Care Act insurance exchange markets can be significantly impacted by executive branch actions. On January 20, 2017, President Trump issued an Executive Order requiring all federal agencies with authorities and responsibilities under the Affordable Care Act to “exercise all authority and discretion available to them to waive, defer, grant exemptions from or delay” parts of the Affordable Care Act that place “unwarranted economic and regulatory burdens” on states, individuals or health care providers. It is impossible to predict the effect of this broad executive order. On October 12, 2017, President Trump issued an Executive Order instructing agencies to modify regulations for association health plans (AHPs), short-term, limited-duration insurance (STLDI), and health reimbursement arrangements (HRAs). Because of variables in implementation of this Executive Order, the impact is uncertain. In addition, as a result of a ruling in a lawsuit (House v. Price) challenging the legality of cost- sharing subsidies paid by the federal government to insurance companies that offer coverage under the Affordable Care Act insurance exchanges, President Trump announced in October 2017 that the payment of such subsidies would terminate immediately. Such action has the potential to significantly impact the insurance exchange market by reducing the number of plans available on the Affordable Care Act health insurance exchanges and/or significantly increasing insurance premiums. In response to such termination, health insurers offering qualified plans enacted rate increases for 2018 and 2019. In Arkansas, the four insurers offering qualified plans announced 2018 rate increases ranging from 14.2% to 24.78%. Rate increases for 2019 showed more stability, with increases averaging from 1% to 4.4%. A Kaiser Family Foundation study concluded that 2018 premium increases were a reaction to the termination of cost-sharing subsidy payments, and the 2019 rate increases suggest the market is much more stable and sustainable. It is not known which additional actions may be proposed or adopted or, if adopted, what effect such actions would have on the operations or revenue of the Members of the Obligated Group. However, the increased focus and interest on federal and state health care reform may increase the likelihood of further significant changes affecting the health care industry in the near future. There can be no assurance that recently enacted, currently proposed or future health care legislation, regulation or other changes in the administration or interpretation of governmental health care programs will not have an adverse effect on the Members of the Obligated Group. Reductions in funding levels of the Medicare or Medicaid programs, changes in payment methods under the Medicare and Medicaid programs, reductions in State funding, or other legislative or regulatory changes could materially reduce the patient service revenue of the Members of Obligated Group. See the caption “Sources of Patient Revenue” in Appendix A hereto.

28 Third-Party Reimbursement Apart from reimbursement by the federal government under Medicare and the federal and state governments under Medicaid, a substantial portion of the revenue of the Members of the Obligated Group is provided by private third-party payors (such as health maintenance organizations (“HMOs”), preferred provider organizations (“PPOs”) and other commercial insurers). Generally, reimbursement received from large national HMOs and PPOs and commercial insurance companies that have specific contracts with the Members of the Obligated Group is lower than reimbursement received from smaller networks and commercial insurance companies which do not have contracts with the Members of the Obligated Group. Future contract negotiations between such third-party payors and the Members of the Obligated Group, and other efforts of these third-party payors and of employers to limit health-care costs, could adversely affect the level of utilization of the services of the Members of the Obligated Group, or reimbursement to the Members of the Obligated Group, or both. In addition, it is possible that competitive pricing of plan premiums could cause an HMO or PPO or insurance carrier to operate at a loss and expose the Members of the Obligated Group to delays in payment or nonpayment of claims for services to plan participants or insured patients. Changes in sources of revenue and case mix intensity may also adversely affect the operating revenue of the Members of the Obligated Group. For example, if patients formerly covered by commercial insurance programs that pay full hospital and physician charges shift to high deductible health plans, health savings accounts (“HSAs”), HMOs, PPOs or other third-party payors such as contracted insurance that pay lower negotiated rates, the adjustments to determine net patient service revenue would increase, which (absent an offsetting decrease in operating expenses) would result in a decrease in operating income. In addition, if the average severity of illness or condition of patients covered by a capitated plan or contracted insurance with per diem charges or charges based on diagnosis were to increase after execution of the related plan contract, operating expenses could increase without an offsetting increase in operating revenue. Approximately 7.1% of the patient service revenue of the Corporation for Fiscal Year 2018 was derived from patients in managed care plans (other than Medicare and Medicaid managed care plans), including contracted insurance. Traditional health insurance programs are increasingly reimbursing outpatient services using case rates and bundled payments for related services. Those payment methodologies put a provider at risk for cases requiring more services than are assumed by the applicable case rate or bundled payment. Blue Cross and Blue Shield of Arkansas (“BCBSA”) reimburses hospitals under a Participating Hospital Agreement, pursuant to which hospitals are reimbursed on a DRG price reimbursement system. Such Participating Hospital Agreement establishes DRGs for all impatient care and pays the lower of actual charges or the DRG plus a percentage of the actual charges in excess of the DRG based on financial incentives. BCBSA has the right to cancel its Participating Hospital Agreement with a hospital by giving advance notice and could therefore use its power to cancel in an effort to reduce its payments in order to improve its financial position. As the impact of any such reduction in payment would be dependent upon the extent of such reduction, it is not possible to estimate the effect such a reduction in payment would have on the revenues of the Members of the Obligated Group. It is expected that the provisions of the Affordable Care Act (e.g. coverage requirements, prohibitions on pre-existing conditions exclusions, excise taxes, health insurance exchanges), whether or not amended, will continue to cause major changes for third-party payors, but considerable uncertainty remains as to future changes and their implementation and impact. The implementation of such provisions could adversely affect the levels of reimbursement received by the Members of the Obligated Group for services provided as well as potentially increasing exposure to further self-pay deductibles or coinsurance and the cost of providing services.

29 Growth of Alternative Delivery Systems In recent years, for various reasons, including changes in methods of payments for health care services, hospitals generally have experienced reductions or only small increases in the average length of stay for patients and a decline (or a relative decline compared to service area population growth) in hospital admissions. Medicaid, Medicare and other purchasers of health care services continue to review their benefit plans in order to create incentives for cost containment. Increases in deductibles and co-payments and increased offerings of HSAs for employer-provided insurance result in increased delays and difficulties in collecting hospital reimbursement. Traditional health insurance programs, which pay for services on a fee-for-service basis, are giving way to health insurance programs being offered with economic incentives for employees and employers. Certain private insurance companies’ contract with some hospitals on an “exclusive” or a “preferred” provider basis, and some insurers have introduced PPOs. Under an exclusive provider plan, which includes most HMOs, private payors limit coverage to those services provided by selected hospitals. With this contracting authority, private payors direct patients away from nonselected hospitals by denying coverage for services provided by them. Increased sensitivity to the cost of health care has led to substantial growth of HMOs, PPOs and other alternative delivery systems. The growth of alternative delivery systems can have negative impacts on health care providers in several ways. A provider generally will not be able to serve the patients of alternative delivery systems with which it does not contract, and a provider is generally required to substantially reduce its charges to obtain a contract to serve alternative delivery system patients. Also, the alternative delivery systems market is becoming increasingly competitive, and many of the alternative delivery systems may not survive. A health care provider that has a contract with an alternative delivery system in poor financial condition may be responsible for providing care even though the alternative delivery system is unable to pay the provider for the services. See the caption “Sources of Patient Revenue” in Appendix A hereto for a summary of the revenue received by Baptist Health affiliated facilities attributable to relationships with PPOs, HMOs and contracted insurance providers. Health care cost sensitivity has also caused more employers to provide all or part of their employee health insurance benefits through self-insurance mechanisms, and self-insured employers are increasingly using aggressive tactics and third-party administrators to shop for discounts. State timely payment regulations may not apply to the self-insured market, and self-insured employers are not always as financially stable as larger, state-regulated health plans. Most HMOs, PPOs and contracted insurers currently pay health care providers on a discounted fee-for-service basis, or on a case rate or a fixed rate per day of care, all of which may result in payment at less than actual cost. Also, the volume of patients directed to a provider under an HMO or PPO contract or under a contracted insurance arrangement may vary significantly from projections. Some HMOs are now offering or mandating a “capitation” payment method under which providers are paid a predetermined periodic rate for each enrollee in the HMO who is “assigned” to or otherwise directed to receive care from a particular provider. In a capitated payment system, the provider assumes a financial risk for the cost and scope of care given to such HMO enrollees for the term of the contract. The Members of the Obligated Group have not entered into any contracts which provide for capitated services. The growth of PPOs, HMOs and alternative delivery systems may require the Members of the Obligated Group to substantially reduce their charges to service members of such plans, and any such reduction in charges could materially adversely affect the operating revenue of the Members of the Obligated Group. The Affordable Care Act establishes a Medicare Shared Savings Program that seeks to promote accountability and coordination of care through the creation of Accountable Care Organizations (“ACOs”). The program allows hospitals, physicians and others to form ACOs and work together to invest in infrastructure and redesign integrated delivery processes to achieve high quality and efficient 30 delivery of services. ACOs that achieve quality performance standards are eligible to share in a portion of the amounts saved by the Medicare program. HHS has significant discretion to determine key elements of the program, including what steps providers must take to be considered an ACO, how to decide if Medicare program savings have occurred, and what portion of such savings will be paid to ACOs. The final rules regarding ACOs are complex and qualification requirements are formidable. Participants in ACOs in some events have to marshal a large upfront financial investment to form unique and untested ACO structures, which may or may not succeed in gaining qualification. For those that do qualify, it is unknown whether the savings will be sufficient to recoup the initial investment. In addition, although the regulation provides for waivers of certain federal laws, there may remain regulatory risks for participating hospitals, as well as financial and operational risks. In particular, since the federal ACO regulation would not preempt state law, providers participating as a federal ACO must be organized and operated in compliance with existing state statutes and regulations. It remains unclear whether investments made by providers who pursue federal ACO status will be warranted by increased payment. Nevertheless, it is anticipated that private insurers may seek to establish similar incentives for providers, while requiring less infrastructural and organizational change. The potential impacts of these initiatives and the regulation for ACOs are unknown, but they are expected to introduce greater risk and complexity to health care finance and operations. The Corporation holds a 50% ownership interest in A2 ACO, LLC, an Arkansas limited liability company doing business as Baptist Health UAMS Accountable Care Alliance (the “A2 ACO”). The A2 ACO is a Medicare Shared Savings Program (“MSSP”) Track 1+ ACO presently covering approximately 36,000 Medicare participants. The other 50% of the A2 ACO is owned by the University of Arkansas for Medical Sciences. Integrated Delivery Systems Health facilities and health care systems may own, control or have affiliations with relatively large physician groups and independent practice associations. For a description of certain of these affiliations, see Appendix A hereto. Frequently, the sponsoring health facility or health system will be the capital and funding source for such alliances and may have an ongoing financial commitment to provide growth capital and support operating deficits. These types of alliances are generally designed to respond to trends in the delivery of medicine to better integrate hospital and physician care, to increase physician availability to the community and/or to enhance the managed care capability of the affiliated hospitals and physicians. However, these goals may not be achieved, and an unsuccessful alliance may be costly and counterproductive to all of the above stated goals. See Appendix A hereto which includes information on the Corporation’s employment and recruitment of physicians. These types of alliances are likely to become increasingly important to the success of hospitals as a result of changes to the health care delivery and reimbursement systems that are intended to restrain the rate of increases of health care costs, encourage coordinated care, promote collective provider accountability and improve clinical outcomes. The Affordable Care Act authorizes several alternative payment programs for Medicare that promote, reward or necessitate integration among hospitals, physicians and other providers. Whether these programs will achieve their objectives and be expanded or mandated as conditions of Medicare participation cannot be predicted. However, Congress and the Centers for Medicare and Medicaid Services (“CMS”) have clearly emphasized continuing the trend away from the fee-for-service reimbursement model, which began in the 1980s with the introduction of the prospective payment system for inpatient care, and toward an episode based payment model that rewards use of evidence-based protocols, quality and satisfaction in patient outcomes, efficiency in using resources, and the ability to measure and report clinical performance. This shift is likely to favor integrated delivery

31 systems, which may be better able than stand-alone providers to realize efficiencies, coordinate services across the continuum of patient care, track performance and monitor and control patient outcomes. Changes to the reimbursement methods and payment requirements of Medicare, which is the dominant purchaser of medical services, are likely to prompt equivalent changes in the commercial sector, because commercial payors frequently follow Medicare’s lead in adopting payment policies. While payment trends may stimulate the growth of integrated delivery systems, these systems carry with them the potential for legal or regulatory risks. Many of the risks discussed in “REGULATION OF THE HEALTH CARE INDUSTRY” below may be heightened in an integrated delivery system. Current laws, in many respects, were not designed to accommodate coordinated action among hospitals, physicians and other health care providers to set standards, reduce costs and share savings, among other things. In October 2011, CMS, the Federal Trade Commission, and the Department of Justice jointly issued guidance regarding waivers and safe harbors to enable providers to participate in the Medicare Shared Savings Program. Although CMS and the agencies that enforce these laws are expected to continue to institute new regulatory exceptions, safe harbors or waivers that will enable providers to participate in payment reform programs, there can be no assurance that such regulations will be forthcoming or that any regulations or guidance issued will sufficiently clarify the scope of permissible activity. State law prohibitions or state law requirements may also introduce complexity, risk and additional costs in organizing and operating integrated delivery systems. Tax- exempt hospitals and health systems also face the risk in affiliating with for-profit entities that the Internal Revenue Service will determine that compensation practices or business arrangements result in private benefit or private use or generate unrelated business income for the hospitals and health systems. In addition, integrated delivery systems present business challenges and risks. Inability to attract or retain participating physicians may negatively affect managed care, contracting and utilization. The technological and administrative infrastructure necessary both to develop and operate integrated delivery systems and to implement new payment arrangements in response to changes in Medicare and other payor reimbursement is costly. Hospitals may not achieve savings sufficient to offset the substantial costs of creating and maintaining this infrastructure. Health care providers, responding to health care reform and other industry pressures, are increasingly moving toward integrated delivery systems, managing the health of populations of individuals, patient-centered medical homes, bundled payments, and capitated insurance plans. Some health care organizations that traditionally operated hospitals may, directly or in partnership, take on actual insurance risk. Risks Associated with the Provision of Uncompensated Care Although the Members of the Obligated Group have and will continue to maximize payment or reimbursement for the care they provide, the Members of the Obligated Group recognize their obligation to provide uncompensated care to the medically indigent. Obligations to provide uncompensated care can be derived from anti-dumping, emergency care, continuity of care and other laws that might apply to the Members of the Obligated Group. See “REGULATION OF THE HEALTH CARE INDUSTRY—Fraud and Abuse Laws and Regulations” below. See also “—Internal Revenue Service Policy Regarding Maintenance of 501(c)(3) Tax Exemption” below under this caption as to additional requirements and limitations for nonprofit entities under the Affordable Care Act and the federal tax code. Also, many nonprofit entities have been and are subject to litigation attempting to establish obligations to provide uncompensated care based on the tax-exempt status of the entity under federal or state law. Increased unemployment or other adverse economic conditions could increase the proportion of patients who are unable to pay all or any of the cost of their care.

32 Competitive Environment The hospitals and medical facilities operated by the Members of the Obligated Group could face increased competition in the future from other hospitals, from skilled nursing facilities and from other forms of health care delivery that offer health care services to the population which the Members of the Obligated Group currently serves. This includes the construction of new or the renovation of existing hospitals and skilled nursing facilities, health maintenance organization facilities, ambulatory surgery centers, freestanding emergency facilities, private laboratory and radiological services, home care, intermediate nursing home care, preventive care and drug and alcohol abuse programs. In addition, competition could result from forms of health care delivery that are able to offer lower priced services to the population served by the Members of the Obligated Group. These services could be substituted for some of the revenue-generating services currently offered by the Corporation. The services that could serve as substitutes for hospital services include skilled and specialized nursing facilities, diagnostics, home care, preventive care, and drug and alcohol abuse programs. Competition may also come from specialty hospitals or organizations, particularly those facilities providing specialized services in areas with high visibility and strong margins, such as cardiac services and surgical services, and having specialty physicians as investors. The State does not currently have a certificate of need program; consequently, entry of additional providers of health care in the service areas of the Members of the Obligated Group is not limited by any State requirement of need determination. Various health care providers in the State have engaged in mergers or joint ventures with other providers resulting in consolidation of competing facilities. The Affordable Care Act (particularly the ACO model) could create incentives for vertical integration, incorporating a range of health care settings. The ability of the Members of the Obligated Group to maintain a rate structure and preserve or increase their market share (especially with respect to private pay and commercially insured patients) may be inhibited by the existence of other players in the market having a greater ability to provide services at reduced rates or to negotiate for increased shares of the market. As part of its ongoing planning process, the Corporation has considered and will continue to consider potential affiliations or alignments with other healthcare providers. For a discussion of the hospital competitors in the primary and secondary service areas of the Corporation and BHRH, see the caption “Service Areas” in Appendix A attached to this Official Statement. Potential Negative Rankings Based on Clinical Outcomes, Quality, Patient Satisfaction and Other Performance Measures Health plans, Medicare, Medicaid, employers, trade groups and other purchasers of health services, private standard-setting organizations and accrediting agencies increasingly are using statistical and other measures in efforts to characterize, publicize, compare and rank the quality, safety and cost of health care services provided by hospitals and physicians. HIS has established the “Hospital Compare” website (http://www.hospitalcompare.hhs.gov/), which is expected to be expanded and improved as Affordable Care Act provisions place more emphasis on the collection and utilization of health care data. Published rankings such as “score cards,” tiered hospital networks with higher copayments and deductibles for nonemergent use of lower-ranked providers, “pay for performance” and other financial and non-financial incentive programs are being introduced to affect the reputation and revenue of health care providers and the members of their medical staffs and to influence the behavior of consumers and providers such as the Members of the Obligated Group. Measures of quality based on clinical outcomes of patient care, reduction in costs, patient satisfaction and investment in health information technology

33 are becoming increasingly common. Measures of performance set by others that characterize a hospital negatively may adversely affect its reputation and financial condition. The Affordable Care Act includes “value-based purchasing” provisions, which provide that Medicare inpatient payments to hospitals will be determined, in part, based on a program under which value-based incentive payments are made in a fiscal year to hospitals based on the quality of care provided during that fiscal year. The program was funded through the reduction of hospital inpatient care payments by 1%, beginning in federal fiscal year 2013, progressing to 2% in federal fiscal year 2017. This reduction may be offset by incentive payments for hospitals that meet or exceed certain quality standards. The Corporation experienced or will experience adjustments to hospital inpatient care payments of $67 (decrease), $83 (decrease) and $86 (decrease) per Medicare admission in fiscal years 2017, 2018 and 2019, respectively. These provisions are expected to increase the importance of hospital performance data, which will be publicly available on the Hospital Compare website. See “REGULATION OF THE HEALTH CARE INDUSTRY — Medicare Reimbursement — Part A Reimbursement of Inpatient Services” below. Environmental Factors Affecting the Health Care Industry Health care facilities and operations are subject to a wide variety of federal, state and local environmental and occupational and safety laws and regulations. Among the types of regulatory requirements faced by health care providers are: air and water quality control requirements; waste management requirements; specific regulatory requirements applicable to asbestos, polychlorinated biphenyls and radioactive substances; requirements for providing notice to employees and members of the public about hazardous materials; and requirements for training employees in the proper handling and management of hazardous materials and wastes. In their role as owners and operators of properties or facilities, health care providers may be responsible for investigating and remedying hazardous substances located on or migrating from their property. Typical health care operations include, in various combinations, the handling, use, storage, transportation, disposal and discharge of infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants or contaminants. For this reason, health care operations are particularly susceptible to the practical, financial and legal risks associated with such environmental and safety laws and regulations, and noncompliance may result in damage to individuals, property or the environment; may interrupt operations or increase their cost, or both; may trigger investigations, administrative proceedings, penalties or other government agency actions; and may result in legal liability, including damages, injunctions or fines, some or all of which may not be covered by insurance. There can be no assurance that the Members of the Obligated Group will not be materially adversely affected by such environmental and safety risks. Information Systems The ability to adequately price and bill health care services and to accurately report financial results depends on the integrity of the data stored within information systems, as well as the operability of such systems. Information systems require an ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards. Technology malfunctions, malware or failure to understand and use information systems properly could result in the dissemination of or reliance on inaccurate information and affect patient safety, as well as in disputes with patients, physicians and other health care professionals. There can be no assurance that efforts to upgrade and expand information systems capabilities, protect and enhance these systems, and develop new systems to keep pace with continuing changes in information processing technology will be successful or that additional systems issues will not arise in the future. Such efforts could be costly and are subject to cost overruns and delays in application, which could negatively affect the financial condition of the Members of the Obligated Group.

34 Federal and state authorities are increasingly focused on the importance of protecting the confidentiality of individuals’ personal information, including patient health information. Many states have enacted laws requiring businesses to notify individuals of security breaches that result in the unauthorized release of personal information. In some states, notification requirements may be triggered even where information has not been used or disclosed, but rather has been inappropriately accessed. State consumer protection laws may also provide the basis for legal action for privacy and security breaches and frequently, unlike federal laws, authorize a private right of action. In particular, the public nature of security breaches exposes health organizations to increased risk of individual or class action lawsuits from patients or other affected persons, in addition to government enforcement. Failure to comply with restrictions on patient privacy or to maintain robust information security safeguards, including taking steps to ensure that contractors who have access to sensitive patient information maintain the confidentiality of such information, could damage a health care provider’s reputation and materially adversely affect business operations. Cybersecurity Healthcare providers and insurers are highly dependent upon integrated electronic medical record and other information systems to deliver high quality, coordinated and cost-effective care. These systems necessarily hold large quantities of highly sensitive protected health information. As a result, the electronic systems and networks of healthcare providers and insurers are considered likely targets for cyberattacks and other potential breaches of their systems. In addition to regulatory fines and penalties, healthcare entities subject to breaches may be liable for the costs of remediating the breaches, damages to individuals (or classes) whose information has been breached, reputational damage and business loss, and damage to the information technology infrastructure. A number of health care providers have recently been the victims of hacker attacks with ransomware, in which hackers attempt to extort money in exchange for returning the provider’s systems to normal. The Corporation has taken and continues to take measures to protect its information technology system against such cyberattacks, but there can be no assurance that the Corporation will not experience a significant breach. If such breach occurs, the financial consequences of such a breach could have a materially adverse impact on the Members of the Obligated Group. In 2019, a cybersecurity assessment review was conducted by CynergisTek. Management is in the process of reviewing the recommendations from that review and expects to implement an action plan to address any areas of concern. See the caption “REGULATION OF THE HEALTH CARE INDUSTRY—Electronic Transmission of Health Information; Privacy and Security Regulations” below. Other Factors Generally Affecting the Members of the Obligated Group In the future, the following factors, among others, may affect the operations, facilities and financial performance of the Members of the Obligated Group to an extent that cannot be determined at this time:

 Medical and scientific advances, pressures for efficiency generated by recent health care reform measures, the increasing role of HMOs, PPOs and other managed health care organizations, preventive medicine, improved occupational health and safety and improved outpatient care could result in decreased usage of inpatient hospital facilities. Also, as medical technology becomes more sophisticated and costly, the Members of the Obligated Group could encounter problems with availability, financing or operation of technology, which could adversely affect utilization.

 Competition from other health care providers now or hereafter located in the service areas of the hospital operated by the Members of the Obligated Group could adversely affect the operations of the Members of the Obligated Group. Such competition includes physicians directly providing competitive outpatient services.

35  The Members of the Obligated Group could be adversely affected by general economic trends (including increases in unemployment or inflation) and by changes in the demographics in its service area. Difficulties in increasing charges and other fees, while at the same time maintaining scope and quality of health services, may affect the ability of the Members of the Operating Group to maintain sufficient operating margins.

 The healthcare industry and the hospitals operated by the Members of the Obligated Group have, from time to time, suffered from a scarcity of nursing and other qualified healthcare personnel. A shortage of qualified professional personnel, including physicians and nurses, could limit operations and/or significantly increase payroll costs. This scarcity may further be intensified as utilization of health care services increases as a consequence of the Affordable Care Act’s expansion of the number of insured consumers. The Members of the Obligated Group cannot control the prevailing wage rates in their service areas, and any increase in such rates will directly affect their costs of operations.

 The Corporation has been successful in recent years in maintaining the desired complement of physicians; however, no assurance can be given that such staffing will be continuously maintained in the future. Changes in the number or composition or admitting practices of the medical staff in the hospitals operated by the Members of the Obligated Group could affect their reputation or services and thus their operations and revenues.

 Health care providers are major employers with a complex mix of professional, technical, clerical, housekeeping, maintenance and other types of workers. Large employers bear a variety of risks flowing from employer-employee relationships as well as employee-patient interactions (for example, discrimination claims, tort actions and work-related injuries); some of these risks are not covered by insurance. Nonprofit health care providers and their employees are under the jurisdiction of the National Labor Relations Board, which has adopted rules permitting collective bargaining units among a hospital’s employees. Also, the National Labor Relations Board has ruled that interns and residents can form unions. There are presently no employees of the Members of the Obligated Group represented by a union. Any future unionization of employees could cause an increase in costs of salaries and benefits. Moreover, work stoppages, slowdowns or lockouts could reduce, interrupt or otherwise adversely affect operations of the Members of the Obligated Group.

 The Members of the Obligated Group could be adversely affected by changes in law or rulings imposing indigent care requirements as a condition of maintaining state or federal tax-exempt status, or by other efforts of taxing authorities to impose taxes related to the property or operations of nonprofit organizations. See “—Internal Revenue Service Policy Regarding Maintenance of 501(c)(3) Tax Exemption” below under this caption.

 Substantial liabilities under federal and state antitrust laws and other trade regulations may arise in connection with a wide variety of activities, including joint ventures; merger, acquisition, and affiliation activities; payor contracting; certain pricing and salary setting activities; and relationships with physicians, including medical staff credentialing. The application of antitrust laws to health care is evolving, and enforcement activity appears to be increasing. Antitrust violations may be subject to criminal and/or civil enforcement actions by government agencies as well as by private litigants. Integration incentives under the Affordable Care Act may come into conflict with this increased antitrust enforcement pressure.

 The State does not presently have a program for the regulation or review of the rates charged for health care services furnished to private-paying patients. If such a program were established, or if wage or price controls were otherwise imposed with respect to the health

36 care industry, such developments could have an adverse effect on the revenue of the Members of the Obligated Group. Also, the absence of any Arkansas certificate of need program could facilitate the entry of competing health care providers into the service areas of the hospitals operated by the Members of the Obligated Group.

 Natural disasters or acts of terrorism (including bioterrorism) could result in the Members of the Obligated Group providing significant unreimbursed services, as well as causing property damage, employee injury and service interruptions.

 As large employers, hospitals may incur significant expenses to fund benefit plans for employees and former employees and to fund required workers’ compensation benefits. Funding obligations in some cases may be erratic or unanticipated and may require significant commitments of available cash needed or designated for other purposes. See “Note 18 – Pension Plans” to the Corporation’s consolidated financial statements in Appendix C hereto and the caption “Professional Staff and Employees” in Appendix A hereto for certain information regarding the Corporation’s defined contribution retirement plans and health insurance benefits. Malpractice and General Liability Claims In recent years, the number of malpractice and general liability suits and the dollar amounts of damage awards have increased nationwide, resulting in substantial increases in insurance premiums, which may have an adverse financial impact on the Members of the Obligated Group. Litigation may also arise against the Members of the Obligated Group from their corporate and business activities, such as their status as employers. While the Members of the Obligated Group maintains malpractice and general liability insurance coverage which management and its independent consultants consider adequate, management is unable to predict the availability or cost of such insurance in the future. In addition, it is possible that certain types of liability awards may not be covered by insurance as in effect at the relevant times. See the captions “LITIGATION” herein and “Litigation” in Appendix A hereto. Additional Bonds and Related Indebtedness The Indenture and Master Indenture permit the issuance of Additional Bonds secured by and payable from the Gross Revenues and/or Accounts of the Obligated Group on a parity with the Series 2014 Bonds, the Series 2015A Bonds, the 2016 Line of Credit, the 2016 Derivative Agreement, the Series 2019 Bonds and the Series 2019 Baptist Health Corporate Bonds. The Master Indenture also permits the Corporation, BHRH and other Members of the Obligated Group to incur Obligations secured by the Gross Revenues and/or Accounts of the Obligated Group on a parity with the Series 2014 Bonds, the Series 2015A Bonds, the 2016 Line of Credit, the 2016 Derivative Agreement, the Series 2019 Bonds and the Series 2019 Baptist Health Corporate Bonds. See the subcaptions “THE SERIES 2019 BONDS - Additional Bonds,” “-Master Indenture Indebtedness” and “- Other Permitted Indebtedness” herein for a description of the limitations on the issuance of such Additional Bonds and the incurrence of such Indebtedness. The issuance of Additional Bonds and the incurrence of Indebtedness which does not result in a comparable increase in the Gross Revenues and/or Accounts of the Obligated Group would result in a dilution of the security for the Series 2019 Bonds. Damage or Destruction Although the Obligated Group will be required to obtain certain kinds of insurance set forth in the Master Indenture, there can be no assurance that the Members of the Obligated Group will not suffer uninsured losses in the event of damage to or destruction of the facilities owned and/or operated by the Members of the Obligated Group due to fire or other calamity or in the event of other unforeseen calamities. In order to alleviate the risks of such an occurrence, the Corporation maintains business

37 interruption insurance with a total limit in excess of $25 million for all locations and commercial property insurance coverage in the amount of approximately $1.5 billion. Covenant to Maintain Tax-Exempt Status of the Series 2019 Bonds The tax-exempt status of the interest on the Series 2019 Bonds, as described under the caption “TAX MATTERS” herein, is based on the continuing compliance by the Issuer, the Members of the Obligated Group and any other users of the facilities financed with the proceeds of the Series 2019 Bonds with certain covenants contained in the Loan Agreement, the Indenture, the Master Indenture and the certifications of the Issuer and/or the Obligated Group Representative with respect to the tax status of the Series 2019 Bonds that will be given in connection with the delivery of the Series 2019 Bonds (the “Tax Certificates”). These covenants relate generally to restrictions on the use of the facilities financed with the proceeds of the Series 2019 Bonds, restrictions on leasing or selling such facilities to organizations other than tax-exempt organizations, continuation of the 501(c)(3) status of the Members of the Obligated Group or such other user(s), requirements regarding the timely and proper use of proceeds of the Series 2019 Bonds, arbitrage limitations, and rebate of certain excess investment earnings, if any, to the federal government. Failure to comply with any of these covenants may cause interest on the Series 2019 Bonds to be includable in gross income retroactive to their date of issuance. Event of Taxability If the Issuer or the Members of the Obligated Group fail to comply with certain covenants set forth in the Loan Agreement and the Master Indenture, or if certain representations or warranties made by the Issuer and the Obligated Group Representative in the Loan Agreement and the Master Indenture or certain certificates are false and misleading, the interest payable on the Series 2019 Bonds may become subject to inclusion in gross income for federal and State income tax purposes retroactive to the date of issuance of the Series 2019 Bonds, regardless of the date on which noncompliance or misrepresentation is ascertained. In the event that interest on the Series 2019 Bonds should become subject to inclusion in gross income for federal or State income tax purposes, the Indenture does not provide for the redemption of the Series 2019 Bonds, or for the payment of any additional interest on the Series 2019 Bonds. Notwithstanding the foregoing, the failure of the Members of the Obligated Group to comply with any of such covenants or representations may cause an Event of Default under the Loan Agreement with the effect of causing an acceleration of payments due with respect to the Series 2019 Bonds. Risk of Redemption The Series 2019 Bonds are subject to redemption or acceleration prior to maturity in certain circumstances. See the caption “THE SERIES 2019 BONDS – Redemption” herein. Bondholders may not realize their anticipated yield on investment to maturity because the Series 2019 Bonds may be redeemed or accelerated prior to maturity at par or at a redemption price that results in the realization of less than the anticipated yield to maturity. Nonprofit Health Care Environment The significant tax benefits received by nonprofit, tax-exempt hospitals have increasingly caused the business practices of such hospitals to be subject to scrutiny by public officials and the press, and to political and legal challenges of the ongoing qualification of such organizations for tax-exempt status. Multiple governmental authorities, including state attorneys general, the Internal Revenue Service (the “IRS”), Congress and state legislatures have held hearings and carried out audits regarding the conduct of tax-exempt organizations, including tax-exempt hospitals. Citizen organizations, such as labor unions and patient advocates, have also focused public attention on the activities of tax-exempt hospitals and health systems and raised questions about their practices. The IRS imposes certain reporting requirements on hospitals and health systems, including through Schedule H, Schedule J and Schedule K of the Form 990. Proposals to increase the regulatory requirements for nonprofit hospitals’ retention of

38 tax-exempt status, such as by establishing a minimum level of charity care, have also been introduced repeatedly in Congress. These challenges and examinations, and any resulting legislation, regulations, judgments or penalties, could materially change the operating environment for nonprofit providers and have a material adverse effect on the Members of the Obligated Group. Significant changes in the obligations of nonprofit, tax exempt hospitals and challenges to or loss of the tax-exempt status of nonprofit hospitals generally, or the Members of the Obligated Group in particular, could have a material adverse effect on the Obligated Group. See “—Internal Revenue Service Policy Regarding Maintenance of 501(c)(3) Tax Exemption” under this caption below. Internal Revenue Service Policy Regarding Maintenance of 501(c)(3) Tax Exemption The Corporation and BHRH are each organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), exempt from the payment of federal income taxes under Section 501(a) of the Code, and the Corporation and BHRH have received letters from the Internal Revenue Service confirming such status. The tax-exempt status of interest on the Series 2019 Bonds depends upon maintenance by the Members of the Obligated Group and any other entity receiving or benefitting from proceeds of the Series 2019 Bonds of their status as an organization described in Section 501(c)(3) of the Code. In order to maintain that status, the Corporation and BHRH are required to comply with current and future IRS regulations and rulings governing tax-exempt health care facilities. The Members of the Obligated Group have covenanted under the Loan Agreement not to perform any acts or enter into any agreements which would adversely affect such 501(c)(3) status. In order to maintain their tax-exempt status under federal law, the Corporation and BHRH must not be operated to any substantial degree for the benefit of private individuals and may not allow their earnings to inure to the benefit of any individuals having a personal or private interest in their organizations or operations. These proscriptions, in practice, regulate business dealings between health care providers and physicians. Tax-exempt health care providers generally are required to demonstrate that their business dealings with physicians benefit the community served by the provider independently from any direct benefit received by the provider itself. Neither the Corporation nor BHRH are presently being challenged or investigated by the IRS with respect to these matters. The IRS has reaffirmed, in the context of federal Medicare and Medicaid anti-kickback laws, the principle that violation of criminal statutes is inconsistent with continued recognition of an organization’s tax-exempt status. Thus, the tax-exempt status of a nonprofit health care provider could be subject to revocation if the entity were determined to have violated federal or state anti-kickback laws by providing illegal remuneration to physicians in exchange for the referral of Medicaid or Medicare patients or to have otherwise violated state anti-kickback laws or federal laws restricting referrals. See the caption “REGULATION OF THE HEALTH CARE INDUSTRY—Fraud and Abuse Laws and Regulations” below. The Affordable Care Act has imposed certain additional requirements for 501(c)(3) nonprofit hospitals (such as the hospitals operated by the Members of the Obligated Group). Such nonprofit entities must conduct periodic community health needs assessments and must include an implementation report with their annual Form 990 information returns. They must also adopt formal financial assistance and emergency treatment policies; may not charge more for care to those who qualify for financial assistance and may not pursue certain collection actions without making a determination as to financial assistance eligibility; and must include audited financial statements with their Form 990 annual information returns. Failure of a nonprofit hospital to complete the required community health needs assessment may result in imposition of a $50,000 excise tax or revocation of its tax-exempt status. Form 990 information is to be reviewed by the Department of the Treasury at least once every three years, and the Department of the Treasury is also required to provide related reports to Congress. The

39 Corporation’s community health needs assessment was conducted and implementation strategy was adopted in 2017. The Corporation is in the process of completing an updated community health needs assessment, and such assessment will be completed in 2020 within the required timeframe. On December 29, 2014, the Secretary of the Treasury issued final regulations under Section 501(r) of the Code that provide detailed and comprehensive guidance relating to requirements for community health needs assessments, financial assistance policies, emergency medical care policies, limitations on charges and billing and collection practices, and also provide guidance on consequences of failure to satisfy Section 501(r) requirements. Among the required financial assistance policies is a limitation on the amount charged for emergency or other medically necessary care provided to individuals eligible for assistance under the hospital’s financial assistance policy to not more than the amounts generally billed to individuals who have insurance covering such care and to make reasonable efforts to determine whether an individual is eligible for financial assistance before engaging in extraordinary collection actions. These final regulations are complex and are administratively burdensome to implement. Generally, the regulations apply to tax years beginning after December 29, 2015, and provide that a hospital organization may rely on a reasonable, good faith interpretation of the Section 501(r) requirements for tax years beginning on or before December 29, 2015, which may include compliance with certain prior proposed regulations under Section 501(r). Taxing authorities in certain state and local jurisdictions have sought to impose or increase property taxes, sales and use taxes, and other taxes related to the property and operations of nonprofit organizations, including health care providers, particularly where such authorities are dissatisfied with the amount of service provided to indigent patients. At the federal level, however, the IRS has ruled that the tax-exempt status of nonprofit hospitals is based on a variety of factors but is not dependent upon their acceptance of patients who cannot pay. It is possible that future administrative or judicial proceedings or legislation could have the effect of requiring nonprofit institutions to increase their services to indigent patients to retain their tax-exempt status. In the recent past, legislation was introduced in Congress that would make a hospital’s tax-exempt status hinge on the extent of its care to indigents, but the bills have not been enacted into law. The IRS has audit guidelines which implement a policy to scrutinize more closely the activities of health care providers to ensure that they satisfy the requirements for tax-exempt status. Given these audit guidelines and other related pronouncements by the IRS, it may be more difficult for such entities to maintain their tax-exempt status. Health care providers may be forced to forgo otherwise favorable opportunities for certain joint ventures, recruitment and other arrangements to maintain their tax-exempt status or to avoid other sanctions. Licensure and Accreditation The hospitals operated by the Members of the Obligated Group are licensed by the State of Arkansas. Certain of such hospitals are accredited by the Joint Commission. See the caption “Administration –Accreditation, Licenses and Memberships” in “APPENDIX A – BAPTIST HEALTH AND CERTAIN RELATED ENTITIES” attached to this Official Statement. Management of the Members of the Obligated Group currently anticipates no difficulty in renewing or maintaining currently held licenses, certifications or accreditations. Nevertheless, actions in any of the areas could result in the loss of the ability of the Members of the Obligated Group to operate all or a portion of such facilities and could affect their ability to receive third party reimbursement from various programs. Bond Rating There is no assurance that the rating assigned to the Series 2019 Bonds at the time of issuance (see the caption “RATING” herein) will not be lowered or withdrawn at any time, the effect of which could adversely affect the market price for, and marketability of, the Series 2019 Bonds.

40 Secondary Market Subject to prevailing market conditions and applicable securities laws, the Underwriters presently intend, but are not obligated, to make a market in the Series 2019 Bonds. Consequently, investors may not be able to resell the Series 2019 Bonds purchased should they wish to do so for emergency purposes or otherwise. Forward-Looking Statements This Official Statement (including the information included in Appendix A hereto) contains statements relating to future results that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. When used in this Official Statement, the words “estimate,” “intend,” “expect” and similar expressions identify forward-looking statements. Any forward-looking statement is subject to uncertainty and risks that could cause actual results to differ, possibly materially, from those contemplated in such forward-looking statements. Inevitably, some assumptions used to develop forward-looking statements will not be realized or unanticipated events and circumstances may occur. Therefore, investors should be aware that there are likely to be differences between forward- looking statements and actual results; those differences could be material.

REGULATION OF THE HEALTH CARE INDUSTRY

General Health Care Industry Factors The health care industry in general is subject to regulation by a number of governmental and private agencies, including those which administer the Medicare and Medicaid programs discussed below, and is affected by federal and state policies concerning the manner in which health care is provided, administered and financed. The health care industry is accordingly sensitive to frequent and substantial legislative and regulatory changes, including persistent federal and state efforts to control the growth of governmental spending on health care programs. In addition, Congress and other governmental agencies have focused on the provision of care to indigent and uninsured patients, prevention of “dumping” such patients on public hospitals in order to avoid providing non-reimbursed care, the unlawful payment of remuneration in exchange for referral of patients, physician self-referral, inaccurate billing, security and privacy of health-related information, and other issues. In recent years, federal and state governments have exerted sharply increased efforts and resources on enforcing laws and regulations against fraud, waste and abuse within government health care programs, and governmental enforcement is increasingly supplemented by lawsuits brought by private citizens. Health care providers that fail to comply with Medicare, Medicaid, and commercial payor rules and guidelines are increasingly likely to receive onerous administrative, civil, and even criminal penalties and may also be subject to exclusion from participation in Medicare, Medicaid and other federal programs. During the fiscal year ended December 31, 2018, Medicare patients (including members of Medicare HMOs) accounted for approximately 47.6% of the Corporation’s patient service revenue, while Medicaid patients accounted for approximately 12.7% of its patient service revenue. See the caption “Sources of Patient Revenue” in Appendix A hereto and “— Medicaid Reimbursement” under this caption. The provisions of the Affordable Care Act, unless repealed or amended, are expected to reduce Medicare payments to providers, including the members of the Obligated Group. Future reductions in funding levels of these programs and other changes designed to limit increases in costs paid by those programs could have a material negative effect on the revenue of the Members of the Obligated Group. In the years leading up to the Affordable Care Act, federal budget legislation included substantial funding cuts in Medicare and Medicaid payments, and diverse and complex mechanisms to limit the amount of money paid to health care providers under both the Medicare and Medicaid

41 programs were enacted. While the Affordable Care Act generally expands Medicaid coverage and funding, it also contains provisions (some of which are presently in effect) aimed at reducing Medicare and Medicaid reimbursements to providers. The Budget Control Act of 2011 (the “Budget Control Act”), which was enacted in August 2011, limits the federal government’s discretionary spending caps at levels necessary to reduce expenditures between fiscal years 2015 and 2021 by $917 billion. The discretionary spending caps do not apply to Medicare, Social Security, Medicaid and other entitlement programs. The Budget Control Act also created a Joint Select Committee on Deficit Reduction (the “Committee”), which was tasked with making recommendations to further reduce the federal deficit by $1.5 trillion. As a result, and in exchange for raising the debt ceiling, the Budget Control Act established mandatory spending cuts, known as sequestration (or across the board) cuts intended to achieve $1.2 trillion in savings through fiscal year 2021, and an automatic 2% reduction in Medicare program payments for all health care providers, which took effect in April 2013, was set in place. The Consolidated and Further Continuing Appropriations Act of 2013, was subsequently enacted, providing funds for operation of the federal government on September 30, 2013 and off-setting some the sequestration mandated reductions for federal fiscal year 2014. In December 2013 Congress and the President signed the Bipartisan Budget Act of 2013 that increased sequestration caps for federal fiscal years 2014 and 2015 by $45 billion and $18 billion, respectively, but extended the caps into 2023. Most recently, on August 2, 2019, President Trump signed into law, a bill suspending the debt ceiling until July 2021. Continued statutory and regulatory efforts to control health care costs, particularly costs paid under the Medicare and Medicaid programs (either generally or for particular classes of health care providers), can be expected. The recent increase in focus and interest on federal and state health care reform may increase the likelihood of additional significant cost control measures being enacted in the near future. It is unlikely that the Members of the Obligated Group could attract sufficient numbers of private pay patients to become self-sufficient without reimbursement from governmental programs. See the caption “RISK FACTORS —Legislative and Regulatory Changes; Health Care Reform” herein. Over the past several years, numerous and varied legislative and regulatory actions to reform the health care system have been proposed at both federal and state levels. Such proposals have included establishment of a single-payor system, encouragement of voluntary efforts to expand health care coverage, stimulation of competition among health care providers, adoption or expansion of “patients’ bills of rights” and similar programs, changes in licensure requirements, and other changes in methods of delivering, regulating and financing health care services. The Affordable Care Act focuses on health insurance mandates; insurance exchanges and other measures to expand healthcare coverage and control health insurance premiums; modifications to methods and rates of payment to health care providers and other measures to control health care costs; use of electronic records and empirical research data to move toward “evidence-based medicine” protocols; new methods and increased enforcement resources to combat waste, fraud and abuse; and alternative approaches to medical malpractice disputes. For acute- care hospital providers such as the Members of the Obligated Group, the Affordable Care Act presently seems to present a trade-off, with lower Medicare and Medicaid reimbursement rates and more stringent federal regulation being balanced against increased insurance coverage and reduced emergency services burdens. The Members of the Obligated Group have recently benefited from reduced charity care write- offs and bad debt expenses. A portion of those gains however have been off-set by the increased use of high-deductible insurance plans under which insured patients are more likely to fail to make payment. Further implementation of the Affordable Care Act, if not repealed or amended, is scheduled to occur over a period of several years; it is possible that its provisions may be changed or superseded by intervening legislation or judicial action. Additional federal or state reform legislation or regulatory measures could be enacted in the future, and such legislative and regulatory action could adversely affect the operations and financial condition of health care providers by reducing government

42 reimbursement or other income, imposing additional uncompensated operating costs, or restricting the provision of new or expanded health care services. No assurance can be given that the operations and financial condition of the Members of the Obligated Group will not be materially adversely affected by ongoing or future legislative and regulatory changes. Regulatory and Contractual Actions That Could Affect the Obligated Group The Members of the Obligated Group are subject to regulation, certification, licensing, accreditation and policy changes by various federal and state government agencies (including agencies which administer the Medicare and Medicaid programs, and including agencies created by the National Health Planning Act), by certain nongovernmental agencies such as The Joint Commission and other professional review organizations. No assurance can be given as to the effect on future operations of the Members of the Obligated Group of existing laws, regulations and standards for such certification, licensing or accreditation, or of any future changes in such laws, regulations and standards. Adverse actions relating to certification, licensure or accreditation could result in the loss of the ability of the Members of the Obligated Group to operate all or a portion of its facilities and could affect its ability to receive third-party reimbursement from various programs. Medicare Reimbursement The members of the Obligated Group are certified providers of Medicare services and have historically received significant revenue from the Medicare program. See the caption “Sources of Patient Revenue” in Appendix A hereto. Changes in the Medicare program are therefore likely to have a material effect on the Members of the Obligated Group. Medicare is a federal health benefits program administered by CMS within HHS to provide health insurance primarily to beneficiaries who are 65 years of age or older. The Medicare program was originally authorized in 1965 and has been frequently amended. Medicare originally operated under a fee-for-service system whereby health care providers were paid under Medicare as they rendered services to Medicare beneficiaries. Starting in the 1980s, managed care was introduced into the Medicare program, affording Medicare beneficiaries the option to enroll in a managed care organization that has entered into a payment agreement with CMS. Managed care within the Medicare system has since expanded its role and is now known as Medicare Advantage, which permits a variety of health plans operating under different payment arrangements and utilizing cost- saving mechanisms that have been widely available in the private sector to contract to cover the health care needs of Medicare recipients. Payments to health care providers under Medicare Advantage can be expected to vary widely from plan to plan, utilizing arrangements such as discounted fee-for-service and capitated models. Medicare benefits are payable under Part A which covers inpatient hospital services, skilled nursing care, and hospice services, certain home health services and certain other services; and Part B, which covers hospital outpatient services, physician and ambulatory services, durable medical equipment, certain home health services and certain other items and services. Medicare Part B is a voluntary program, and only those eligible beneficiaries who pay the Part B premiums receive benefits. Part C governing the Medicare Advantage program provides for payment to Medicare Advantage plans from the Part A and Part B trust funds. Part C requires that Medicare Advantage plans cover at least those items and services currently covered under Parts A and B, other than hospice care. Additional benefits may be offered as part of a basic package or pursuant to an extra charge. Part D provides Medicare prescription drug coverage. Part A Reimbursement of Inpatient Services. Since the early 1980s, legislative action and the promulgation of related regulations have resulted in significant changes in the Medicare program. Medicare originally provided reimbursement for the reasonable direct and indirect costs of inpatient hospital services furnished to beneficiaries. Congress subsequently adopted a prospective payment 43 system to cover the routine and ancillary operating costs of most Medicare inpatient hospital services. Under Medicare’s prospective payment system (“PPS”), hospital discharges are classified into categories of specific diagnosis-related groups of services (“DRGs”), which are based roughly on estimated intensity and hospital resources necessary to furnish care for each principal diagnosis and are indexed for wages in the hospital’s metropolitan area. Hospitals generally receive a fixed amount based upon the assigned DRG, on a per discharge basis for each Medicare patient (other than those enrolled in a Medicare Advantage plan), regardless of how long the patient remains in the hospital or the volume of ancillary services provided to the patient. Additional payments (referred to as “outlier payments”) may be made to hospitals for cases involving extremely long periods of stay or unusually high costs in comparison with other discharges in the same DRG. Under PPS, hospitals may retain payments in excess of costs but must absorb costs in excess of payments. DRG rates are subject to adjustment by CMS, including reductions mandated by the Affordable Care Act and Budget Control Act and are subject to federal budget considerations. Adjustments are made annually based on a “market basket” of estimated cost increases. In recent years, market basket adjustments for inpatient hospital care have averaged approximately 2% to 4% annually. The Affordable Care Act contains provisions aimed at reducing Medicare (and Medicaid) payments to providers, including reductions in the annual market basket adjustments. The Affordable Care Act also provides for overall reductions in DRG-based payments to be phased in through 2019, in amounts ranging from 0.10% to 0.75% each year through federal fiscal year 2019. The DRG reductions are intended to offset incentive payments to hospitals under the Hospital Value-Based Purchasing (“HVBP”) program created pursuant to the Affordable Care Act, which links a portion of Medicare inpatient PPS payments to performance on certain quality measures. The HVBP program is intended to shift from payments based on volume to incentive payments to hospitals based on specified performance measures. These measures include both clinical process of care measures and patient experience of care (survey) measures. Hospitals are scored on these measures on both achievement (relative to other hospitals) and improvement (relative to the hospitals’ own performance during a baseline period). Data and scores are made available to the public on the Hospital Compare website. The measures are expected to change over time, in order to continue to raise the bar as quality improves for hospitals generally. As part of the HVBP program, the Corporation has experienced and will experience payment adjustments of $67 (decrease), $83 (decrease), and $86 (decrease) per Medicare admission in 2017, 2018 and 2019 respectively. The Corporation cannot predict the potential long-term effects of the HVBP program. Increasingly, the Medicare and Medicaid programs seek to penalize providers that do not successfully participate in quality initiatives; CMS has created categories of serious errors in the provision of health care services that will result in denial of reimbursement to providers. See “RISK FACTORS—Legislative and Regulatory Changes; Health Care Reform” herein. The Affordable Care Act specifically provides for Medicare payment reductions for hospitals showing excess 30-day readmission rates with respect to certain medical conditions, for hospitals with high rates of certain hospital acquired conditions, and for hospitals failing to “meaningfully use” information technology. The American Taxpayer Relief Act of 2015 requires CMS to recoup funds from hospitals based on changes in documentation and coding that have increased PPS payments but that do not represent real increases in the intensity of services provided to patients. In the final regulations for fiscal year 2014, CMS stated that it intends to phase in this recoupment over time, starting with a 0.8% reduction in the Medicare standardized amount for 2014. Additional recoupment adjustments were in effect for federal fiscal years 2015 through 2017. In addition to payments for hospital operating and capital costs, the Medicare program provides additional reimbursement to hospitals for the direct costs of graduate medical education (“GME”), as

44 well as indirect medical education (“IME”) costs attributable to a teaching hospital’s approved graduate medical education programs. Hospitals receive additional Medicare reimbursement for a portion of the bad debts associated with providing covered services to Medicare patients, and for rendering services to a disproportionately high share of low-income patients. Under PPS, hospitals that serve a disproportionate share of low- income patients receive, in addition to payments related to operating and capital costs discussed above, an additional Medicare DSH (disproportionate share hospital) adjustment. A hospital may qualify for a Medicare DSH payment based upon a statutory formula relating to a hospital’s number of Medicaid and certain Medicare days to total days. The Arkansas provider fee program is described under the caption “Medicaid Reimbursement” below which apportions DSH payments. Certain physician services are reimbursed under Medicare on the basis of a national fee schedule called the “resource-based relative-value scale” (“RB-RVS”). The RB-RVS fee schedule establishes payment amounts for all physician services, including services of provider-based physicians, and is subject to annual updates. The Sustainable Growth Rate (“SGR”), which has been a limit on the growth of Medicare payments for physician services, was linked to changes in the U.S. Gross Domestic Product over a ten-year period. In April 2015, Congress adopted legislation eliminating the SGR limitation. The legislation provides for Medicare payment increase to physicians over a five-year period while a transition is made to a system based on quality of care. Uncertainty surrounds the future determination of reimbursement levels related to DRG classifications, DSH adjustments, HVBP incentives and GME and IME costs (as well as reimbursement for outpatient services, as discussed below). In addition, the Medicare program is subject to judicial interpretations, administrative rulings, governmental funding restrictions and requirements for utilization review (such as second opinions for surgery and preadmission criteria). Such matters, as well as more general governmental budgetary concerns, may reduce payments made to the Corporation under the Medicare program, and future Medicare payment rates may not be sufficient to cover increases in the cost of providing services to Medicare patients. Part B Reimbursement of Outpatient Services. Part B of Medicare generally covers certain hospital outpatient services, physician services, medical supplies and durable equipment. Certain outpatient procedures which are provided within 72 hours of an inpatient admission are considered to be part of the inpatient services and are not separately reimbursed. A prospective payment system now applies to covered hospital outpatient services (“Ambulatory Payment Categories”); CMS establishes relative payment rates for Ambulatory Payment Categories based on hospital claims and cost report data and sets certain specified limits on coinsurance payable for such services. Laboratory, therapy and certain radiology services are paid under a fee schedule. The Bipartisan Budget Act of 2015 created a mandate that new off-campus hospital outpatient departments established on or after November 2, 2015, will not be eligible for reimbursement under the outpatient prospective payment system after January 1, 2017. The effect of the prospective payment system on the Members of the Obligated Group depends upon the ability of management to control costs of covered services. There can be no assurance that reimbursement for outpatient services will be sufficient to cover costs for such services. Medicare Advantage Plans. Part C of the Social Security Act gives most Medicare beneficiaries the option to obtain Medicare coverage either under the traditional Medicare program (Parts A and B as described above), or under a Medicare Advantage plan. A Medicare Advantage plan may be offered by a coordinated care plan (such as an HMO or PPO), a provider sponsored organization (a network operated by health care providers rather than an insurance company), a private fee-for-service plan, or a combination of a medical savings account (“MSA”) and contributions to a Medicare Advantage plan. Each Medicare Advantage plan, except an MSA plan, is required to provide at least the benefits offered under Medicare Parts A and B (other than hospice care) and any additional benefits approved by the Secretary of HHS. A Medicare Advantage plan will receive a capitated monthly payment from HHS for 45 each Medicare beneficiary who has elected coverage under the plan. In general, health care providers such as the Members of the Obligated Group must contract with Medicare Advantage plans to treat Medicare Advantage enrollees at agreed upon rates, with the exception of Private Fee for Service plans which do not require a contract with the provider. Medicaid Reimbursement Medicaid is a combined federal and state program for certain low-income and needy individuals that is jointly funded by the federal government and the states. Pursuant to broad federal guidelines, each state establishes its own eligibility standards; determines the type, amount, duration and scope of services; sets the payment rate for services; and administers its own Medicaid program. In Arkansas, the Medicaid program is administered by the Arkansas Department of Human Services. The Members of the Obligated Group are certified providers of Medicaid services and have participation agreements with the State. The Corporation has historically received significant revenue from the Medicaid program, and changes in the Medicaid program are therefore likely to affect the Corporation and BHRH. The Corporation’s Fiscal Year 2018 revenue from Medicaid was approximately 12.7% of its patient service revenue. See the caption “Sources of Patient Revenue” in Appendix A hereto. Fiscal considerations in setting both federal and State budgets will directly affect the funds available to providers for payment of services rendered to Medicaid patients. Since State payments to Medicaid providers are subject to State legislative appropriation, delays in appropriations and State budget pressures which may occur from time to time create a risk that payments for services to Medicaid patients will be withheld or delayed. Inpatient hospital services under Medicaid are reimbursed under a cost reimbursement methodology subject to certain cost limitations. Medicaid outpatient hospital services are generally reimbursed in accordance with fee schedules produced by the State Department of Human Services. These payments are supplemented under the provider assessment program, which assesses participating hospitals a tax based on net revenue. The federal government matches the assessment amount at a rate of approximately 3 to 1, and these amounts are allocated to private hospitals in Arkansas based on each hospital’s share of total Medicaid patients. Based on the Medicaid reimbursement methodologies, there can be no assurance that Medicaid revenue will cover expenses for Medicaid patients. The Affordable Care Act contains provisions aimed at reducing Medicaid and Medicare reimbursements to providers. See “—Medicare Reimbursement—Part A Reimbursement of Inpatient Services” above under this caption for a discussion of market basket and other reimbursement reductions imposed by the Affordable Care Act. While Arkansas has recently implemented a program to manage the care of Medicaid beneficiaries with specialized needs for developmental disabilities and behavioral health service, at the present time Medicaid managed care organizations do not have a significant presence in the service areas of the hospitals operated by the members of the Obligated Group relating to the provision of acute care. If such Medicaid managed care organizations were to become more active in such service areas in the future, there can be no assurance that the Members of the Obligated Group would be selected as providers by Medicaid managed care organizations or, if selected, that the revenue received under such managed care contracts would be adequate to pay the costs of treating the Medicaid beneficiaries covered by such contracts. The amount of Medicaid reimbursement received by providers in the future will depend on, among other things, fiscal considerations of both the federal and state governments in establishing their budgets for funding the Medicaid program. Because a portion of Medicaid’s program costs are paid by the State, the absolute level of Medicaid revenue paid to the Members of the Obligated Group, as well as the timeliness of their receipt, may be partly dependent upon the financial condition of and budgetary factors facing the State, which may be adversely affected by factors beyond the State’s control. State budgets are not only affected by State economic conditions but also by a combination of Arkansas

46 constitutional provisions that limit taxes and revenues. Consequently, the State’s ability to appropriate additional funds for the Medicaid program, or to increase taxes to provide additional revenue for health care, is limited by the State Constitution and may be further restricted by initiated ballot proposals or by other changes in law or policy. Future changes in State law or policy could adversely affect State Medicaid funding. To the extent that future changes in State law, policy, or financial conditions cause the State to reduce its funding of the non-federal portion of Medicaid reimbursement, the revenue of Medicaid providers such as the Members of the Obligated Group could be adversely affected. While the Affordable Care Act has expanded Medicaid eligibility and funding in the State, considerable uncertainty remains as to its impact. Medicaid funding may be affected further by future health care reform legislation and general governmental budgetary concerns. The Secretary of HHS has advocated converting Medicaid to a “block grant” funded program, meaning states would receive a fixed dollar amount from the federal government rather than the current funding approach based upon level of state expenditure. The effect of block grant funding on the State’s Medicaid Program and the Members of the Obligated Group is not known at this time; however, it is likely to have an adverse effect on the Members of the Obligated Group. Such factors could lead to future reductions in Medicaid payments, and Medicaid payment rates could be insufficient to cover increases in costs of providing services to Medicaid patients. It is impossible to predict the effect such changes might have on the Members of the Obligated Group. Medicare and Medicaid Annual Cost Reporting; Audits The annual cost reports of the Members of the Obligated Group, which are required under the Medicare and Medicaid programs, are subject to audit which ultimately may result in retroactive adjustments to the amounts determined to be due to or from the Members of the Obligated Group under these programs. Medicare and Medicaid regulations provide for withholding payment in certain circumstances if audits determine that an overpayment of Medicare or Medicaid funds has been made. These audits often require several years to reach the final determination of amounts earned under each program based on cost. Providers also have rights of appeal. The Corporation is not aware of any situation whereby a material Medicare or Medicaid payment is presently being withheld, and does not anticipate that substantial withholdings or audit adjustments not covered by existing reserves will be made in the future. However, if such withholdings or audit adjustments were to be assessed, such an occurrence could have a material adverse effect on the financial position of the Members of the Obligated Group. In addition to the cost report audits described above, Medicaid has implemented an audit program relating to overpayment of Medicaid claims in specified years. The Members of the Obligated Group may be required to repay certain claims, but do not expect such repayments to be material in amount. Under certain circumstances, payments may be determined to have been made as a consequence of improper claims subject to the federal False Claims Act or other federal or state statutes, which could subject the members of the Obligated Group to civil or criminal sanctions. See the discussion of the False Claims Act in “Fraud and Abuse Laws and Regulations—Billing and Reimbursement Practices” under this caption. The Affordable Care Act requires identified overpayments to be repaid within 60 days of discovery; failure to meet this deadline may result in False Claims Act liability. Recovery Audit Contractors Over the last several years, CMS has implemented and expanded a program for the use of recovery audit contractors (“RACs”) to search for improper Medicare payments, and the Affordable Care Act has extended the use of RACs to the Medicaid program, Medicare Advantage and Medicare Part D. RACs are compensated in part on the basis of their collections, and the program has reportedly resulted in significant recoveries of Medicare overpayments. The Members of the Obligated Group cannot anticipate the amount or volume of its past Medicare claims that will be reviewed by the RACs 47 or what the results of any such audits may be. The amount of volume of RAC activity is not expected to materially impact the consolidated financial statements of the Corporation. Fraud and Abuse Laws and Regulations The Affordable Care Act provides new methods and increased resources to combat waste, fraud and abuse, and these provisions are expected to be a significant source of funding for implementation of health care reform. Significantly, the Affordable Care Act authorizes the Secretary of MIS to exclude a provider from participation in Medicare, Medicaid and other governmental programs, as well as suspend payments to a provider, pending an investigation of a credible allegation of fraud against a provider. Thus, providers may experience adverse financial consequences based on a mere allegation of violation of a federal fraud and abuse law, even if such allegation is unproven or is never proved. The Affordable Care Act also allows CMS to reduce provider payments by set-offs for various types of federal liabilities providers (or their affiliates) may have. The Affordable Care Act provides for additional program integrity measures aimed at fraud prevention and detection (e.g. data integration, sharing and matching; also enhanced provider screening and enrollment requirements). The Affordable Care Act also creates incentives for providers to create more integrated and coordinated care platforms, and there may be some potential for tension between these incentives and certain types of fraud and abuse regulation. Anti-Kickback Laws. The federal Medicare/Medicaid Anti-Fraud and Abuse Amendments to the Social Security Act (the “Anti-Kickback Law”) make it a criminal felony offense (subject to certain exceptions) to knowingly and willfully offer, pay, solicit or receive remuneration in order to induce business for which reimbursement is provided under the Medicare or Medicaid programs or other “federal health care programs,” or in return for the purchasing, leasing, ordering or arranging for, or recommending the purchasing, leasing, or ordering of, any good, facility, service or item for which payment is made in whole or in part under a federal health care program. For purposes of the Anti- Kickback Law, a “federal health care program” includes the Medicare and Medicaid programs, as well as any other health plan or program funded directly, in whole or in part, by the United States government. The Affordable Care Act contains provisions relaxing the intent requirements for criminal liability under the Anti-Kickback Law, so that actual knowledge of statutory requirements or specific intent to violate them is not required for a criminal prosecution. The Affordable Care Act also provides that Anti-Kickback Law violations may constitute a basis for False Claims Act liability; see “Billing and Reimbursement Practices” below under this caption. In addition to criminal penalties, violations of the Anti-Kickback Law can lead to civil monetary penalties and suspension or exclusion from participation in Medicare, Medicaid and other federal health care programs. A person who violates the Anti-Kickback Law is subject to damages of up to three times the total amount of remuneration offered, paid, solicited or received. The government may exclude from a federal health care program any individual who has a direct or indirect ownership or control interest in a sanctioned entity and has acted in deliberate ignorance, or is an officer or managing employee of the sanctioned entity, irrespective of whether the individual participated in the wrongdoing. Exclusion from the Medicare or Medicaid programs would have a material adverse impact on the operations and financial condition of the Members of the Obligated Group. The scope of prohibited payments in the Anti-Kickback Law is broad and has been broadly interpreted by courts in many jurisdictions. Read literally, the statute places at risk many otherwise legitimate business arrangements, potentially subjecting such arrangements to lengthy, expensive investigations and prosecutions initiated by federal and state governmental officials. In particular, the Office of the Inspector General of HHS has expressed concern that the acquisition of physician practices by entities in a position to receive referrals of business reimbursable by Medicare from such practices could violate the Anti-Kickback Law. In addition, the Anti-Kickback Law covers certain economic

48 arrangements involving hospitals, physicians and other health care providers, including joint ventures, space and equipment rentals, management and personal services contracts and physician employment contracts. HHS has adopted regulations establishing certain payment practices and arrangements as “safe harbors” which are deemed not to violate the Anti-Kickback Law. The safe harbors are, however, narrow, and do not cover a wide range of economic relationships which many hospitals, physicians and other health care providers have historically considered to be legitimate business arrangements not prohibited by the Anti-Kickback Law. Because the safe harbor regulations do not purport to describe comprehensively all lawful or unlawful economic arrangements or other relationships between health care providers and referral sources, it is uncertain whether hospitals and other health care providers that have these arrangements or relationships may need to alter them in order to ensure compliance with the Anti-Kickback Law. Billing and Reimbursement Practices. Health care providers, including hospitals and physicians’ clinics, are also subject to criminal, civil and exclusionary penalties for violating billing and reimbursement standards under state and federal law. In recent years, state and federal enforcement authorities have investigated and prosecuted providers for submitting false claims to Medicare or Medicaid for services not rendered or for misrepresenting the level or necessity of services actually rendered in order to obtain a higher level of reimbursement. The United States Department of Justice has instituted a number of national investigations concerning allegations under the federal False Claims Act relating to alleged improper billing practices by hospitals. Significant fines and penalties are being imposed in these areas, and, since enforcement authorities are in a position to exert considerable settlement pressure against providers, substantial settlement amounts are being paid. In additions, the False Claims Act authorizes “qui tam” actions in which a private person (known as a “relator”) sues on behalf of the government. If the lawsuit is successful, the relator is eligible to receive a percentage of the recovered amount. The Affordable Care Act also allows CMS to reduce provider payments by set offs for various types of federal liabilities providers (or their affiliates) may have. This “cross provider” recovery provision (which may extend to all entities sharing a federal tax identification number) constitutes an important change from prior rules. These enforcement activities are aimed at a wide variety of health care related activities, many of which have not generally been perceived as “fraud.” In many areas, regulatory authorities have not provided clear guidance. The False Claims Act and similar laws may be violated merely by reason of inaccurate or incomplete reports, and ordinary course errors and omissions may result in liability. Because the members of the Obligated Group have structured their accounting and financial systems around complex billing code mechanisms imposed by the Medicare and Medicaid programs, the Members of the Obligated Group may not be able to comply expeditiously with future Medicare and Medicaid modifications, which could result in an adverse effect on operations. CMS is reviewing health care providers that are receiving large proportions of their Medicare revenues from outlier payments. Management of the Obligated Group does not believe that any such review would result in a material adjustment. Restrictions on Referrals. Federal law (the “Stark Law”) prohibits physicians from referring Medicare or Medicaid patients for certain designated health services where the physician has an ownership or other financial interest in the provider of the referral services. Any services furnished pursuant to a referral prohibited under the Stark Law are not eligible for payment by the Medicare or Medicaid programs, and the provider is prohibited from billing any third-party for such services. Violations can result in denial of payment, imposition of substantial civil money penalties and exclusion from the Medicare and Medicaid programs. There are a number of exceptions for certain arrangements, such as employment arrangements, personal service and physician recruitment activities meeting specified criteria, which are not considered violative of these federal referral prohibitions. Regulations which the Secretary of HHS has stated are 49 indicative of HHS’ position provide further clarification regarding the application of these federal laws; however, numerous ambiguities and questions of interpretation exist concerning application of referral restrictions to specific business arrangements. The Affordable Care Act contains additional restrictions on some Stark Law exceptions, and also provides new self-disclosure protocols for Stark Law violations as described below. As mandated by the Affordable Care Act, CMS has established a voluntary self-referral disclosure protocol (the “SRDP”) under which hospitals and other entities may voluntarily self-report Stark violations and seek a reduction in potential refund obligations. However, because the SRDP is relatively new and published settlement amounts do not indicate a correlation to the total potential overpayment disclosed, it is difficult to determine at this time whether the SRDP will provide significant monetary relief to hospitals that discover and self-report inadvertent Stark law violations. The Members of the Obligated Group may make self-disclosures under the SRDP as appropriate from time to time. However, in light of the technical nature of the Stark law, the scarcity of case law interpreting the Stark Law and the breadth and complexity of the Stark Law, there can be no assurances that the Members of the Obligated Group will not be found to have violated the Stark Law, and if so, whether any repayment obligation or sanction imposed would have a material adverse effect on the operations or the financial condition of the Members of the Obligated Group. Management believes that the Members of the Obligated Group are currently in material compliance with the Stark Law. However, see the discussion of the Corporation’s Stark Law Self-Report under the caption “Litigation” in Appendix A attached to this Official Statement. Anti-Dumping. In 1986, in response to concerns regarding inappropriate hospital transfers of emergency patients based on the patient’s inability to pay for the services provided, Congress enacted the Emergency Medical Treatment and Active Labor Act. This so-called “anti-dumping” law restricts the hospital’s right to inquire as to the patient’s ability to pay until a medical screening exam has been performed and if necessary, the patient’s condition has been stabilized. It requires adherence to certain procedures before an emergency patient or patient in labor may be transferred to another facility. Failure to comply with this law can result in exclusion from the Medicare and/or Medicaid programs as well as civil and criminal penalties. Failure of the Members of the Obligated Group to meet these legal responsibilities could adversely affect their financial condition. See also “RISK FACTORS — Internal Revenue Service Policy Regarding Maintenance of 501(c)(3) Tax Exemption” herein. Other Federal Legislation. Extensive procedural and substantive changes to fraud and abuse and reimbursement related provisions of federal law have been enacted, including within the Affordable Care Act. In part, the changes provided funding and other incentives to encourage more vigorous enforcement of existing law. In addition, criminal and civil penalty provisions have been added, existing requirements and penalties have been extended to additional federal programs, and changes have been made to mandatory and permissive exclusion provisions. Criminal violations relating to “health care fraud” and “federal health care offense” have been defined. Civil monetary penalties have been added for actions such as patterns of incorrect coding or billing for unnecessary services, offering inducements to beneficiaries to obtain services from a particular provider, and for contracting with, or employing, an individual who is excluded from participation in a federal health care program. These legislative changes have and will continue to produce a very substantial number of proposed and final rules, advisory opinions and other notifications, all of which could have a material adverse effect on the financial condition or results of operations of the Members of the Obligated Group. Compliance. Management believes that its business relationships, billing and claims practices and other operations and activities materially comply with the terms of all applicable state and federal fraud and abuse laws and regulations. However, in light of the broad scope of these provisions, the narrowness of safe harbor regulations, and the scarcity of case law or other concrete guidance in interpreting them, there can be no assurance that the Members of the Obligated Group will not be 50 challenged under fraud and abuse provisions in the future. Such a challenge could materially adversely affect the financial condition of the Members of the Obligated Group. The increasing pace of development of new laws and regulations increases the risk of failure to comply with applicable legal requirements as interpreted by federal and state agencies. The Corporation and BHRH maintain an ongoing compliance program. Electronic Transmission of Health Information; Privacy and Security Regulations The Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”), added two prohibited practices the commission of which may lead to civil monetary penalties: (i) the practice or pattern of presenting a claim for an item or service on a reimbursement code that the person knows or should know will result in greater payment than appropriate (i.e., upcoding); and (ii) the practice of submitting claims for payment for medically unnecessary services. Violation of such prohibited practices due to civil neglect could amount to civil monetary penalties ranging from $50,000 to $1.5 million for all identical violations in a calendar year and/or imprisonment. Management of the Obligated Group is not aware of any material violations of the prohibited practices provisions of HIPAA. HIPAA also includes administrative simplification provisions intended to facilitate the processing of health care payments by encouraging the electronic exchange of information and the use of standardized formats for health care information. Congress recognized, however, that standardization of information formats and greater use of electronic technology presents additional privacy and security risks due to the increased likelihood that databases of personally identifiable health care information will be created and the ease with which vast amounts of such data can be transmitted. Therefore, HIPAA requires the establishment of distinct privacy and security protections for individually identifiable health information (“Protected Health Information” or “PHI”). HHS promulgated privacy regulations under HIPAA (the “Privacy Rule”) that protect the privacy of PHI maintained by health care providers (including hospitals), health plans, and health care clearinghouses (collectively, “Covered Entities”) and provide individuals with certain rights regarding their PHI (including, for example, access to PHI, amending PHI, and receiving an accounting of disclosures of PHI). Security regulations have also been promulgated under HIPAA (the “Security Rule”). The Security Rule requires Covered Entities to have certain administrative, technical and physical safeguards in place to ensure the confidentiality, integrity and availability of all electronic PHI they create, receive, maintain or transmit. Additionally, HHS promulgated regulations to standardize the electronic transfer of information pursuant to certain enumerated transactions (the “Transactions and Code Sets Rule”). In September of 2015, the HHS Office of the Inspector General released two reports that reviewed the Office of Civil Rights’ (“OCR”) enforcement of HIPAA. The first report (the Privacy Report) suggests that OCR strengthen its oversight of covered entities’ compliance with the Privacy Rule. The second report (the “Breach Enforcement Report”) suggests that OCR strengthen its follow-up of reported HIPAA breaches. In response to the reports, there has been a dramatic increase in the number of HIPAA enforcement actions and settlements, and OCR announced plans to conduct random audits of covered entities and business associates beginning in 2016. OCR has stated that the audits will primarily consist of a review of policies and procedures, but if serious compliance issues are identified OCR may initiate a separate compliance review to further investigate which may result in settlements and fines. Despite the implementation of network security measures by the Corporation, its information technology systems may be vulnerable to breaches, ransom malware, hacker attacks, computer viruses, physical or electronic break-ins and other similar events or issues. Such events or issues could lead to the inadvertent disclosure of protected health information or other confidential information, could have an adverse effect on the ability of the Corporation and BHRH to provide health care services, or could result in government civil, criminal or monetary penalties. 51 The 2009 Health Information Technology for Economic and Clinical Health (“HITECH”) Act significantly changed the landscape of federal privacy and security laws regarding PHI. The HITECH Act (i) extended the reach of HIPAA, certain provisions of the Privacy Rule, and the Security Rule; (ii) imposed a breach notification requirement on HIPAA covered entities and their business associates; (iii) limited certain uses and disclosures of PHI; (iv) increased individuals’ rights with respect to PHI; and (v) increased enforcement of, and penalties for, violations of the privacy and security of PHI. The HITECH Act also created a federal breach notification requirement that mirrors protections that many states have passed in recent years. This requirement provides that the Members of the Obligated Group must notify patients of any unauthorized access, acquisition or disclosure of their unsecured PHI that poses significant risk of financial, reputational or other harm to a patient. In addition, a new breach notification requirement was established requiring reporting to the Secretary of HHS and, in some cases, local media outlets, of certain unauthorized access, acquisition of disclosure of unsecured PHI that poses significant risk of financial, reputational or other harm to a patient. In January of 2013 HHS issued an omnibus final rule interpreting and implementing various provisions of the HITECH Act, including a final breach notification rule. In addition, the facilities of the Members of the Obligated Group are also subject to any state law that is related to the reporting of data breaches and more restrictive than the regulations and/or requirements issued under HIPAA and the HITECH Act. The Corporation has experienced several minor data security breaches over the past two years where disclosure of patient personal and health information may have occurred. A total of 4,963 patients were potentially impacted by these events, and each such patient has been notified by mail of the occurrence of the related data security incident. Any violation of HIPAA, the HITECH Act or other regulations promulgated thereunder is subject to HIPAA civil and criminal penalties, including monetary penalties and/or imprisonment. Management of the Obligated Group believes it is in substantial compliance with HIPAA, the HITECH Act, and the rules promulgated thereunder, but there can be no assurance that the Members of the Obligated Group will not experience a HIPAA privacy or security breach. The Members of the Obligated Group conduct annual security risk assessments and develop corrective action plans to address remediation of any identified risks, threats or vulnerabilities to electronic protected health information or gaps in applicable requirements.

SUMMARY OF PORTIONS OF THE LOAN AGREEMENT

The following is a summary of certain portions of the Loan Agreement. The summary does not purport to be complete and reference is made to the full text of the Loan Agreement for a complete description of its terms. Obligation Payments and Additional Payments Obligation Payments. The Corporation, as Obligated Group Representative, is required to make (or to cause the Obligated Group to make) semiannual payments as set forth in Obligation No. 9 in amounts sufficient to provide fully for each payment of the principal of, premium, if any, and interest on the Series 2019 Bonds, as due. Such payments are payable two (2) days prior to each respective payment date for the Series 2019 Bonds. Additional Payments. In addition, under the Loan Agreement, the Corporation, as Obligated Group Representative, is obligated to pay (or to cause the Obligated Group to pay) to the Trustee (i) any other moneys necessary to pay principal of and interest and redemption premiums (if any) on the Series 2019 Bonds as the same become due and payable or are subject to redemption, as the case may be, (ii) the reasonable fees for services rendered and charges for expenses reasonably incurred of the Master 52 Trustee, the Trustee and any Paying Agent, and (iii) the reasonable costs and expenses of the Issuer directly related to the Series 2019 Bonds. Obligations of Corporation Unconditional The obligations of the Obligated Group to make the Obligation Payments, Additional Payments and any other sums payable under the Loan Agreement shall be absolute and unconditional without defense or set-off by reason of any default by the Issuer under the Loan Agreement or any other agreement between a Member of the Obligated Group and the Issuer or for any other reason. Obligations and Options to Prepay The Obligated Group shall have the option to prepay the ADFA Obligations in full and terminate the Loan Agreement at any time prior to full payment of the Bonds, which shall be done by making provision satisfactory to the Trustee for payment of the Outstanding Bonds in accordance with the provisions of the Indenture, including the payment to the Trustee of an amount which, when added to the amount on deposit in the Bond Fund and the Bond Redemption Fund, will be sufficient to pay, retire and redeem all of the Outstanding Bonds in accordance with the provisions of the Indenture, and, in case of redemption, making arrangements satisfactory to the Trustee for the giving of the required notice of redemption, and by paying the Issuer any and all sums then due to the Issuer under the Loan Agreement. The Obligated Group shall also have the option to prepay the ADFA Obligations in full and terminate the Loan Agreement if substantially all of any health care facility comprising the Facility has been damaged or destroyed or title to any health care facility comprising the Facility is taken under the exercise of, or acquired under the threat of the exercise of, the power of eminent domain, to such extent that (i) in the opinion of a Management Consultant, the obligation of the Obligated Group to comply with the rate covenant in Section 3.07(a) of the Master Indenture will be materially adversely affected and (ii) in the opinion of an Independent Architect, the completion time for repair, rebuilding, replacement or restoration of such portion of the Facility is estimated to extend one year beyond the term of the business interruption insurance carried by the Obligated Group. In the event that the Obligated Group is required to prepay Obligation No. 1 relating to the Series 2014 Bonds in the event of certain damage, destruction or condemnation of certain of the Corporation’s health care facilities (consisting of Baptist Health Medical Center-Little Rock, Baptist Health Rehabilitation Institute and Baptist Health Medical Center- North Little Rock), the Obligated Group shall also be required to prepay the Obligation Payments in full and terminate the Loan Agreement. The Obligated Group shall also have the right to prepay Obligation Payments in part from the Net Proceeds of insurance or condemnation as follows: (a) Amounts that do not exceed 20% of the Book Value of the Property, Plant and Equipment of the Obligated Group received by any Member of the Obligated Group as insurance proceeds with respect to any casualty loss or as condemnation awards may be used in such manner as the recipient, with the approval of the Authorized Representative of the Obligated Group Representative, may determine, including, without limitation, applying such moneys to the payment or prepayment of any Indebtedness in accordance with the terms thereof and of any pertinent Supplement. (b) Amounts that exceed 20% of the Book Value of the Property, Plant and Equipment of the Obligated Group received by any Member of the Obligated Group as insurance proceeds with respect to any casualty loss or as condemnation awards shall be applied to repair or replace the Property (either with Property serving the same function or with other Property that, in the judgment of the Governing Body, is of equal usefulness) to which such proceeds relate or to the payment or prepayment of Indebtedness in accordance with the terms thereof and of any pertinent Supplement; provided, however, that such amounts may be used in such manner

53 as the recipient may determine, if the recipient notifies the Master Trustee and within 12 months after the casualty loss or taking, delivers to the Master Trustee: (i) (A) An Officer’s Certificate of the Obligated Group Representative certifying the forecasted Long-Term Debt Service Coverage Ratio for each of the two Fiscal Years following the date on which such proceeds or awards are forecasted to have been fully applied, which Long-Term Debt Service Coverage Ratio for each such period is not less than 1.35 to 1.00, as shown by pro forma financial statements for each such period, accompanied by a statement of the relevant assumptions including assumptions as to the use of such proceeds or awards, upon which such pro forma statements are based; and (B) if the amount of such proceeds or awards received with respect to any casualty loss or condemnation exceeds 30% of the Book Value of the Property, Plant and Equipment of the Obligated Group, a written report of a Consultant confirming such certification; or (ii) A written report of a Consultant stating the Consultant’s recommendations, including recommendations as to the use of such proceeds or awards, to cause the Long-Term Debt Service Coverage Ratio for each of the periods described in subsection (i) above to be not less than 1.20 to 1.00, or, if in the opinion of the Consultant the attainment of such level is impracticable, to the highest practicable level. If any proceeds of insurance or condemnation are received with respect to Property that was financed or refinanced with Related Bonds issued with the intent that the interest thereon would not be includable in the gross income of the recipient thereof for federal income tax purposes, no application of such proceeds as otherwise permitted in the Loan Agreement shall occur until there shall have been filed with the Master Trustee an Opinion of Bond Counsel to the effect that such application of proceeds, in and of itself, will not adversely affect the federal income tax status of the interest on such Related Bonds. Each Member of the Obligated Group agrees that it will use such proceeds or awards, to the extent permitted by law, only in accordance with the assumptions described in subsection (i), or the recommendations described in subsection (ii) above. The Obligated Group shall also have the option to prepay Obligation Payments in full and terminate the Loan Agreement if (i) as a result of any changes in the Constitution of the State or the Constitution of the United States of America or of legislative or administrative action (whether state or federal) or by final decree, judgment or order of any court or administrative body (whether state or federal) entered after the contest thereof by the Obligated Group in good faith, any ADFA Obligation, the Supplement, the Master Indenture or the Loan Agreement shall have become void or unenforceable or impossible of performance in accordance with the intent and purposes of the parties as expressed therein; or (ii) any burden on the Issuer or unreasonable burdens or excessive liabilities, whether direct or indirect, shall have been imposed on the Obligated Group, including, without limitation, federal, state or other ad valorem, property, income or other taxes not being imposed on the date of the Loan Agreement; or (iii) the Obligated Group is required or ordered, by legislative, judicial or administrative action of the United States or of the State, or any agency, department or subdivision thereof, to operate the Facility in a manner inconsistent with the stated goals, purposes and policies of the Members of the Obligated Group, including medical treatment and surgical procedures, and such legislative, judicial or administrative action is applicable to the Obligated Group because the Obligated Group is a party to any ADFA Obligation, the Supplement, the Master Indenture or the Loan Agreement. Default Events of Default. Under the Loan Agreement, any one or more of the following events is an Event of Default: 54 (a) The occurrence of any of the events (with notice and lapse of time as specified) described in the Master Indenture as an “Event of Default” thereunder. See the caption “SUMMARY OF PORTIONS OF THE MASTER INDENTURE - Events of Default” herein. (b) If default shall be made in the due and punctual payment of any Obligation Payment or Additional Payment payable under the Loan Agreement; and (c) If a default shall be made by the Obligated Group in the due performance of or compliance with any of the terms of the Loan Agreement, other than those referred in subsection (b) above, and such default shall continue for thirty (30) days after the Issuer or the Trustee or the Holders of at least 25% in aggregate principal amount of Bonds Outstanding shall have given the Obligated Group Representative written notice of such default and requiring it to be remedied; provided, however, that if the Obligated Group shall fail to make any repair, restoration or replacement which, if begun and prosecuted with due diligence cannot be completed within a period of thirty (30) days, then such period shall be increased to such extent as shall be necessary to enable the Obligated Group to begin and complete such repair, restoration or replacement through the exercise of due diligence. Upon the occurrence of an Event of Default, the Trustee, the Master Trustee, the Issuer and the Holders of the Bonds may exercise any or all of the remedies set forth in the Master Indenture, subject to the conditions and requirements set forth therein.

SUMMARY OF PORTIONS OF THE INDENTURE

The Indenture is a contract between the Issuer and the Trustee for the benefit of Holders of any Bonds issued pursuant to the Indenture. Under the Indenture, the Issuer has assigned to the Trustee all of the Issuer’s right, title and interest in the ADFA Obligations and the Loan Agreement (except for certain rights to payment of expenses and indemnification). Set forth below is a summary of certain provisions of the Indenture which does not purport to be comprehensive. Reference is made to the full text of the Indenture for a complete description of its terms. Granting Clauses The Issuer grants and assigns unto the Trustee, subject to Permitted Encumbrances, the following: A. The ADFA Obligations and all rights of the Issuer thereunder. B. All right, title and interest of the Issuer in, to and under the Loan Agreement (except as set forth therein), including without limitation, all Obligation Payments, Additional Payments, income, revenues and receipts, fees, proceeds and payments received or receivable by the Issuer under and pursuant to the Loan Agreement and the present and continuing right to make claim for, collect, receive and receipt for any of the revenues and receipts and other sums of money payable or receivable thereunder, to bring actions and proceedings thereunder or for the enforcement thereof, and to do any and all things which the Issuer is or may become entitled to do under the Loan Agreement, provided that such assignment shall not impair or diminish any obligation of the Issuer under the provisions of the Loan Agreement. C. All moneys and securities from time to time held by the Trustee under the terms of the Indenture and the Loan Agreement and any and all other property of every type and nature from time to time hereafter by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or transferred, as and for additional security under the Indenture by the Issuer or by anyone in its behalf, or with its written consent to the Trustee which is authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms of the Indenture.

55 Creation of Funds The Indenture creates the Bond Fund, the Bond Redemption Fund and the Project Fund, all of which will be held by the Trustee. Bond Fund. The Bond Fund contains two accounts, the Principal Account and the Interest Account. Moneys on deposit in the Principal Account are to be used to pay the principal of and premium, if any, on the Series 2019 Bonds as the same become due, whether at maturity or by reason of prior redemption. Moneys on deposit in the Interest Account are to be used to pay the interest on the Series 2019 Bonds. There will be deposited in the Interest Account any accrued interest from the date of the Series 2019 Bonds to the date of delivery of the Series 2019 Bonds. There will also be deposited, in the respective accounts of the Bond Fund, that portion of the Obligation Payments made by the Obligated Group pursuant to Obligation No. 9 as specified in the Loan Agreement, all other moneys required to be deposited therein pursuant to the Loan Agreement, and any other moneys received by the Trustee when accompanied by directions that such moneys are to be deposited in the Bond Fund. All investment income on moneys in the Interest Account shall be credited to the Interest Account. All investment income on moneys in the Principal Account shall be credited to the Principal Account. Bond Redemption Fund. There shall be deposited in the Bond Redemption Fund that amount required under the Loan Agreement and the Indenture. Moneys on deposit in the Bond Redemption Fund shall be used to redeem Series 2019 Bonds as provided in the Indenture. Interest derived from the investment of moneys in the Bond Redemption Fund shall be deposited in the Bond Redemption Fund. Project Fund. The Trustee shall credit to the Accounts of the Project Fund the initial deposits from proceeds of the Series 2019 Bonds as specified in a Written Request of the Issuer to the Trustee. All income on the investment of amounts in the Project Fund shall be credited to the Account of the Project Fund from which such income was derived, unless otherwise directed in writing by the Obligated Group Representative. All moneys in the Project Fund shall be held by the Trustee in trust and, subject to the provisions of the Indenture, shall be applied to the payment of Costs of the Project or Issuance Costs, and, pending such application, shall be subject to a lien and charge in favor of the holders of the Outstanding Bonds, until paid out or transferred as provided in the Indenture, except that if there shall occur an Event of Default under the Indenture, moneys in the Project Fund shall be used to complete the Project unless the Bonds have been accelerated. Payment of the Costs of the Project shall be made in accordance with the provisions of the Indenture from the Series 2019 Project Account of the Project Fund. Payment of Issuance Costs shall be made from the Series 2019 Issuance Costs Account. Investments The Trustee shall invest to the extent reasonably possible all Trust Moneys on hand from time to time in the funds and accounts established in the Indenture as specified in a Written Request of the Obligated Group Representative in Permitted Investments. Such Permitted Investments shall be made so as to mature or be subject to redemption at the option of the holder thereof on or prior to the date or dates that the Obligated Group Representative or the Trustee anticipate that moneys therefrom will be required. The Trustee may trade with itself or its affiliates in the purchase and sale of such Permitted Investments, and the Trustee shall not be liable or responsible for any loss resulting from any such investment. Such Permitted Investments shall be registered in the name of the Trustee. The Trustee may invest in Permitted Investments through its own trust department, and Trust Moneys may be deposited in time deposits, or in certificates of deposit issued by the Trustee or its affiliates. The Trustee shall without further direction from the Issuer or the Obligated Group Representative sell such Permitted Investments as and when required to make any payment for the purpose of which such investments are held. Each investment shall be credited to the fund for which it is

56 held, subject to any other provision of the Indenture directing some other credit, but income on such Permitted Investments shall be held or transferred, as received, in accordance with the Indenture. In determining the value of any fund or account under the Indenture, the Trustee shall credit Permitted Investments at market value, as determined by the Trustee by any method selected by the Trustee in its reasonable discretion. No less frequently than annually, the Trustee shall determine the value of each fund and account held under the Indenture and shall report such determination to the Obligated Group Representative and any Holder of the Bonds who shall have made written request therefor. The Trustee shall sell or present for redemption any investment whenever it shall be necessary in order to provide money to make any payment required under the Indenture, and the Trustee shall not be liable or responsible for any loss resulting from such sale. Any loss on or reduction in the value of investments in any fund or account created by the Indenture shall be charged to the fund or account in which such investment was held. To the extent any loss on or reduction in the value of investments in any fund or account reduces the amount of Trust Moneys or the value of Permitted Investments in such fund or account below the amount of Trust Moneys or the value of Permitted Investments then required to be on hand in such fund or account pursuant to the Indenture, such loss or reduction in value is to be made up by the Obligated Group Representative in the manner set forth in the Loan Agreement. Any moneys or Permitted Investments delivered to the Trustee by a Member of the Obligated Group for such purpose shall be deposited in the fund or account with respect to which, and to the extent that, such loss or reduction in value was incurred. Discharge of the Indenture When the Series 2019 Bonds become due and payable and the whole amount of the principal of, premium, if any, and interest due and payable upon all of the Series 2019 Bonds shall be paid, or provision shall have been made for such payment, together with the payment of all other sums payable under the Indenture, all covenants, agreements and other obligations of the Issuer to the Holders of the Series 2019 Bonds shall thereupon cease, terminate and become void and be discharged and satisfied. All Outstanding Series 2019 Bonds prior to maturity or redemption shall be deemed to have been paid if (1) in case such Series 2019 Bonds are to be redeemed on any date prior to their maturity, the Obligated Group Representative shall have given to the Trustee irrevocable instructions to give notice of redemption of such Series 2019 Bonds, (2) there shall have been deposited with the Trustee either cash in an amount which shall be sufficient (or Government Obligations, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which, together with the moneys, if any, deposited with or held by the Trustee at the same time, shall be sufficient) to pay when due the principal of, premium, if any, and interest due and to become due on such Series 2019 Bonds, and (3) the Issuer or the Obligated Group Representative has delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel reasonably acceptable to the Trustee, each stating that all conditions therein provided for relating to the satisfaction and discharge of the Indenture have been complied with. Events of Default Each of the following events shall constitute an "Event of Default" under the Indenture (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) Default in the payment of any interest upon any Bond when it becomes due and payable; or

57 (2) Default in the payment of the principal of (or premium, if any, on) any Bond when the same becomes due and payable; or (3) Default in the performance, or breach, of any covenant or warranty or representation of the Issuer contained in the Indenture (other than as described in clauses (1) and (2)); or (4) The occurrence and continuation of an "Event of Default" under the Loan Agreement; or (5) The occurrence and continuation of an "Event of Default" under the Master Indenture or as defined in Section 5.01 of the Master Indenture. Acceleration of Maturity If an Event of Default occurs and is continuing, then and in every case the Trustee may, and upon the written request by registered or certified mail to the Trustee by the Holder or Holders of not less than 25% in aggregate principal amount of the Bonds then Outstanding shall, declare the principal of all the Bonds and the interest accrued thereon to be due and payable immediately, by a notice in writing to the Issuer and the Obligated Group Representative, and upon such declaration such principal shall become immediately due and payable. Additional Remedies The Trustee, in case of the happening of an Event of Default, may, and upon the written request of the Holders of not less than a majority in principal amount of the Bonds then Outstanding, and upon being indemnified to its satisfaction, shall (a) exercise any or all rights of the Issuer under the Loan Agreement; (b) proceed to protect and enforce its rights and the rights of the Holders of the Bonds under the Indenture by a suit or suits in equity or at law, either for the specific performance of any covenant or agreement contained therein or in aid of the execution of any power therein granted, or for the enforcement of any other appropriate legal or equitable remedy as the Trustee may deem most effectual to protect and enforce any of the rights or interests of the Holders of the Bonds under the Bonds or the Indenture; and (c) exercise any remedies available to a secured party under the Arkansas Uniform Commercial Code. Master Indenture Remedies Control The Trustee, if so requested by the Master Trustee, shall cede all control over remedies to the Master Trustee and all remedies, including acceleration, will be as set forth in the Master Indenture. Supplemental Indentures Without the consent of, or notice to, any of the Holders of the Bonds, the Issuer and the Trustee may at any time enter into supplemental indentures which (a) add covenants and agreements of the Issuer to the Indenture, (b) cure any ambiguity or correct any defect or inconsistent provision in the Indenture or for any other purpose, if any such supplement does not adversely affect the interests of the Holders of the Bonds, (c) subject, describe or redescribe any property subjected or to be subjected to the lien of the Indenture, (d) qualify the Indenture under the Trust Indenture Act of 1939, (e) set forth the terms and conditions of Additional Bonds, (f) provide for the exchange of Bonds of one series or denomination for Bonds of another series or denomination, and (g) to modify or eliminate terms of the Indenture as provided in the Indenture. The Indenture describes the procedures to be used to obtain the consents of the Holders of any Bonds whenever the Issuer and the Trustee propose to enter into a supplemental indenture requiring such consents.

58 Trustee and Paying Agent Under the Indenture, the Trustee is indemnified and held harmless against any liabilities which it may incur in the exercise and performance of its powers and duties under the Indenture and which are not due to its negligence or willful misconduct. The Indenture establishes procedures for the resignation or removal of the Trustee and the appointment of a successor, either by the Issuer or by the Holders of a majority in aggregate principal amount of the Bonds then Outstanding.

SUMMARY OF PORTIONS OF THE MASTER INDENTURE

The following is a summary of certain provisions of the Master Indenture. The summary does not purport to be complete and reference is made to the full text of the Master Indenture for a complete description of its terms. Purpose of Master Indenture The Obligated Group has entered into the Master Indenture for the purpose of providing for the issuance from time to time by Members of the Obligated Group of Obligations to finance or refinance the acquisition, construction, equipping or betterment of health care or other facilities, or for other lawful and proper purposes of any Member of the Obligated Group. Obligations under Master Indenture All Obligations issued (or converted) pursuant to the Master Indenture shall be a general obligation of each Member of the Obligated Group, secured by the Gross Revenues and/or Accounts of the Obligated Group and otherwise as set forth in the Master Indenture. Each Member of the Obligated Group so long as it is a Member, jointly and severally, covenants and agrees that it will promptly pay the principal of, redemption premium, if any, and interest on all Obligations issued and outstanding under the Master Indenture. Each Member of the Obligated Group covenants that it will not pledge or grant a security interest in any of its Property, except for Permitted Encumbrances. However, any one or more series of Obligations may, so long as any Liens created in connection therewith constitute Permitted Encumbrances, be secured by security interests in other Property of the Obligated Group or any Member. Such security need not extend to any other indebtedness, including Obligations. Consequently, the Supplement pursuant to which any one or more series of Obligations is issued may provide for such supplements or amendment to the provisions of the Master Indenture as are necessary to provide for such security and to permit realization upon such security solely for the benefit of the Obligations entitled thereto. To secure the prompt payment of the principal of, redemption premium, if any, and the interest on the Obligations and the performance by each Member of the Obligated Group of its other obligations under the Master Indenture, each Member of the Obligated Group and each Restricted Affiliate pledges, assigns and grants to the Master Trustee, for the benefit of the Holders of the Obligations, equally and ratably without preference or priority as to lien or source of payment of any one Obligation over any other Obligation, a lien on and security interest in (i) all Gross Revenues and/or Accounts of the Obligated Group and such Restricted Affiliate; (ii) all other property or collateral held by or assigned or pledged to the Master Trustee under the Master Indenture; and (iii) all proceeds and products of any of the foregoing; subject, in each case, to Permitted Encumbrances. Limitations on Indebtedness Subject to the terms, limitations and conditions established in the Master Indenture, each Member of the Obligated Group may incur Indebtedness by issuing Obligations thereunder or by creating Indebtedness under any other document. The principal amount of Indebtedness created under other documents and the number and principal amount of Obligations evidencing Indebtedness that may be

59 created under the Master Indenture are not limited, except as limited by the provisions of the Master Indenture. Each Member of the Obligated Group covenants and agrees that it will not incur any Additional Indebtedness if, after giving effect to all other Indebtedness incurred by the Obligated Group, such Indebtedness could not be incurred pursuant to any one of subsections (a) to (i), inclusive, below. Each Member of the Obligated Group further covenants and agrees that it will not incur any Additional Indebtedness without the written consent of the Governing Body of the Obligated Group Representative. (a) Long-Term Indebtedness may be incurred if prior to incurrence of the Long-Term Indebtedness there is delivered to the Master Trustee: (i) An Officer’s Certificate of the Obligated Group Representative certifying that the Long-Term Debt Service Coverage Ratio for the most recent period of 12 full consecutive calendar months preceding the date of delivery of the certificate of the Obligated Group Representative for which there are Audited Financial Statements available, taking all Long-Term Indebtedness incurred after such period and the proposed Long-Term Indebtedness into account as if such Long-Term Indebtedness had been incurred at the beginning of such period, is not less than 1.15 to 1.00; or (ii) (A) an Officer’s Certificate of the Obligated Group Representative demonstrating that the Long-Term Debt Service Coverage Ratio for the period mentioned in subsection (a)(i) above, excluding the proposed Long-Term Indebtedness, is at least 1.10 to 1.00 and (B) an Officer’s Certificate of the Obligated Group Representative demonstrating that the forecasted Long-Term Debt Service Coverage Ratio is not less than 1.25 to 1.00 for (x) in the case of Long-Term Indebtedness (other than a Guaranty) to finance capital improvements, each of the two full Fiscal Years succeeding the date on which such capital improvements are forecasted to be in operation or (y) in the case of Long-Term Indebtedness not financing capital improvements or in the case of a Guaranty, each of the two full Fiscal Years succeeding the date on which the Indebtedness is incurred, as shown by pro forma financial statements for the Obligated Group for each such period, accompanied by a statement of the relevant assumptions upon which such pro forma financial statements for the Obligated Group are based; provided, however, that if a report of a Consultant states that Governmental Restrictions have been imposed which make it impossible for the coverage requirements of this subsection to be met, then such coverage requirements shall be reduced to the maximum coverage permitted by such Governmental Restrictions but in no event less than 1.00 to 1.00. (b) In addition to, and not in lieu of, Long-Term Indebtedness permitted to be incurred under subsection (a) above, Long-Term Indebtedness may be incurred provided that immediately after giving effect to any Long-Term Indebtedness incurred pursuant to this subsection (b) the aggregate of Long-Term Indebtedness incurred under this subsection (b) and then outstanding shall not exceed 25% of Operating Revenues as reflected in the most recent Audited Financial Statements; provided, further, that the aggregate of the principal amount of Indebtedness Outstanding under this subsection (b) and subsection (d) below shall not at any time exceed 25% of Operating Revenues as reflected in the most recent Audited Financial Statements. (c) Long-Term Indebtedness incurred for the purpose of refunding any Outstanding Long-Term Indebtedness if, prior to the incurrence of such Long-Term Indebtedness, (i) if the Long-Term Indebtedness to be incurred does not constitute Cross-over Refunding Indebtedness there is delivered to the Master Trustee (A) an Officer’s Certificate of the Obligated Group Representative demonstrating that either (1) Maximum Annual Debt Service will not increase by more than 15% after the incurrence of such proposed refunding Long-Term Indebtedness and after giving effect to the disposition of the proceeds thereof or (2) the total debt service on all Indebtedness will not increase by

60 more than 15% after the incurrence of such proposed refunding Indebtedness and after giving effect to the disposition of the proceeds thereof and (B) an Opinion of Bond Counsel stating that upon the incurrence of such proposed Long-Term Indebtedness and application of the proceeds thereof, the Outstanding Long-Term Indebtedness to be refunded thereby will no longer be Outstanding; or (ii), if the Indebtedness proposed to be issued is Cross-over Refunding Indebtedness, there is delivered to the Master Trustee an Officer’s Certificate of the Obligated Group Representative stating that the total Maximum Annual Debt Service immediately following the Cross-over Date does not exceed the Maximum Annual Debt Service immediately prior to the issuance of the Cross-over Refunding Indebtedness by more than 15% assuming for the purpose of this test only that no other Additional Indebtedness is incurred between the date of issuance of the Cross-over Refunding Indebtedness and the Cross-over Date. (d) (i) Short-Term Indebtedness may be incurred subject to the limitation that the aggregate of all Short-Term Indebtedness shall not at any time exceed 25% of Operating Revenues as derived from the most recent Audited Financial Statements; provided, that the aggregate of the principal amount of Indebtedness Outstanding under this subsection (d)(i) and subsection (b) above shall not at any time exceed 25% of Operating Revenues as derived from the Audited Financial Statements for the most recent period of twelve consecutive months for which Audited Financial Statements are available; provided, however, the Obligated Group shall be free of all Short-Term Indebtedness (except for an amount not to exceed 5% of Operating Revenues) for a period of not less than 20 consecutive calendar days in each 12-month period unless the tests mentioned in subsection (b) above are met with respect to any amount in excess of 5% of Operating Revenues. (ii) Short-Term Indebtedness may also be incurred if the tests set forth in subsections (a)(i) or (a)(ii) above are met with respect to the incurrence of such Short-Term Indebtedness. For the purpose of calculating compliance with the Long-Term Indebtedness coverage tests set forth in subsection (a)(i) or (a)(ii), the Short-Term Indebtedness to be incurred pursuant to this subsection (d)(ii) shall be deemed to be Long-Term Indebtedness. For purposes of this subsection (d), a Guaranty of Short-Term Indebtedness shall be treated in the manner described in the definitions of "Guaranty" and "Exposure on Guaranteed Debt." For the purpose of calculating compliance with the tests set forth in this subsection (d), Short-Term Indebtedness shall not be taken into account except to the extent provided in subsection (i) below. (e) Non-Recourse Indebtedness may be incurred as follows: (i) Non-Recourse Indebtedness incurred for the purposes of acquiring Property and improving the Property acquired, either simultaneously or subsequent to the acquisition of such Property with Non-Recourse Indebtedness, may be incurred without limit; and (ii) Non-Recourse Indebtedness for any other purpose may be incurred in a principal amount not to exceed at any time outstanding 10% of Property, Plant and Equipment. (f) Completion Indebtedness may be incurred without limitation; provided, however, that prior to the incurrence of Completion Indebtedness, the Obligated Group Representative shall furnish to the Master Trustee: a certificate of an Architect estimating the costs of completing the facilities for which Completion Indebtedness is to be incurred; an Officer’s Certificate of the Chief Financial Officer of the Member of the Obligated Group for which Completion Indebtedness is to be incurred certifying that the amount of Completion Indebtedness to be incurred will be sufficient, together with other funds, if applicable, to complete construction of the facilities in respect of which Completion Indebtedness is to be incurred; and a certificate from a Consultant to the effect that the Long-Term Indebtedness originally incurred to finance the costs of the construction or acquisition of the facilities in respect of which Completion Indebtedness is to be incurred was estimated prior to the date of incurrence of the original Long-Term Indebtedness to be sufficient, together with other funds, if applicable, to complete the

61 construction of such facilities, but due to certain factors enumerated in the certificate the costs of constructing such facilities exceeded the amount of the original Indebtedness plus other funds, if applicable. (g) Subordinated Indebtedness may be incurred without limit. (h) Indebtedness under a Credit Facility (including a Guaranty of indebtedness under a Credit Facility) issued with respect to any Indebtedness of the Obligated Group permitted under the Master Indenture, other than with respect to Non-Recourse Indebtedness and Subordinated Indebtedness, may be incurred without limit. (i) Indebtedness secured by Accounts may be incurred in any amount not to exceed 75% of the carrying value of the Accounts, determined in accordance with GAAP. Indebtedness incurred pursuant to any one of subsections (b), (d)(i) or (d)(ii) above may be reclassified as indebtedness incurred pursuant to any other of such subsections if the tests set forth in the subsection to which such Indebtedness is to be reclassified are met at the time of such reclassification. Indebtedness containing a "put" or "tender" provision pursuant to which the holder of such Indebtedness may require that such Indebtedness be purchased prior to its maturity shall not be considered Balloon Long-Term Indebtedness, solely by reason of such "put" or "tender" provision, and the put or tender provision shall not be taken into account in testing compliance with any debt incurrence tests set forth above. Consolidation, Merger or Sale Each Member of the Obligated Group covenants that it will not merge or consolidate with, or sell or convey all or substantially all of its assets to any Person that is not a Member of the Obligated Group unless: (i) Either a Member of the Obligated Group will be the successor corporation, or if the successor corporation is not a Member of the Obligated Group, such successor corporation shall execute and deliver to the Master Trustee an appropriate instrument, containing the agreement of such successor corporation to assume the due and punctual payment of the principal of, premium, if any, and interest on all Outstanding Obligations according to their tenor and the due and punctual performance and observance of all the covenants and conditions of the Master Indenture and any Supplement thereto; and (ii) There is delivered to the Master Trustee an Officer’s Certificate of the Obligated Group Representative indicating that no Member of the Obligated Group immediately after such merger or consolidation, or such sale or conveyance, would be in default in the performance or observance of any covenant or condition of the Master Indenture; and (iii) If any Related Bond then Outstanding was issued with the intent that interest thereon not be includable in the gross income of the recipient thereof for federal income tax purposes, there shall have been delivered to the Master Trustee an Opinion of Bond Counsel, to the effect that under then existing law the consummation of such merger, consolidation, sale or conveyance, whether or not contemplated on any date of the delivery of such Related Bond, would not, in and of itself, adversely affect the exclusion of interest payable on such Related Bond from the gross income of the holder thereof for federal income tax purposes; and (iv) There is delivered to the Master Trustee an Officer’s Certificate of the Obligated Group Representative demonstrating compliance with the Transaction Test; provided, however, that compliance with the Transaction Test shall not be required for the merger or consolidation of any two or more Members with each other.

62 Parties Becoming Members of the Obligated Group Persons which are not Members of the Obligated Group and corporations which are successor corporations to any Member of the Obligated Group through a merger or consolidation permitted by the Master Indenture may, with the prior written consent of the Obligated Group Representative, become Members of the Obligated Group, if: (a) The Person or successor corporation which is becoming a Member of the Obligated Group shall execute and deliver to the Master Trustee an appropriate instrument containing the agreement of such Person or successor corporation (i) to become a Member of the Obligated Group and thereby become subject to compliance with all provisions of the Master Indenture and any Supplements pertaining to a Member of the Obligated Group, and the performance and observance of all covenants and obligations of a Member of the Obligated Group, (ii) to unconditionally and irrevocably pay, jointly and severally as a co-obligor with each other Member of the Obligated Group and not as a surety, to the Master Trustee and each other Member of the Obligated Group, all Obligations issued and then Outstanding and to be issued and Outstanding in accordance with the terms thereof and of the Master Indenture when due and (iii) to pledge its Gross Revenues and/or Accounts to secure all outstanding Obligations. (b) Each instrument executed and delivered to the Master Trustee in accordance with subsection (a) above shall be accompanied by an Opinion of Counsel, addressed to the Master Trustee, to the effect that such instrument has been duly authorized, executed and delivered by such Person or successor corporation and constitutes a valid and binding obligation enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy laws, insolvency laws, other laws affecting creditors’ rights generally, equity principles and laws dealing with fraudulent conveyances. (c) There shall be filed with the Master Trustee an Officer’s Certificate of the Obligated Group Representative demonstrating compliance with the Transaction Test. (d) If any Related Bond is then Outstanding which was issued with the intent that interest thereon is not includable in the gross income of the recipient thereof for federal income tax purposes, there shall be filed with the Master Trustee, (i) an Opinion of Bond Counsel to the effect that the consummation of such transaction would not, in and of itself, adversely affect the exclusion of the interest on any such Related Bond from the gross income of the holder thereof for federal income tax purposes, and (ii) an Opinion of Counsel to the effect that the consummation of such transaction would not require the registration of the Obligations under the Securities Act of 1933, as amended or the Supplements under the Trust Indenture Act of 1939, as amended, or if such registration is required, that all applicable registration and qualification provisions of said acts have been complied with. (e) There shall be delivered to the Master Trustee an Officer’s Certificate certifying that the admission of such Person as a Member of the Obligated Group will not give rise to an Event of Default under the Master Indenture. Withdrawal from the Obligated Group No Member of the Obligated Group may withdraw from the Obligated Group without the prior written consent of the Obligated Group Representative and unless, prior to the taking of such action, there is delivered to the Master Trustee: (i) If any Related Bonds then Outstanding were issued with the intent that interest thereon not be includable in the gross income of the recipient thereof for federal income tax purposes, there shall be delivered to the Master Trustee an Opinion of Bond Counsel to the effect that under then existing law such Member’s withdrawal from the Obligated Group, whether or 63 not contemplated on any date of delivery of any Related Bond, would not, in and of itself, cause the interest payable on such Related Bond to become includable in the gross income of the recipient thereof for federal income tax purposes; and (ii) An Officer’s Certificate of the Obligated Group Representative demonstrating compliance with the Transaction Test. Upon the withdrawal of any Member from the Obligated Group pursuant to the provisions above, any guaranty by such Member pursuant to the provisions of the Master Indenture shall be released and discharged in full and all liability of such Member of the Obligated Group with respect to all Obligations Outstanding under the Master Indenture shall cease; provided, however, that unless specifically released by the Obligated Group Representative, any obligations of such withdrawing Member to the Obligated Group shall not be released and discharged. A Member of the Obligated Group shall withdraw upon the request of the Obligated Group Representative provided the conditions for voluntary withdrawal set forth above are met. Events of Default Event of Default, as used herein, shall mean any of the following events: (a) The Members of the Obligated Group shall fail to make any payment of the principal of, the premium, if any, or interest on any Obligations issued and Outstanding when and as the same shall become due and payable, whether at maturity, by proceedings for redemption, by acceleration or otherwise; (b) Any Member of the Combined Group shall fail duly to perform, observe or comply with any covenant or agreement on its part under the Master Indenture for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Members of the Obligated Group by the Master Trustee, or to the Members of the Obligated Group and the Master Trustee by the Holders of at least 25% in aggregate principal amount of Obligations then Outstanding; provided, however, that if said failure be such that it cannot be corrected within 30 days after the receipt of such notice but is reasonably subject to cure within a reasonable time, it shall not constitute an Event of Default if corrective action is instituted within such 30-day period and diligently pursued until the Event of Default is corrected; (c) An event of default shall occur under a Related Bond Indenture or Related Loan Agreement or upon a Related Bond; (d) (i) Any Member of the Combined Group shall fail to make any required payment with respect to any Indebtedness (other than Subordinated Indebtedness, Non-Recourse Indebtedness or Obligations issued and Outstanding under the Master Indenture ), which Indebtedness is in an aggregate principal amount greater than one percent (1%) of Operating Revenues for the most recent Fiscal Year whether such Indebtedness now exists or shall hereafter be created, and any period of grace with respect thereto shall have expired, or (ii) there shall occur an event of default as defined in any mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any Indebtedness, which Indebtedness (other than the Obligations) is in an aggregate principal amount greater than one percent (1%) of Operating Revenues for the most recent Fiscal Year whether such Indebtedness now exists or shall hereafter be created, which event of default shall not have been waived by the holder of such mortgage, indenture or instrument, and as a result of such failure to pay or other event of default such Indebtedness shall have been accelerated; provided, however, that such default shall not constitute an Event of Default if within 30 days (i) written notice is delivered to the Master Trustee, signed by the Authorized Representative of the Obligated Group Representative, that such Member of the Combined Group is contesting the payment of such Indebtedness and within the time allowed for service of a responsive pleading if any proceeding to enforce payment of the Indebtedness is

64 commenced, any Member of the Combined Group in good faith shall commence proceedings to contest the obligation to pay such Indebtedness and if a judgment relating to such Indebtedness has been entered against such Member of the Combined Group (A) the execution of such judgment has been stayed or (B) sufficient moneys are escrowed with a bank or trust company for the payment of such Indebtedness; (e) The entry of a decree or order by a court having jurisdiction in the premises for an order for relief against any Member of the Combined Group, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of such Member under the United States Bankruptcy Code or any other applicable federal or state law, or appointing a receiver, liquidator, custodian, assignee, or sequestrator (or other similar official) of such Member or of any substantial part of its Property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; and (f) The institution by any Member of the Combined Group of proceedings for an order for relief, or the consent by it to an order for relief against it, or the filing by it of a petition or answer or consent seeking reorganization, arrangement, adjustment, composition or relief under the United States Bankruptcy Code or any other similar applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, custodian, assignee, trustee or sequestrator (or other similar official) of such Member of the Combined Group or of any substantial part of its Property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due. Acceleration; Annulment of Acceleration Upon the occurrence and during the continuation of an Event of Default, the Master Trustee may and, upon the written request of the Holders of not less than 25% in aggregate principal amount of Obligations Outstanding the Master Trustee shall, by notice to the Members of the Obligated Group declare all Obligations Outstanding immediately due and payable, whereupon such Obligations shall become and be immediately due and payable, anything in the Obligations or in any other section of the Master Indenture to the contrary notwithstanding; provided, however, that if the terms of any Supplement give a Person the right to consent to acceleration of the Obligations issued pursuant to said Supplement, the Obligations issued pursuant to such Supplement may not be accelerated by the Master Trustee unless such consent is properly obtained pursuant to the terms of such Supplement. In the event Obligations are accelerated, there shall be due and payable on such Obligations an amount equal to the total principal amount of all such Obligations, plus all interest accrued thereon to the date of acceleration and, to the extent permitted by applicable law, which accrues to the date of payment. At any time after the principal of the Obligations shall have been so declared to be due and payable and before the entry of final judgment or decree in any suit, action or proceeding instituted on account of such default, if (i) the Obligated Group has paid or caused to be paid or deposited with the Master Trustee money sufficient to pay all matured installments of interest and interest on installments of principal and interest and principal or redemption prices then due (other than the principal then due only because of such declaration) of all Obligations Outstanding; (ii) the Obligated Group has paid or caused to be paid or deposited with the Master Trustee money sufficient to pay the charges, compensation, expenses, disbursements, advances, fees and liabilities of the Master Trustee; (iii) all other amounts then payable by the Obligated Group under the Master Indenture shall have been paid or a sum sufficient to pay the same shall have been deposited with the Master Trustee; and (iv) every Event of Default (other than a default in the payment of the principal of such Obligations then due only because of such declaration) shall have been remedied or waived, then the Master Trustee may, and upon the written request of Holders of not less than 25% in aggregate principal amount of the Obligations Outstanding or any Person exercising the right given to such Person in any Supplement, shall, annul such declaration and its consequences with respect to any Obligations or portions thereof not then due by their terms. No such

65 annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon. Additional Remedies Upon the occurrence and continuance of any Event of Default, the Master Trustee may, and upon the written request of the Holders of not less than 25% in aggregate principal amount of the Obligations Outstanding, or any Person exercising the right given to such Person in any Supplement, together with indemnification of the Master Trustee to its satisfaction therefor, shall, proceed forthwith to protect and enforce its rights and the rights of the Holders by such suits, actions or proceedings as the Master Trustee, being advised by counsel, shall deem expedient, including but not limited to: (i) enforcement of the right of the Holders to collect and enforce the payment of amounts due or becoming due under the Obligations; (ii) suit upon all or any part of the Obligations; (iii) civil action to require any Person holding moneys, documents or other property pledged to secure payment of amounts due or to become due on the Obligations to account as if it were the trustee of an express trust for the Holders; (iv) civil action to enjoin any acts or things, which may be unlawful or in violation of the rights of the Holders; (v) enforcement of rights as a secured party under the Uniform Commercial Code of the State; and (vi) enforcement of any other right of the Holders conferred by law or by the Master Indenture. Duties and Responsibilities of Master Trustee Except during the continuance of an Event of Default: (i) the Master Trustee undertakes to perform such duties and only such duties as are specifically set forth in the Master Indenture, and no implied covenants or obligations shall be read into the Master Indenture against the Master Trustee; and (ii) In the absence of bad faith on its part, the Master Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Master Trustee and conforming to the requirements of the Master Indenture; but in the case of any such certificates or opinions which by any provision of the Master Indenture are specifically required to be furnished to the Master Trustee, the Master Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of the Master Indenture. In case an Event of Default has occurred and is continuing, the Master Trustee shall exercise such of the rights and powers vested in it by the Master Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. Supplements to Master Indenture Not Requiring Consent of Holders Each Member of the Obligated Group, when authorized by resolution or other action of equal formality by its Governing Body, and the Master Trustee may, without the consent of or notice to any of the Holders, enter into one or more Supplements for one or more of the following purposes: (a) To cure any ambiguity or formal defect or omission in the Master Indenture; (b) To correct or supplement any provision in the Master Indenture which may be inconsistent with any other provision therein, or to make any other provisions with respect to matters or questions arising thereunder and which shall not adversely affect the security for the Obligations; (c) To grant or confer ratably upon all of the Holders any additional rights, remedies, powers or authority that may lawfully be granted or conferred upon them subject to the limitations set forth under the subcaption “Supplements to Master Indenture Requiring Consent of Holders” below; (d) To qualify the Master Indenture under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect; (e) To create and provide for the issuance of Indebtedness as permitted under the Master Indenture;

66 (f) To obligate a successor to any Member of the Obligated Group or any additional Member of the Obligated Group; (g) To comply with the provisions of any federal or state securities law; (h) To modify any provision of the Master Indenture in order to avoid any unintended impact on the compliance by the Obligated Group with financial covenants following any change in GAAP that would affect the computation of any financial ratio or other financial computation under the Master Indenture, if the Master Trustee is provided with (1) an Officer’s Certificate stating that (1) the amendment is intended to avoid a change (positive or negative) in the Obligated Group’s future compliance with any minimum or maximum financial ratio or other metric required by the Master Indenture when applied to the same economic facts and (2) if the changed accounting principles and amendment were in effect in the prior Fiscal Year, no minimum or maximum financial ratio or other metric imposed by the Master Indenture would have been complied with by a greater margin;. (i) To grant a lien on or security interest in any Property as security for payment of Obligations, to correct or amplify the description of any Property at any time subject to such lien or security interest, or better to assure, convey and confirm unto the Master Trustee any Property subject or required to be subjected to such lien or security interest; (j) To make any other changes or modifications to the terms of the Master Indenture which, in the judgment of the Master Trustee, based on and in reliance on certificates and/or opinions contemplated in the Master Indenture, are not prejudicial to the rights and interests of the Holders of Obligations Outstanding thereunder; and (k) To amend the definition of “Capital Leases” in the Master Indenture, as set forth in the definition of such term in Appendix B to this Official Statement, upon compliance with the requirements set forth in such definition. Supplements to Master Indenture Requiring Consent of Holders Other than Supplements described above, the Holders of not less than a majority in aggregate principal amount of Obligations then Outstanding shall have the right, from time to time, anything contained in the Master Indenture to the contrary notwithstanding, to consent to and approve the execution by each Member of the Obligated Group, when authorized by resolution or other action of equal formality by its Governing Body, and the Master Trustee of such Supplements as shall be deemed necessary and desirable for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions of the Master Indenture; provided, however, there shall not be permitted a Supplement which would: (i) effect a change in the times, amounts or currency of payment of the principal of, premium, if any, and interest on any Obligation or a reduction in the principal amount or redemption price of any Obligation or the rate of interest thereon, without the consent of the Holder of such Obligation; (ii) permit the preference or priority of any Obligation over any other Obligation, without the consent of the Holders of all Obligations then Outstanding; or (iii) reduce the aggregate principal amount of Obligations then Outstanding the consent of the Holders of which is required to authorize such Supplement without the consent of the Holders of all Obligations then Outstanding. Satisfaction and Discharge of Master Indenture If (i) the Obligated Group Representative shall deliver to the Master Trustee for cancellation all Obligations theretofore authenticated and not theretofore canceled, or (ii) all Obligations not theretofore canceled or delivered to the Master Trustee for cancellation shall have become due and payable and money sufficient to pay the same shall have been deposited with the Master Trustee, or (iii) all Obligations that have not become due and payable and have not been canceled or delivered to the Master Trustee for cancellation shall be Defeased Obligations, and if in all cases the Members of the Obligated Group shall also pay or cause to be paid all other sums payable under the Master Indenture by the 67 Members of the Obligated Group or any thereof, then the Master Indenture shall cease to be of further effect, and the Master Trustee, on demand of the Members of the Obligated Group and at the cost and expense of the Members of the Obligated Group, shall execute proper instruments acknowledging satisfaction of and discharging the Master Indenture.

SUMMARY OF PORTIONS OF THE CONTINUING DISCLOSURE AGREEMENT

The following statements are brief summaries of certain provisions of the Continuing Disclosure Agreement. The statements do not purport to be complete, and reference is made to the Continuing Disclosure Agreement, copies of which are available for examination at the offices of the Obligated Group Representative, for a full statement thereof. Purpose of the Agreement The Continuing Disclosure Agreement is executed and delivered by the Corporation, BHRH and Regions Bank, with offices in Little Rock, Arkansas, as dissemination agent (the “Dissemination Agent”) for the benefit of the Beneficial Owners of the Series 2019 Bonds and in order to assist the Underwriters in complying with, and constitutes the written undertaking for the benefit of the Beneficial Owners of the Series 2019 Bonds required by, Securities and Exchange Commission Rule 15c2-12(b)(5). The Corporation, BHRH and the Dissemination Agent acknowledge that the Issuer has undertaken no responsibility with respect to reports, notices or disclosures provided or required under the Continuing Disclosure Agreement, and has no liability to any person, including any Beneficial Owner, with respect to any such reports, notices or disclosures. Definitions In addition to the definitions set forth in Appendix B to this Official Statement, the following capitalized terms shall have the following meanings when used under this caption “SUMMARY OF PORTIONS OF THE CONTINUING DISCLOSURE AGREEMENT.” “Affiliate” shall mean any corporation, partnership, joint venture, association, business trust, governmental unit or similar entity organized under the laws of the United States of America or any state thereof (i) which directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Corporation or BHRH; or (ii) a majority of the members of the governing body of which are the same as the Corporation or BHRH. For purposes of this definition, "control" means the power to direct the management and policies of an entity through the ownership of a majority of its voting securities or the right to designate or elect or approve and remove a majority of the members of its governing body (or, in the event that any corporate action of such governing body requires a super-majority vote, the number of members of such governing body constituting such super- majority of the members of such governing body), by contract or otherwise. "Annual Report" shall mean any Annual Report provided by the Obligated Group Representative on behalf of the Corporation and BHRH, as described hereinafter under the subheading “Provision of Annual Reports.” "Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or dispose of ownership of, any Series 2019 Bonds (including persons holding Series 2019 Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Series 2019 Bonds for federal income tax purposes. "Disclosure Representative" shall mean the Executive Vice President and Chief Financial Officer of the Obligated Group Representative or his or her designee, or such other person as the Obligated Group Representative shall designate in writing to the Trustee and the Dissemination Agent (if other than the Trustee) from time to time.

68 "Dissemination Agent" shall mean Regions Bank, with offices in Little Rock, Arkansas, acting in its capacity as Dissemination Agent under the Continuing Disclosure Agreement, or any successor Dissemination Agent designated in writing by the Obligated Group Representative and which has filed with the Issuer and the Trustee a written acceptance of such designation. "EMMA" shall mean the Electronic Municipal Market Access system as described in 1934 Act Release No. 59062 and maintained by the MSRB for purposes of the Rule. “Financial Obligation” shall mean a (A) debt obligation; (B) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (C) guarantee of obligations described in (A) or (B). “Fiscal Quarter” shall mean each three-month period of the Corporation’s Fiscal Year, currently ending on the last day of each March, June, September and December. “Fiscal Year” shall mean any period of twelve (12) consecutive months adopted by the Corporation and BHRH as their fiscal year for financial reporting purposes. The Corporation’s Fiscal Year presently ends on December 31 of each year. "Listed Events" shall mean any of the events listed hereinafter under the subheading “Reporting of Significant Events.” "MSRB" shall mean the Municipal Securities Rulemaking Board. “Quarterly Report” shall mean any Quarterly Report provided by the Obligated Group Representative pursuant to, and as described under the subheading “Provision of Quarterly Reports”. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Provision of Annual Reports The Obligated Group Representative shall, or shall cause the Dissemination Agent to, not later than 180 days after the end of each of the Corporation’s Fiscal Years (presently ending on December 31 in each year), commencing with the Fiscal Year ending December 31, 2019, provide to the MSRB, through its continuing disclosure service portal provided through EMMA at http://www.emma.msrb.org or any similar system acceptable to the Securities and Exchange Commission, an Annual Report which is consistent with the requirements of the Continuing Disclosure Agreement. The Annual Report shall be filed in electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB. Not later than fifteen (15) Business Days prior to said date, the Obligated Group Representative shall provide the Annual Report to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent). Annual Reports may be submitted as single documents or as separate documents comprising a package, and may cross-reference other information; provided that the annual financial statements of the Corporation may be submitted separately from the balance of the Annual Reports and later than the date set forth above for the filing of such Annual Reports if they are not available by that date. Content of Annual Reports The Corporation’s and BHRH’s Annual Report shall contain or include by reference the following: (1) The following general categories of financial information and operating data with respect to the Corporation and its Affiliates for the prior Fiscal Year: (a) For all of the hospitals then operated by the Corporation and/or its Affiliates (currently, BH-Little Rock, BH-Rehab, BH-North Little Rock, BH-Conway,

69 BH-Arkadelphia, BH-Extended Care, BH-Heber Springs, BH-Stuttgart, BH-HSC, BH- Fort Smith and BH-Van Buren), the following information on a combined basis: (i) Licensed bed numbers; (ii) Beds in service; (iii) Occupancy percentages; (iv) Number of admissions; (v) Patient days; (vi) Average length of stay; (vii) Average daily census; (viii) Observation cases; (ix) Outpatient visits; (x) Emergency room visits; (xi) Inpatient surgical procedures; (xii) Outpatient surgical procedures; and (xiii) Case mix index. (b) Information regarding total nursing staff employees (FTEs) at each of the hospitals then operated by the Corporation and/or its Affiliates; (c) Information regarding total employees (FTEs) of the Corporation and its Affiliates by area of service; (d) Information regarding discharging physicians at BH-Little Rock and BH- North Little Rock and specific information regarding any physician accounting for 5% or more of total discharges at BH-Little Rock and BH-North Little Rock; (e) Information regarding discharging physicians at BH–Fort Smith and BH- Van Buren and specific information regarding any physician accounting for 5% or more of total discharges at BH-Fort Smith and BH-Van Buren; and (f) Information regarding the sources of patient revenue for the Corporation and its Affiliates. (2) The Corporation’s audited consolidated financial statements for the prior Fiscal Year, prepared in accordance with GAAP as promulgated by the Financial Accounting Standards Board ("FASB"). If the Corporation’s audited financial statements are not available by the time its Annual Report is required to be filed, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement for the Series 2019 Bonds, and the audited financial statements shall be filed in the same manner as such Annual Report when they become available. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues with respect to which the Corporation and BHRH are "obligated persons" (as defined by the Rule), which are available on the MSRB internet website or which have been submitted to the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Obligated Group Representative shall clearly identify each such other document so included by reference. Provision of Quarterly Reports The Obligated Group Representative shall, or shall cause the Dissemination Agent to, not later than 75 days after the end of each of the Corporation’s Fiscal Quarters, commencing with Fiscal Quarter ended December 31, 2019, provide to the MSRB, through its continuing disclosure service portal provided through EMMA at http://www.emma.msrb.org, or any other similar system that is acceptable to

70 the Securities and Exchange Commission, a Quarterly Report which is consistent with the requirements of the Continuing Disclosure Agreement. Quarterly Reports shall be filed in electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB. Not later than fifteen (15) Business Days prior to the dates specified above for providing the Quarterly Reports to the MSRB, the Obligated Group Representative shall provide the Quarterly Report to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent). Quarterly Reports may be submitted as a single document or as separate documents comprising a package, and may include by reference other information. Content of Quarterly Reports The Corporation’s and BHRH's Quarterly Report shall contain or include by reference the Corporation’s unaudited financial statements for the prior Fiscal Quarter, prepared in accordance with GAAP as promulgated by the Financial Accounting Standards Board ("FASB"). Said unaudited financial statements may be included by specific reference to other documents, including official statements of debt issues with respect to which the Corporation or BHRH is an “obligated person” (as defined in the Rule), which are available to the public on the MSRB internet website or which have been submitted to the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Obligated Group Representative shall clearly identify each such other document so incorporated by reference. Reporting of Significant Events (a) The Obligated Group Representative shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series 2019 Bonds: (i) Principal and interest payment delinquencies; (ii) Non-payment related defaults, if material; (iii) Unscheduled draws on debt service reserves reflecting financial difficulties; (iv) Unscheduled draws on credit enhancements reflecting financial difficulties; (v) Substitution of credit or liquidity providers, or their failure to perform; (vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax-exempt status of the security; (vii) Modification to rights of security holders, if material; (viii) Bond calls (excluding mandatory sinking fund redemptions), if material; (ix) Defeasances and tender offers; (x) Release, substitution, or sale of property securing repayment of the securities, if material; (xi) Rating changes; (xii) Bankruptcy, insolvency, receivership or similar event of the obligated person; (xiii) The consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;

71 (xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if material; (xv) Incurrence of a Financial Obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the obligated person, any of which affect security holders, if material; and (xvi) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial difficulties. (b) After the occurrence of a Listed Event (excluding an event described in (a)(viii) above), the Obligated Group Representative shall promptly notify the Dissemination Agent (if other than the Obligated Group Representative) in writing. Such notice shall instruct the Dissemination Agent to report the occurrence. (c) After the occurrence of a Listed Event (excluding an event described in (a)(viii) above), the Obligated Group Representative shall file (or shall cause the Dissemination Agent to file), in a timely manner not in excess of ten (10) Business Days after the occurrence of such Listed Event, a notice of such occurrence with the MSRB, through its continuing disclosure service portal provided through EMMA at http://www.msrb.emma.org or any other similar system that is acceptable to the Securities and Exchange Commission, with a copy to the Trustee (if the Trustee is not the Dissemination Agent). Each notice of the occurrence of a Listed Event shall be captioned "Notice of Listed Event" and shall be filed in electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB. In the event of a Listed Event described in (a)(viii) above, the Trustee shall make the filing in compliance with the Indenture and notice thereof need not be given any earlier than the notice for the underlying event is given to registered owners of affected Series 2019 Bonds pursuant to the terms of the Indenture. Termination of Reporting Obligation The obligations of the Corporation and BHRH under the Continuing Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Series 2019 Bonds. If the Corporation’s or BHRH’s obligations under the Loan Agreement are assumed in full by some other entity, such entity shall be responsible for compliance with the Continuing Disclosure Agreement in the same manner as if it were the Corporation or BHRH, as applicable, and the Corporation and/or BHRH shall have no further responsibility thereunder. If such termination or substitution occurs prior to the final maturity of the Series 2019 Bonds, the Obligated Group Representative shall give notice of such termination or substitution in the same manner as for a Listed Event. Dissemination Agent The Obligated Group Representative may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Continuing Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. A Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Corporation or BHRH pursuant to the Continuing Disclosure Agreement and has no duty to review the contents thereof. If at any time there is not any other designated Dissemination Agent, the Obligated Group Representative shall be the Dissemination Agent. Amendment and Waiver Notwithstanding any other provision of the Continuing Disclosure Agreement, the Obligated Group Representative and the Dissemination Agent may amend the Continuing Disclosure Agreement

72 (and the Dissemination Agent shall agree to any amendment so requested by the Obligated Group Representative so long as it is not adverse or prejudicial to the Dissemination Agent), and any provision of the Continuing Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) If such amendment or waiver relates to the provisions requiring the filing of Annual Reports or Quarterly Reports by certain dates, the content of Annual Reports, Quarterly Reports or the Listed Events to be reported, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an "Obligated Person" (as defined in the Rule) with respect to the Series 2019 Bonds, or the type of business conducted; (b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Series 2019 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstance; and (c) The amendment or waiver either (i) is approved by the Holders of the Series 2019 Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of the Bondholders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Bondholders or the Beneficial Owners of the Series 2019 Bonds. In the event of any amendment or waiver of a provision of the Continuing Disclosure Agreement, the Obligated Group Representative shall describe such amendment or waiver in the next Annual Report of the Corporation and BHRH, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented with respect to the Corporation and/or BHRH. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event, and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Additional Information Nothing in the Continuing Disclosure Agreement shall be deemed to prevent the Corporation or BHRH from disseminating any other information, using the means of dissemination set forth in the Continuing Disclosure Agreement or any other means of communication, or including any other information in any Annual Report, Quarterly Report or notice of occurrence of a Listed Event, in addition to that which is required by the Continuing Disclosure Agreement. If the Corporation or BHRH chooses to include any information in any Annual Report, Quarterly Report or notice of occurrence of a Listed Event, in addition to that which is specifically required by the Continuing Disclosure Agreement, it shall have no obligation under the Continuing Disclosure Agreement to update such information or include it in any future Annual Report, Quarterly Report or notice of occurrence of a Listed Event. Default In the event of a failure of the Corporation, BHRH or the Dissemination Agent (if the Trustee is not the Dissemination Agent) to comply with any provision of the Continuing Disclosure Agreement, any Beneficial Owner or the Trustee may (and, at the request of the Bondholders of at least 25% aggregate principal amount of Outstanding Series 2019 Bonds, the Dissemination Agent shall), take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order,

73 to cause the Corporation, BHRH or the Dissemination Agent, as the case may be, to comply with its obligations under the Continuing Disclosure Agreement. In the event of any failure of the Dissemination Agent to comply with any provision of the Continuing Disclosure Agreement, the Obligated Group Representative or any Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Dissemination Agent to comply with its obligations under the Continuing Disclosure Agreement. A default under the Continuing Disclosure Agreement shall not be deemed an Event of Default under the Indenture or the Loan Agreement, and the sole remedy under the Continuing Disclosure Agreement in the event of any failure of the Corporation, BHRH or the Dissemination Agent to comply with the Continuing Disclosure Agreement shall be an action to compel performance. Without limiting the generality of the foregoing, neither the commencement nor the successful completion of an action to compel performance described under this caption shall entitle any person to attorneys’ fees, financial damages of any sort or any other relief other than an order or injunction compelling performance. Duties, Immunities and Liabilities of Trustee and Dissemination Agent The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in the Continuing Disclosure Agreement and the Corporation and BHRH agree, jointly and severally, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties under the Continuing Disclosure Agreement, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s or the Trustee’s gross negligence or willful misconduct. Such indemnification obligation of the Corporation and BHRH shall survive resignation or removal of the Dissemination Agent and payment of the Series 2019 Bonds. Compliance with Prior Undertakings The Corporation is a party to various prior undertakings pursuant to the Rule requiring that it file certain financial and operating information and financial statements and notice of the occurrence of certain listed events with the MSRB through its EMMA system. During the past five years, the Corporation has identified certain instances in which filings were not made as required by such undertakings. A listing of such instances, which may not be exhaustive, is as follows: (1) a late filing (7 days late) was made of the required Quarterly Report of the Corporation for the quarter ended March 31, 2017, and (2) a late filing (74 days late) was made of a July 31, 2019 ratings downgrade of the Series 2014 Bonds and Series 2015A Bonds from “A+” to “A.” The Corporation makes no representation as to the materiality of the instances set forth above. The Corporation has undertaken steps to ensure future compliance with its continuing disclosure responsibilities. BHRH is not a party to any prior undertaking pursuant to the Rule.

UNDERWRITING

Under a bond purchase agreement entered into by and among the Issuer, the Obligated Group Representative and Crews & Associates, Inc., Stephens Inc. and Raymond James & Associates, Inc. (the “Underwriters”), the Series 2019 Bonds are being purchased at a total purchase price of $______(which represents the stated principal amount of the Series 2019 Bonds [plus][less] a net original offering [premium][discount] of $______and less an underwriting discount of $______). The bond purchase agreement provides that the Underwriters will purchase all of the Series 2019 Bonds if any are purchased. The obligation of the Underwriters to accept delivery of the Series 2019 Bonds is subject to various conditions contained in the bond purchase agreement, including the absence of pending or

74 threatened litigation questioning the validity of the Series 2019 Bonds or any proceedings in connection with the issuance thereof, and the absence of material adverse changes in the financial or business condition of the Obligated Group. The Underwriters intend to offer the Series 2019 Bonds to the public initially at the offering prices as set forth on the inside cover page of this Official Statement, which offering prices (or bond yields establishing such offering prices) may subsequently change without any requirement of prior notice. The Underwriters reserve the right to join with dealers and other underwriters in offering the Series 2019 Bonds to the public, and may offer the Series 2019 Bonds to such dealers and other underwriters at a price below the public offering price. The Obligated Group Representative has agreed to indemnify the Underwriters against certain civil liabilities in connection with the offering and sale of the Series 2019 Bonds, including certain liabilities under federal securities laws. Certain of the Underwriters and their affiliates together comprise full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. Such activities may involve or relate to assets, securities and/or instruments of the Issuer and/or the Obligated Group (whether directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with (or that are otherwise involved with transactions by) the Issuer and/or the Obligated Group. The Underwriters and their affiliates may have, from time to time, engaged, and may in the future engage, in transactions with, and performed and may in the future perform, various investment banking services for the Issuer and/or the Obligated Group for which they received or will receive customary fees and expenses. Under certain circumstances, the Underwriters and their affiliates may have certain creditor and/or other rights against the Issuer and/or the Obligated Group and any affiliates thereof in connection with such transactions and/or services. In addition, the Underwriters and their affiliates may currently have and may in the future have investment and commercial banking, trust and other relationships with parties that may relate to assets of, or be involved in the issuance of securities and/or instruments by, the Issuer and/or the Obligated Group and any affiliates thereof. The Underwriters and their affiliates also may communicate independent investment recommendations, market advice or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and at any time may hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments. Jim Jones, a Principal in Crews & Associates, Inc., one of the Underwriters, is a member of the Board of Trustees of the Corporation.

TAX MATTERS Federal Tax Exemption In the opinion of Friday, Eldredge & Clark, LLP, Bond Counsel, under existing law, the interest on the Series 2019 Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes. Moreover, such interest is not an item of tax preference for purposes of the federal alternative minimum tax. The opinions set forth in this paragraph are subject to the condition that the Issuer, the Corporation, and BHRH comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2019 Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The Issuer, the Corporation, and BHRH have covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on

75 the Series 2019 Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2019 Bonds. Bond Counsel expresses no opinion regarding other federal tax consequences arising with respect to the Series 2019 Bonds. Purchasers of the Series 2019 Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States); property and casualty insurance companies, banks, thrifts or other financial institutions; certain recipients of Social Security or Railroad Retirement benefits; taxpayers otherwise entitled to claim the earned income tax credit; and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax- exempt obligations, should consult their tax advisors concerning their tax consequences of purchasing and holding the Series 2019 Bonds. As shown on the inside front cover page of this Official Statement, certain of the Series 2019 Bonds are being sold at a premium (collectively, the "Premium Bonds"). An amount equal to the excess of the issue price of a Premium Bond over its stated redemption price at maturity constitutes premium on such Premium Bond. An initial purchaser of a Premium Bond must amortize any premium over such Premium Bond’s term using constant yield principles, based on the purchaser’s yield to maturity (or, in the case of Premium Bonds callable prior to their maturity, by amortizing the premium to the call date, based on the purchaser’s yield to the call date and giving effect to the call premium). As premium is amortized, the amount of the amortization offsets a corresponding amount of interest for the period and the purchaser’s basis in such Premium Bond is reduced by a corresponding amount resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Premium Bond prior to its maturity. Even though the purchaser’s basis may be reduced, no federal income tax deduction is allowed. Purchasers of the Premium Bonds should consult with their tax advisors with respect to the determination and treatment of amortizable premium for federal income tax purposes and with respect to the state and local tax consequences of owning a Premium Bond. As shown on the inside front cover page of this Official Statement, certain of the Series 2019 Bonds are being sold at an original issue discount (collectively, the "Discount Bonds"). The difference between the initial public offering prices, as set forth on the inside cover page, of such Discount Bonds and their stated amounts to be paid at maturity constitutes original issue discount treated as interest which is excluded from gross income for federal income tax purposes, as described above. The amount of original issue discount which is treated as having accrued with respect to such Discount Bond is added to the cost basis of the owner in determining, for federal income tax purposes, gain or loss upon disposition of such Discount Bond (including its sale, redemption, or payment at maturity). Amounts received upon disposition of such Discount Bond which are attributable to accrued original issue discount will be treated as tax-exempt interest, rather than as taxable gain, for federal income tax purposes. Original issue discount is treated as compounding semiannually, at a rate determined by reference to the yield to maturity of each individual Discount Bond, on days which are determined by reference to the maturity date of such Discount Bond. The amount treated as original issue discount on such Discount Bond for a particular semiannual accrual period is equal to the product of (i) the yield of maturity for such Discount Bond (determined by compounding at the close of each accrual period) and (ii) the amount which would have been the tax basis of such Discount Bond at the beginning of the particular accrual period if held by the original purchaser, less the amount of any interest payable for such Discount Bond during the accrual period. The tax basis is determined by adding to the initial public offering price on such Discount Bond the sum of the amounts which have been treated as original issue discount for such purposes during all prior periods. If such Discount Bond is sold between semiannual

76 compounding dates, original issue discount which would have been accrued for that semiannual compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period. Owners of the Discount Bonds should consult their tax advisors with respect to the determination and treatment of original issue discount accrued as of any date and with respect to the state and local tax consequences of owning a Discount Bond. Current or future legislative proposals, if enacted into law, may cause interest on the Series 2019 Bonds to be subject, directly or indirectly, to federal income taxation or otherwise prevent holders of the Series 2019 Bonds from realizing the full current benefit of the tax status of such interest. On December 20, 2017, Congress passed The Tax Cuts and Jobs Act (the “Tax Legislation”), which, for tax years beginning after December 31, 2017, among other things, significantly changes the income tax rates for individuals and corporations, modifies the current provisions relative to the federal alternative minimum tax on individuals and eliminates the federal alternative minimum tax for corporations. The President signed the Tax Legislation on December 22, 2017. The Tax Legislation or the introduction or enactment of any such legislative proposals may also affect the market price for, or marketability of, the Series 2019 Bonds. Prospective purchasers of the Series 2019 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. It is not an event of default on the Series 2019 Bonds if legislation is enacted reducing or eliminating the exclusion of interest on state and local government bonds from gross income for federal or state income tax purposes. State Taxes Bond Counsel is of the opinion that, under existing law, the Series 2019 Bonds and interest thereon are exempt from all state, county, and municipal taxes in the State of Arkansas and that the Series 2019 Bonds are further exempt from property taxes in the State of Arkansas.

RATING

S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC (“S&P”), has assigned the municipal bond rating of “A” (negative outlook) to the Series 2019 Bonds. The rating reflects only the view of the rating agency. Any explanation as to the significance of the above rating may be obtained only from the rating agency furnishing the same. No application was made to any other rating agency for the purpose of obtaining additional ratings on the Series 2019 Bonds. The Obligated Group Representative has furnished to the above rating agency certain information and materials, some of which have not been included in this Official Statement. Generally, rating agencies base their ratings on such information and materials and investigations, studies and assumptions furnished to and obtained and made by the rating agencies. There is no assurance that a rating will remain for any given period of time or that it may not be lowered or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Neither the Issuer, the Obligated Group Representative nor the Underwriters have undertaken any responsibility to bring to the attention of the holders of the Series 2019 Bonds any proposed revision or withdrawal of a rating or to oppose any such revision or withdrawal. Any downward change in or withdrawal of a rating may have an adverse effect on the market price of the Series 2019 Bonds.

77 LEGAL MATTERS

Legal matters incident to the authorization and issuance of the Series 2019 Bonds and with regard to the tax-exempt status thereof are subject to the unqualified approving opinion of Friday, Eldredge & Clark, LLP, Little Rock, Arkansas, Bond Counsel, whose approving opinion will be delivered with the Series 2019 Bonds, and the form of which is attached as Appendix E to this Official Statement. Certain matters will be passed upon for the Underwriters by Kutak Rock LLP, Little Rock Arkansas, counsel to the Underwriters, and for Corporation by its counsel, Quattlebaum, Grooms & Tull PLLC, Little Rock, Arkansas.

LITIGATION The Issuer There is not now pending nor to the knowledge of the Issuer, threatened, any litigation restraining or enjoining the issuance or delivery of the Series 2019 Bonds or questioning or affecting the validity of the Series 2019 Bonds or the proceedings or authority under which they are to be issued. Neither the creation, organization or existence, nor the title of the present members and officers of the Issuer to their respective offices is being contested. There is no litigation pending or, to the knowledge of the Issuer, threatened which in any manner questions the right of the Issuer to enter into the Loan Agreement or the Indenture or to secure the Series 2019 Bonds in the manner provided in the Indenture. The Corporation The Corporation and BHRH are parties to various litigation and audit matters described under the heading “Litigation” in Appendix A attached to this Official Statement.

The Corporation and BHRH have no litigation or proceedings pending, or, to their knowledge, threatened against them which may not be adequately covered by the Corporation’s and BHRH’s reserves and insurance policies, or which, in the opinion of the Corporation, BHRH and their defense counsel, could have a material adverse effect on the Corporation’s or BHRH’s business or financial position.

FINANCIAL ADVISOR

Ponder & Co. (“Ponder”) has served as financial advisor to the Obligated Group for purposes of assisting with the development and implementation of a bond structure in connection with the Series 2019 Bonds. Ponder has not been engaged by the Obligated Group to compile, create, or interpret any information in this Official Statement relating to the Obligated Group, including without limitation any of the Obligated Group’s financial and operating data, whether historical or projected. Any information contained in this Official Statement concerning the Obligated Group has not been independently verified by Ponder and inclusion of such information is not, and should not be construed as, a representation by Ponder as to its accuracy or completeness or otherwise. Ponder is not a public accounting firm and has not been engaged by the Obligated Group to review or audit any information in this Official Statement in accordance with auditing standards generally accepted in the United States.

INDEPENDENT AUDITORS

Set forth in Appendix C to this Official Statement are the consolidated financial statements of the Corporation and its subsidiaries as of and for the fiscal years ended December 31, 2018 and 2017, which consolidated financial statements have been audited by BKD, LLP, independent certified public accountants, as stated in their Independent Auditor’s Report appearing in Appendix C. The notes set forth in Appendix C are an integral part of such consolidated financial statements, and the statements and notes should be read in their entirety. The consolidated financial statements of the Corporation and its

78 subsidiaries for the eight-month periods ended August 31, 2019 and August 31, 2018, in unaudited form, are set forth in Appendix D hereto.

MISCELLANEOUS

The Obligated Group Representative has furnished the information in this Official Statement relating to the Obligated Group and its operations. The Underwriters have furnished the information in this Official Statement with respect to the public offering prices of the Series 2019 Bonds and the information under the caption “UNDERWRITING.” Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. The information contained in this Official Statement has been taken from sources considered to be reliable, but is not guaranteed. To the best of the knowledge of the undersigned this Official Statement does not include any untrue statement of a material fact; nor does it omit the statement of any material fact required to be stated herein, or necessary to make the statements herein, in light of the circumstances under which they were made, not misleading. The summaries in this Official Statement of certain provisions of the Indenture, the Loan Agreement, the Master Indenture, the Supplement, Obligation No. 9, the Series 2019 Bonds, the Continuing Disclosure Agreement and other documents do not purport to be complete, and reference is made to such documents for a complete statement of their provisions.

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79 The Issuer and the Members of the Obligated Group have authorized and approved the execution and delivery of this Official Statement and its use by the Underwriters in connection with the offering and sale of the Series 2019 Bonds. ARKANSAS DEVELOPMENT FINANCE AUTHORITY

By: President

APPROVED BY:

BAPTIST HEALTH

By: President

BAPTIST HEALTH REGIONAL HOSPITALS

By: President

80 APPENDIX A

BAPTIST HEALTH AND CERTAIN RELATED ENTITIES

Except where noted, the information contained in this Appendix A has been provided by Baptist Health.

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A-2 APPENDIX A

BAPTIST HEALTH AND CERTAIN RELATED ENTITIES

Except where noted, the information contained in this Appendix A has been provided by Baptist Health.

A-1 4834-5782-6476.3 TABLE OF CONTENTS

Page No. Introduction...... A-3 Governance ...... A-9 Administration ...... A-11 Hospitals – Central Arkansas...... A-14 Hospitals – West Arkansas ...... A-20 Other Controlled Affiliated Organizations ...... A-21 Non-Controlled Affiliated Organizations ...... A-24 Service Areas ...... A-25 Historic Utilization...... A-45 Sources of Patient Revenue ...... A-45 Professional Staff and Employees ...... A-46 Financial Information...... A-52 Management’s Discussion and Analysis of Financial Performance...... A-55 Capitalization...... A-56 Investments and Liquidity...... A-57 Long-Term Debt and Hedge Agreement ...... A-57 Insurance...... A-58 Capital Project Plans...... A-58 Information Technology ...... A-59 Managed Care ...... A-59 System Vision and Strategic Initiatives ...... A-61 Corporate Compliance ...... A-63 Educational Affiliations...... A-64 Quality, Risk Management and Patient Safety Overview ...... A-64 Litigation...... A-66

A-2 4834-5782-6476.3 Introduction

This Appendix A contains information related to the business, affairs and financial condition of Baptist Health, an Arkansas nonprofit corporation (“Baptist Health”), and certain of its affiliated entities (collectively, the “System”). Baptist Health is a not-for-profit charitable membership corporation founded in 1921 and headquartered in the City of Little Rock, Arkansas. The System is the largest health care delivery system in Arkansas and provides a full continuum of health care delivery and support services to Central and Western Arkansas through its ownership and/or control of nine acute care hospitals, a rehabilitation hospital, a long-term acute care hospital, medical practices, an accredited nursing school, outpatient care facilities, a charitable foundation, and other healthcare related facilities. Nine of its hospitals (seven acute care, one rehabilitation, and one long-term acute care hospital) are located within Baptist Health’s Central Arkansas Primary Service Area which includes Pulaski County (home of the City of Little Rock) and 15 surrounding counties (with a population of over one million for calendar year 2019). Two of Baptist Health’s acute care hospitals were acquired in November 2018 and serve residents of Baptist Health’s West Arkansas Primary Service Area which includes Sebastian and Crawford counties in Arkansas and Le Flore and Sequoyah counties in Oklahoma (with a population of over 284,000 for calendar year 2019). Sebastian County is home to the City of Fort Smith, Arkansas which is located approximately 150 miles west/northwest of the City of Little Rock. Prior to the acquisitions in November 2018, Baptist Health did not have a meaningful presence in the West Arkansas Primary Service Area and did not recognize it as a separate or distinct market. Baptist Health formed and incorporated Baptist Health Regional Hospitals on April 18, 2018 as a wholly owned, nonprofit charitable affiliate and member of the Obligated Group for the purpose of acquiring and operating the two acute care hospitals located in the West Arkansas Primary Service Area. Baptist Health and BHRH are each organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), exempt from the payment of federal income taxes under Section 501(a) of the Code, and Baptist Health and BHRH have received letters from the Internal Revenue Service confirming such status.

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A-3 4834-5782-6476.3 The following map of the State of Arkansas indicates the general location of the System’s hospitals within its Central Arkansas and West Arkansas Primary and Secondary Service Areas.

A-4 4834-5782-6476.3 The System provides its healthcare services through various divisions within Baptist Health and separate affiliated companies. The following chart indicates the current operating and ownership structure of Baptist Health.

A-5 4834-5782-6476.3 Baptist Health presently operates eleven hospitals as divisions within Baptist Health or as wholly owned subsidiaries. As of September 1, 2019, Baptist Health operated a total of 2,146 licensed inpatient beds. Each of these inpatient hospitals is described in greater detail within the sections entitled “Hospitals – Central Arkansas” and “Hospitals – West Arkansas” within this Appendix A. The following table provides a general overview and licensed bed count of Baptist Health’s eleven inpatient hospitals. Operating Division/Subsidiary Description

Baptist Health Medical Center – Little Rock(2) 851-bed general acute care hospital Division of Baptist Health Little Rock, Arkansas

Baptist Health Medical Center – North Little 202-bed general acute care hospital Rock(2) 23-bed rehabilitation hospital Division of Baptist Health North Little Rock, Arkansas

Baptist Health Rehabilitation Institute(2) 120-bed rehabilitation hospital Division of Baptist Health Little Rock, Arkansas

Baptist Health Medical Center – Arkadelphia(1) (2) 25-bed certified critical access hospital Division of Baptist Health Arkadelphia, Arkansas

Baptist Health Medical Center – Heber Springs(2) 25-bed certified critical access hospital Division of Baptist Health Heber Springs, Arkansas

Baptist Health Hospitals, Inc. d/b/a 49-bed general acute care hospital Baptist Health Medical Center – Stuttgart (1) Wholly owned not-for-profit corporation Stuttgart, Arkansas

Baptist Health Extended Care Hospital – Little 73-bed long-term acute care hospital Rock Wholly owned not-for-profit corporation Little Rock, Arkansas

Baptist Health Medical Center – Hot Spring 72-bed acute care hospital County(1) (2) Division of Baptist Health Malvern, Arkansas

Conway Community Services d/b/a 111-bed general acute care hospital Baptist Health Medical Center – Conway Wholly owned not-for-profit corporation Conway, Arkansas

A-6 4834-5782-6476.3 Baptist Health Regional Hospitals d/b/a 492-bed acute care hospital Baptist Health – Fort Smith(2) Wholly owned not-for-profit corporation Fort Smith, Arkansas

Baptist Health Regional Hospitals d/b/a 103-bed acute care hospital Baptist Health – Van Buren(1) (2) Wholly owned not-for-profit corporation Van Buren, Arkansas ______(1) Operates acute care facility through lease or sub-lease agreement (2) Operated by an Obligated Group member

Baptist Health provides additional healthcare related services through a variety of controlled affiliated organizations. Certain of these controlled affiliated organizations are described in greater detail within the “Controlled Affiliated Organizations” section of this Appendix A. The following table provides a general overview of the significant controlled affiliated organizations of Baptist Health. Organization Description

Parkway Village, Inc. Retirement center and provider of related health care services Wholly owned not-for-profit corporation Little Rock, Arkansas

Parkway Health Center, Inc. Nursing home and provider of related health care services Wholly owned not-for-profit corporation Little Rock, Arkansas

Arkansas Health Group Physician services Wholly owned not-for-profit corporation Locations throughout Baptist Health’s Central service area

Complete Health with PACE All-inclusive care for the elderly Not-for-profit corporation (60% owned by Baptist Health) Little Rock, Arkansas

Baptist Health Foundation Conducts fund-raising activities for the System Wholly owned not-for-profit corporation Little Rock, Arkansas

Multi-Management Services, Inc. Diversified holding company Wholly owned for-profit corporation Little Rock, Arkansas

A-7 4834-5782-6476.3 BH Physician Partners, LLC Clinical integration company Wholly-owned single member limited liability company Little Rock, Arkansas

OrthoArkansas Surgery Center, LLC Freestanding ambulatory surgery center For-profit limited liability corporation (51% owned by Baptist Health) Little Rock, Arkansas

Diamond Risk Insurance, LLC Captive insurance company Wholly-owned single member limited liability company Little Rock, Arkansas

Baptist Health Services Physician services Wholly owned not-for-profit corporation Locations throughout Baptist Health’s West Arkansas Primary Service Area

Additionally, Baptist Health has a non-controlling interest in various other organizations, including a 50% interest in Springhill Surgery Center, LLC, and a 50% interest in A2 ACO, LLC, an Arkansas limited liability company, which is a value-based health care partnership with University of Arkansas for Medical Sciences. Multi-Management Services, Inc. has a 50% non-controlling interest in Surgical Pavilion, LLC, a 50% interest in Baptist Medical System HMO, Inc., a 50% interest in Baptist Urgent Team JV, LLC, a 59.72% interest in Autumn Road, LLC, and a 65% interest in Two Financial Centre Holding Company, LLC, and numerous other interests, including a durable medical equipment company, outpatient imaging facilities, a clinic management company, a hotel and various real estate holdings. THE OBLIGATED GROUP WILL BE RESPONSIBLE FOR PAYING DEBT SERVICE ON THE SERIES 2019 BONDS. BAPTIST HEALTH AND BAPTIST HEALTH REGIONAL HOSPITALS ARE CURRENTLY THE ONLY MEMBERS OF THE OBLIGATED GROUP.

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A-8 4834-5782-6476.3 The following table is a summary of the Operating Income (Loss) and Excess (Deficiency) of Revenues Over Expenses for the Obligated Group and the Other Entities of Baptist Health for the three fiscal years ended December 31, 2018, and for the eight months ended August 31, 2018 and August 31, 2019. Information for the summary was derived from the audited and the unaudited consolidated financial statements of Baptist Health. The following table should be read in conjunction with the financial information provided beginning on Page 52 in this Appendix A and in Appendix C and D to this Preliminary Official Statement.

(Dollars in Thousands) Eight Months Ending Fiscal Year Ending (Unaudited) 12/31/2016 12/31/2017 12/31/2018 8/31/2018 8/31/2019 Operating Income (Loss) Obligated group $ 16,510 $ 7,473 $ 5,564 $ 7,261 $ 23,061 Other entities (25,744) (37,525) (26,442) (18,601) (21,146) Total $ (9,234) $(30,052) $(20,878) $(11,340) $ 1,915

Excess (Deficiency) of Revenues Over Expenses Obligated group $ 40,792 $ 52,170 $(18,123) $ 18,977 $ 60,257 Other entities (23,231) (29,569) (26,956) (16,537) (13,761) Total $ 17,561 $ 22,601 $(45,079) $ 2,440 $ 46,496

For the eight months ending August 31, 2019 (unaudited), the Obligated Group accounted for 76% of the System’s consolidated total operating revenue.

Governance

Baptist Health presently has 57 members, all of whom are required by the Constitution and By-Laws of Baptist Health to be active members of a Baptist church. Eighty percent (80%) of the members must be active members of a Baptist Church in Arkansas that is affiliated with the Arkansas Baptist State Convention. The members of Baptist Health meet annually, receive a report from the administrative staff of Baptist Health and its Board of Trustees (the “Board”), and elect members of the Board. The Constitution and By-Laws of Baptist Health provide that its business and affairs shall be conducted solely by the Board, comprised of between fifteen and twenty-one members. Each Board member is entitled to one vote. Trustees are elected for staggered three-year terms. They may serve two consecutive terms then must be off the Board a year before becoming eligible for reelection. The Board is currently composed of eighteen members. The Board meets quarterly.

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A-9 4834-5782-6476.3 The current members of the Board, the date of expiration of their terms, and their occupations are as follows: Name Term Expiration Occupation Virgil Miller (Chairman) (1) 12/31/2020 Banker Judy Simmons Henry (Vice Chairman) (1) 12/31/2019 Attorney Dr. Glen Jones (Secretary) 12/31/2021 Education Barbara Graves 12/31/2019 Business Owner (Retired) Herren Hickingbotham (1) 12/31/2021 Investments Ed Choate (1) 12/31/2020 Businessman Rochelle Bartholomew 12/31/2020 Transportation Kent Lockwood 12/31/2021 Businessman Steven Booth 12/31/2021 CPA Teresa Howell (1) 12/31/2019 Attorney Jim Jones (2) 12/31/2021 Investments Dr. John McCallum 12/31/2019 Minister John McMoran (1) 12/31/2021 Architect Dr. Glenn Millner (1) 12/31/2020 Businessman Michael W. Pierce, Sr. 12/31/2020 Businessman Dr. Ken Shaddox 12/31/2021 Minister Michael Shelley 12/31/2023 Banker (Retired) Louis Lee 12/31/2021 Businessman

______(1) Member of Executive Committee (2) Principal in Crews & Associates, Inc., an Underwriter of the Series 2019 Bonds

The standing committees of the Board include an Executive Committee, Compliance/Audit Committee, Finance Committee, and Governance Committee. The Executive Committee meets monthly and the other standing committees meet on a quarterly basis or more often, if necessary.

Members of all committees are appointed by the Chairman of the Board for a term of one year or until their successors are named. Non-board members cannot be appointed to Board Committees, except for the Quality Committees, described below. The Executive Committee acts on behalf of the Board between meetings of the Board for all matters except as otherwise limited in the Constitution and Bylaws. The Administrative Compensation Committee, a subcommittee of the Executive Committee, also serves as the compensation committee for the President/CEO of Baptist Health and all other senior executives. The Finance Committee recommends finance related policy, reviews all financial aspects of the operation and carries out any other activity that may be assigned to it by the Board. It also recommends an independent audit firm to the Board and meets with the auditor after the completion of the audit to receive and review the independent auditor’s report. Additionally, the Finance Committee is responsible for establishing and administering Baptist Health’s investment program, including selection of an investment consultant who advises the Committee on asset allocations, risk tolerance and return requirements and evaluates the portfolio managers’ performance.

A-10 4834-5782-6476.3 Baptist Health also has Quality Committees in addition to the committees of the Board of Trustees. The Quality Committees consist of a mixture of Trustees, medical staff officers, and corporate officers whose numbers vary by committee. The current Quality Committees are Metro (serving the hospitals in Little Rock, North Little Rock, and Conway), Arkadelphia/Hot Spring County, Heber Springs, Stuttgart, and Fort Smith/Van Buren. The Quality Committees recommend quality and safety goals for the various Baptist Health facilities and oversee progress on such quality and safety goals. These committees also are responsible for physician credentialing and appointments to the professional staffs of the hospitals. Baptist Health Regional Hospitals is an Arkansas nonprofit corporation whose only member is Baptist Health. As the sole member, Baptist Health elects the directors of Baptist Health Regional Hospitals. The current board of directors of Baptist Health Regional Hospitals is composed of three individuals, all of whom are also officers of Baptist Health. Transactions with Members and Board. Baptist Health has from time to time invested certain of its funds with, and procured goods and services from, institutions and companies affiliated with or controlled by various members of Baptist Health and its Board. In the opinion of management of Baptist Health, the fees and compensation paid to such persons as a result of such business transactions, along with the other material terms and conditions of agreements or arrangements with such persons, have been no less favorable to Baptist Health than those which would have been obtained in transactions with unrelated or unaffiliated persons. Baptist Health intends to continue to engage in business transactions with its members and individuals on its Board, and their affiliated institutions and companies, where Baptist Health has a need for the goods or services offered by any such persons, institutions or companies, and where the terms and conditions of such transactions and the compensation paid therefor would be as favorable in all material respects as Baptist Health could obtain from unaffiliated or unrelated persons. All Board members complete a conflict of interest disclosure form each year. Administration The principal members of the administrative staff of Baptist Health, their educational qualifications, recent work history, professional affiliations and ages are as follows: Troy R. Wells (age 47), President and CEO - Mr. Wells was appointed President and CEO in June 2014 becoming only the third person to hold this title for Baptist Health since World War II. Mr. Wells joined Baptist Health in 2006 and since that time held many roles including Vice President of Clinical Services, Vice President of Practice Plus, Chief Executive Officer of Arkansas Health Group, and Senior Vice President of Administrative Services. Prior to working for Baptist Health, Mr. Wells was Chief Operating Officer for Newport Hospital and Clinic, Inc. in Newport, Arkansas. He received a Master of Healthcare Administration degree from the University of Arkansas at Little Rock in 1997 and a Bachelor of Science degree in Microbiology from the University of Arkansas at Fayetteville in 1994. Mr. Wells is a member of the American College of Healthcare Executives, the Arkansas Executives Forum, Young Presidents Organization, and Fifty for the Future. He serves as a director on multiple boards including Goodwill Industries of Arkansas, the American Hospital Association Healthcare Systems Council, the alumni chapter of the University of Arkansas at Little Rock, the Little Rock Regional Chamber of Commerce, Healthy Active Arkansas, and the Downtown Rotary Club of Little Rock.

A-11 4834-5782-6476.3 Doug Weeks (age 56), Executive Vice President, Strategy and Innovation - Mr. Weeks assumed his present duties on March 3, 2019. Previously, he served as Executive Vice President and Chief Operating Officer (2014-2019), Senior Vice President of Hospital Operations (2012- 2014), Senior Vice President and Administrator of Baptist Health Rehabilitation Institute and Baptist Health Medical Center-Little Rock (1998-2012), and as Assistant Vice President (1990- 1992), and Vice President of Patient Services (1992-1993) and Vice President and Administrator (1993-1998) for Baptist Health Rehabilitation Institute. He was an Administrative Resident with Baptist Health in 1989. Mr. Weeks received a Bachelor of Arts degree in General Studies from Louisiana Tech, Ruston, Louisiana, in 1986, and a Master of Hospital Administration degree from Tulane University, New Orleans, Louisiana, in 1988. He is a Diplomat of the American College of Healthcare Executives. Brent Beaulieu (age 44), Chief Financial Officer - Mr. Beaulieu joined Baptist Health in 2007 as Assistant Vice President of Finance and was promoted to Vice President, Financial Services in 2008, and then to Chief Financial Officer in 2019. Prior to working for Baptist Health, Mr. Beaulieu worked as a certified public accountant for BKD, LLP for nine years in Little Rock, Arkansas. He holds a Bachelor of Business Administration in Accounting from Harding University. Mr. Beaulieu is an active member of the Healthcare Financial Management Association and a past Arkansas Chapter President. He was a member of the AICPA Health Care Expert Panel from 2010-2013, and the HFMA Principles and Practices Board from 2013-2016. Dr. Eddie Phillips (age 70), Senior Vice President and Chief Medical Officer - Dr. Phillips has been Chief Medical Officer for Baptist Health since July 2013. Prior to that, Dr. Phillips was in the private practice of obstetrics and gynecology at Baptist Health Medical Center - Little Rock for 33 years. He received his MD degree from the University of Arkansas for Medical Sciences in 1975. Dr. Phillips is a fellow of the American College of Obstetricians and Gynecologists. Harrison M. Dean (age 65), Regional President – Western Arkansas - Mr. Dean oversees Baptist Health’s hospitals in Fort Smith and Van Buren as well as the approximate 40 Physician Clinics in the region, and has responsibilities to align the region’s operations with Baptist Health resources. He previously served as Senior Vice President and Administrator of Baptist Health Medical Center – North Little Rock for over 30 years. During his tenure at North Little Rock, Mr. Dean also assumed system-wide responsibility across Baptist Health for the four (4) Baptist Health Rural Hospital operations. His involvement and leadership was instrumental in the construction, opening and operationalizing of Baptist Health Medical Center – Conway, which opened in 2016. Prior to joining Baptist Health, Mr. Dean was Assistant Administrator of Magnolia Hospital in Corinth, Mississippi. He received a Master of Healthcare Administration degree from the University of Mississippi and a Bachelor of Science degree in Management from Jacksonville (Alabama) State University. Mr. Dean is a fellow in the American College of Healthcare Executives. Duane Erwin (age 71), Chief of Hospital Operations – Mr. Erwin was appointed March 1, 2019 as Chief of Hospital Operations, overseeing the operations of Baptist Health Medical Center - Little Rock, Baptist Health Medical Center - North Little Rock, Baptist Health Medical Center - Conway, Baptist Health Rehabilitation Institute, Baptist Health Extended Care, Baptist Health - Arkadelphia Hospital, Baptist Health - Hot Springs County Hospital, Baptist Health - Stuttgart Hospital, and Baptist Health - Heber Springs Hospital. Prior to joining Baptist Health,

A-12 4834-5782-6476.3 Mr. Erwin served as Interim Chief Executive Officer for Providence Hospital, Washington D.C. from October 2015 to August 2016; as Interim CEO for Columbus Regional Healthcare System, Whiteville, N.C. from May 2014 to January 2015; and as Chief Executive Officer, Aspirus, Inc., Wausau, Wisconsin, from January 2008 through July 2013. Mr. Erwin received a B.A, from Kent State University in 1970, and a Juris Doctor degree from Duquesne University School of Law in 1973. He is a Fellow of the American College of Healthcare Executives. Corporate Operations Financial Services. As the operator of a multi-facility healthcare system, Baptist Health provides many of its administrative functions through a central division called Financial Services. Financial Services includes accounting, supply chain management, fund development, decision support, revenue cycle services, information services, human resources and two preschools, most of which have one department and one location within Baptist Health while serving all eleven hospitals operated by Baptist Health. Financial Services also handles the risk management for all hospitals operated by Baptist Health, including property damage, earthquake, business interruption, boiler and machinery, blanket crime, data processing liability, public and druggists’ liability, automobiles, and professional liability insurance. The costs of Financial Services are allocated by function to the operating divisions based on statistics that relate to each division’s estimated consumption of resources. Corporate Planning. Baptist Health utilizes a traditional, formal process of defining long- range strategic goals (focuses) and annual continuous improvement objectives. Annual objectives serve as the basis for annual work plans and budgets for Baptist Health’s principal business units. This process draws extensively on data related to internal operating trends and external market dynamics in setting assumptions defining key business strategies. Through the integration of both the traditional and innovative planning disciplines, Baptist Health develops an annual strategic framework. This framework is built around long-range strategic focuses and defines key performance measures for the year against which performance is evaluated on a quarterly basis. These performance measures fall into four categories - Community, Quality, Service, and Value. Standards are set as performance benchmarks. Performance is evaluated on the basis of effectiveness in enhancing quality while successfully managing costs. Accreditation, Licenses and Memberships

Baptist Health Medical Center-Little Rock, Baptist Health Medical Center-North Little Rock, Baptist Health Medical Center -Conway, Baptist Health-Fort Smith and Baptist Health-Van Buren are accredited or "deemed status" by The Joint Commission (TJC). Baptist Health Medical Center-Stuttgart, Baptist Health Medical Center-Hot Spring County, Baptist Health Rehabilitation Institute-Little Rock & North Little Rock, and Baptist Health Extended Care Hospital complete the Centers for Medicare & Medicaid Services (“CMS”) Certification Survey process conducted by the Arkansas Dept. of Health. Baptist Health Medical Center-Arkadelphia, and Baptist Health Medical Center-Heber Springs dropped the deemed status TJC accreditation in March 2019 but were fully accredited by TJC in 2017 and are pending full recertification survey by CMS/Arkansas Dept. of Health beginning with fiscal year October 1, 2019-September 30, 2020.

A-13 4834-5782-6476.3 In addition to the CMS/Arkansas Dept. of Health certification, Baptist Health Rehabilitation Institute is also fully accredited by the Commission on Accreditation of Rehabilitation Facilities (CARF). All eleven hospital facilities operated by Baptist Health are licensed by the Arkansas State Department of Health and are approved for participation in the Medicare and Medicaid programs by the United States Department of Health and Human Services and the State. Baptist Health is a member of the American Hospital Association, and the Arkansas Hospital Association. Hospitals – Central Arkansas The following provides a description of the Baptist Health hospitals located in its Central Arkansas Primary Service Area. The term “Central Arkansas” is used within this section and other sections to reference the Central Arkansas Primary and Secondary Service Areas.

BH–Little Rock (operated by Obligated Group Member) Baptist Health Medical Center-Little Rock (“BH-Little Rock”) is an 851 licensed bed general acute care hospital located in Little Rock, Arkansas along Interstate 630 (I-630) an east- west connector within Little Rock, also known as the Wilbur D. Mills Freeway. BH-Little Rock is currently operating approximately 734 of its 851 licensed beds. The acute care facility consists of a fifteen-story building which contains approximately 1,600,000 square feet. The campus, which is located on 34.55 acres, has parking space available for approximately 4,800 vehicles. In 2008, Baptist Health purchased the 36.484-acre campus of a facility previously operated as Southwest Regional Medical Center located at the intersection of U.S. Interstates 430 and 30 in southwest Little Rock. This facility is currently operated as a separate campus of BH-Little Rock, providing psychiatric and miscellaneous other services. The southwest facility is comprised of a three-story building of approximately 125,000 square feet and a three-story brick medical office building containing approximately 40,000 square feet. Services available at BH-Little Rock include: anesthesiology, bariatric surgery, cardiology, clinical laboratory, dental and oral surgery, dermatology, diabetes treatment, enterstomal therapy, emergency medicine, family medicine, gastrointestinal laboratory, general surgery, gynecology, gynecologic oncology, hospice, intensive care, internal medicine, kidney dialysis, magnetic resonance imaging, maternal-fetal medicine, medflight, neonatology, neurology, neurosurgery, nuclear medicine, obstetrics, occupational therapy, ocular surgery, oncology, ophthalmology, orthopedic surgery, orthopedic trauma, palliative care, perinatology, otolaryngology, outpatient surgery, pathology, pediatrics, physical therapy, plastic and traumatic surgery, psychiatric treatment, pulmonary medicine, radiation therapy, radiology, respiratory therapy, speech pathology, surgical and medical care, thoracic and cardiovascular surgery, urology, and heart transplantation services. The active medical staff of BH-Little Rock is currently composed of approximately 493 physicians and dentists. Approximately 332 of such staff are board certified specialists. Other noteworthy facilities/operations adjacent to or near the BH–Little Rock campus include:  Hickingbotham Outpatient Center is a five-story facility containing more than 198,000 square feet and is the location for the Baptist Heart Center, the Baptist Breast Center, the Baptist

A-14 4834-5782-6476.3 Women’s Resource Center and a branch of the Central Arkansas Radiation Therapy Institute (“CARTI”). It also houses an outpatient surgery joint venture between Baptist Health and a large group of physicians, numerous physicians’ offices and additional space that is expected to be used for future programs.  Baptist Health MRI is adjacent to the Hickingbotham Outpatient Center and is a full-service imaging facility housing two high-field, high resolution conventional magnetic resonance imaging scanners. The staff at Baptist Health MRI includes specialized physicians and MRI board certified technologists.  Baptist Health Eye Center offers a broad spectrum of ophthalmic specialties as well as working relationships with physicians statewide. The 70,000 square foot building contains six operating suites, an in-house pathology lab, a state-of-the-art diagnostic and laser treatment center, education facilities and a full service low vision clinic.  Medical Towers 1 Building is a 12-story, 150,000 square foot medical office condominium building and patient care facility located on 12 acres adjacent to and connected with BH–Little Rock and BH-Rehab. Baptist Health owns 78,624 square feet of space in the Medical Towers 1 Building which it utilizes for administrative offices, rental space, a retail pharmacy and a coffee shop.  Medical Towers II Building is a 10-story, 112,000 square foot office condominium building which houses BH-Rehab on five of its floors. In addition, Baptist Health owns approximately 25,739 square feet of office space on various floors of the Medical Towers II Building which is leased or available for lease to physicians for use as their offices.  Baptist Health Support Center is a 120,000-square foot building of which approximately 90,000 square feet has been converted into an education center. The building houses the Baptist Health College Little Rock (described below) and includes classrooms, chemistry labs, skills labs, faculty offices, student union offices and a snack center. Also located in the building is the information systems department for Baptist Health, and Baptist Home Health Network. The remainder of the facility is shell space available for other support activities as needed. Baptist Health Support Center is located approximately four miles from the BH-Little Rock campus.  Baptist Health College Little Rock (“BHCLR”) provides nine programs in healthcare education and is primarily located in the Baptist Health Support Center. A private school for the preparation of registered nurses was established in 1920 and continues to operate today as BHCLR. The nursing program offers two tracks: a three- semester Associate of Applied Science (AAS) degree program and a two-semester accelerated AAS program for licensed practical nurses and certified emergency medical technicians. Upon successful completion of the program and passage of the NCLEX licensure examination, graduates become registered nurses. BHCLR affiliates with University of Arkansas-Pulaski Technical College in North Little Rock, Arkansas for the general education and science courses that provide the foundation for the nursing courses. The program is accredited through the Accrediting Commission for Education in Nursing and is approved by the Arkansas State Board of Nursing. Although the program is housed at the Baptist Health Support Center, students receive clinical education in the Central Arkansas hospitals operated by Baptist Health

A-15 4834-5782-6476.3 as well as many other clinical affiliates. Current enrollment in the registered nurses’ program is approximately 450 in the BHCLR-School of Nursing. Baptist Health employs approximately 50% of the over 240 annual program graduates. A second program in nursing education, the BHCLR - School of Practical Nursing, was established in 1964. The program is two semesters and enrolls students twice annually, in January and July. It is also housed in the Baptist Health Support Center. Current enrollment in the practical nurses’ program is approximately 100 students. The BHCLR - School of Practical Nursing is approved by the Arkansas State Board of Nursing and is the only practical nursing school in the State accredited by the Accrediting Commission for Education in Nursing. Baptist Health employs approximately 30% of the over 80 annual program graduates. In addition to its nursing education programs, BHCLR offers seven programs in the field of allied health: the Schools of Histotechnology, Medical Laboratory Science, Nuclear Medicine Technology, Occupational Therapy Assistant, Radiography, Sleep Technology and Surgical Technology. Total current enrollment in these schools is approximately 100. Baptist Health employs approximately 30% of the over 70 annual program graduates. All nine programs are accredited through the Accrediting Bureau of Health Education Schools and are certified through the Arkansas Department of Higher Education. For information regarding other Baptist Health educational affiliations refer to the “Educational Affiliations” section of this Appendix A.

BH–Rehab (operated by Obligated Group Member) Baptist Health Rehabilitation Institute (“BH-Rehab”) is a 120 licensed bed rehabilitation hospital located in the Medical Towers II building adjacent to and connected with BH-Little Rock. BH-Rehab is currently operating all of its 120 licensed beds. BH-Rehab (formerly Central Baptist Hospital and Arkansas Rehabilitation Institute) was established in 1974 when Baptist Health moved BH-Little Rock to its current location. The 120 licensed beds at BH-Rehab are designated as physical medicine and rehabilitation beds. BH-Rehab has programs for a variety of disabilities, including amputation, arthritis orthopedic trauma, traumatic brain injury, stroke, spinal cord injury, chronic obstructive pulmonary disease, ventricular assist device recovery and various neurological disorders. In addition, BH-Rehab operates 21 satellite outpatient therapy centers in the Central Arkansas area. Presently, there are approximately 14 active physicians on the professional staff of BH- Rehab. Approximately seven of these physicians are board certified specialists.

BH–North Little Rock (operated by Obligated Group Member) Baptist Health Medical Center-North Little Rock (“BH–North Little Rock”) is a 225 licensed bed general acute care which includes a 23 licensed bed rehabilitation hospital. Opened in 1999, BH-North Little Rock is located on approximately 157 acres at the intersection of U.S. Interstate 40 and U.S. Highway 67/167 in North Little Rock, Arkansas. BH-North Little Rock is currently operating 214 of its 225 licensed beds.

A-16 4834-5782-6476.3 BH-North Little Rock contains approximately 401,145 square feet consisting of an integrated hospital, outpatient services and physicians’ offices. A child care center and a freestanding medical office building housing an ambulatory surgery center and an outpatient radiation therapy center are located on the BH-North Little Rock campus. Also located on the campus are two hotels and a restaurant. Services available at BH-North Little Rock have been developed based upon estimates of future disease and utilization patterns for demographic groups unique to Central Arkansas and include: anesthesiology, breast surgery, cardiology, clinical laboratory, dental and oral surgery, dermatology, diabetes treatment, emergency medicine, family medicine, gastrointestinal laboratory, general surgery, gynecology, hospice, intensive care, internal medicine, kidney dialysis, magnetic resonance imaging, neurology, neurosurgery, nuclear medicine, occupational therapy, ocular surgery, oncology, orthopedic surgery, otolaryngology, outpatient surgery, pathology, pediatrics, physical therapy, plastic and traumatic surgery, pulmonary medicine, sleep medicine, radiation therapy, radiology, respiratory therapy, speech pathology, surgical and medical care, thoracic and cardiovascular surgery. Baptist Health and the University of Arkansas Medical Sciences (“UAMS”) created a graduate medical education program through Baptist Health-UAMS Medical Education Program LLC, which is a joint venture owned 50% by Baptist Health (and 50% by UAMS) and located on the BH-North Little Rock campus. The program provides accredited graduate medical education for residency training of physicians in a private, community-based hospital. The two programs currently in operation are Family Medicine and Internal Medicine. Each of these programs are 3 years in length with 12 positions open for each year. The programs each currently have a full complement of students in their first academic year of existence with a total of 24 residents (12 from each program). These two programs are expected to be at full capacity in July 2021 when each of the programs will have 36 residents for a total of 72. Additional programs under consideration include Transitional Year (required prior to starting certain residencies), Obstetrics and Gynecology, Psychiatry, and General Surgery. The active medical staff of BH-North Little Rock currently is composed of approximately 157 physicians. Approximately 96 of such staff are board certified specialists. Other noteworthy facilities/operations adjacent to or near the BH–North Little Rock campus include:  Springhill Medical Office Building (SMOB) is a 4-story medical office condominium building and patient care facility located on 8.3 acres adjacent to and connected with BH– North Little Rock. Baptist Health owns 80.61% of the 104,000 square foot building which it utilizes for the Springhill Surgery Center, a joint venture between Baptist Health (50%) and Springhill Surgery Center LLC (50%), NLR Baptist Health Breast Center, a branch of the Central Arkansas Radiation Therapy Institute (“CARTI”), Dialysis Center and numerous physician offices.  North Little Rock Medical Office Building is a 4-story medical office building and patient care facility located on 9.35 acres adjacent to and connected with BH–North Little Rock. Baptist Health owns 100% of the 150,000 square foot building. The General Medicine Education program administration is located on the 2nd floor with just over 30,000 square feet

A-17 4834-5782-6476.3 of office, class rooms and resident areas. Located on the 1st floor of the building is the Internal Medicine Residency Clinic. This clinic is 14,000 square feet with 27 patient exam rooms, procedure rooms, lab area and employee break room. The 3rd floor clinic is 12,000 square feet and houses the Family Medicine Resident Clinic. This clinic includes 31 patient exam rooms, 2 procedure rooms, doctor’s offices and lab area. The GME residency clinics will have up to 60 residents each when the program is fully staffed. This building also has space for a retail pharmacy and a coffee shop. BH–Conway Baptist Health Medical Center-Conway (“BH-Conway”) is the newest constructed facility in the System. The 111-licensed bed acute care community hospital opened in 2016 and reflects state of the art for medical equipment and technology. Situated on 37 acres located just off the Dave Ward exit on Interstate 40 in Conway, Arkansas, BH-Conway offers a convenient location in a facility that's both architecturally pleasing and a point of pride for the Faulkner County area. The BH Conway campus includes the 260,000 square foot hospital with 8 operating rooms, a full complement of outpatient and diagnostic services, a full service Emergency Department and a Women’s Center with 9 delivery rooms, 2 additional surgical suites and 15 mother- baby rooms. Adjacent to the hospital is a 4-story, 75,000 square foot Medical Office Building which houses clinics for cardiology, dermatology, neurology, neurosurgery, laboratory services, obstetrics and gynecology, orthopedics, pediatrics, and sleep health. BH-Conway services were developed to meet current community needs and the forecast estimates for future disease rates and health care requirements for Central Arkansas. This includes level 3 trauma status, emergency medicine, critical care/pulmonology, general surgery, ENT, orthopedic, spine, nephrology, urology, radiology, anesthesiology, cardiology medical/interventional diagnostic, hospitalist services, dialysis, oncology, gastroenterology, wound care, physical rehabilitation; women’s services including obstetrics, gynecology, podiatry, pediatrics, pain management and breast health. BH-Conway is equipped with advanced technical systems that create safer and more efficient health care. This includes smart beds and smart phones that constantly communicate patient information to nurses and coordinate with Baptist Health’s Epic electronic health record and the nurse call system. BH-Conway provides 24/7 electronic security surveillance for infant safety and every room's lighting and temperature are patient controlled. Additional specialized technology is used to enhance hand hygiene, infection prevention and medication safety. The active medical staff is currently comprised of 113 physicians of which 61 are board certified specialists; including all board certified and fellowship trained emergency medicine physicians in the Emergency Department. Other noteworthy facilities/operations adjacent to or near the BH–Conway campus include:  Conway Medical Office Building is a 4-story medical office building and patient care facility located on 7.01 acres adjacent to and connected with BH–Conway. Baptist Health owns 100% of the 75,000 square foot building. The building is utilized for physician office space.

A-18 4834-5782-6476.3 BH–Arkadelphia (operated by Obligated Group Member) Baptist Health Medical Center-Arkadelphia (“BH-Arkadelphia”), located on 15 acres in Arkadelphia, Arkansas, is a 25 licensed bed certified critical access facility, which is the only hospital in Clark County, Arkansas. Constructed in 1982, the present three-story structure housing BH-Arkadelphia includes facilities for administration, a kitchen, radiology, physical therapy, respiratory therapy, sleep lab, pharmacy, laboratory, surgery/obstetrics, emergency medicine, admissions and nursing. The active medical staff of BH-Arkadelphia currently is composed of approximately 39 physicians. Approximately 22 of such staff are board certified specialists. BH-Extended Care Baptist Health Extended Care Hospital (“BH-Extended Care”) is a 73 licensed bed long- term acute care hospital (“LTACH”) located on the 10th floor of the main BH-Little Rock facility. Regulatory requirements mandate that LTACHs be separate hospitals distinct from the host hospital and not merely operated as a nursing unit of the host hospital. Accordingly, BH-Extended Care has a separate board of trustees. LTACHs care for patients whose average length of stay is between 20 and 30 days. As a part of its 73 licensed bed complement, BH-Extended Care operates 24 ICU-level licensed beds. The active medical staff of BH-Extended Care currently is composed of 110 physicians. Approximately 70 of such staff are board certified specialists.

BH-Heber Springs (operated by Obligated Group Member) Baptist Health Medical Center-Heber Springs (“BH-Heber Springs”) is located on 44 acres in Heber Springs, Arkansas and is a 25 licensed bed certified critical access facility, which is the only hospital in Cleburne County, Arkansas. The present three-story structure housing BH-Heber Springs was constructed in 2006 and includes facilities for administration, a cafeteria, a kitchen, radiology, physical therapy, respiratory therapy, pharmacy, laboratory, surgery, emergency medicine, admissions and nursing. The active medical staff of BH-Heber Springs currently is composed of 34 physicians. Approximately 18 of such staff are board certified specialists. BH–Stuttgart Baptist Health Medical Center-Stuttgart (“BH-Stuttgart”) is located on 13 acres in Stuttgart, Arkansas and is a 49 licensed bed general acute care facility. The present one-story structure housing BH-Stuttgart includes facilities for administration, a cafeteria, a kitchen, radiology, physical therapy, respiratory therapy, pharmacy, laboratory, surgery, emergency medicine, admissions and nursing. Baptist Health operates BH-Stuttgart under a lease arrangement that commenced on October 28, 2014. The hospital facility lease has a 20-year term, with two renewal options of 25 years each. The rent is $25 per year. The City of Stuttgart, Arkansas enacted a one percent (1%) sales tax commencing in 2014 dedicated to the benefit of the hospital facility currently leased by BH-Stuttgart. The proceeds of the sales tax are used by the City to reimburse the Hospital for costs of maintenance, improvement,

A-19 4834-5782-6476.3 renovation, expansion, and equipping of the hospital facilities and in activities to assist patients in obtaining access to providers of health care services at the hospital. This sales tax does not have an expiration date. The annual sales tax benefit is approximately $2,500,000. The active medical staff of BH-Stuttgart currently is composed of 25 physicians. Approximately 18 of such staff are board certified specialists.

BH–Hot Spring County (operated by Obligated Group Member) Baptist Health Medical Center-Hot Spring County (“BH-HSC”) is a 72 licensed bed acute care facility located on 27.86 acres in Malvern, Arkansas. The 72 licensed beds are comprised of 24 inpatient mental health beds, 4 ICU beds, and 44 general medical/surgical beds. BH-HSC is currently operating 64 of its 72 licensed beds. The three-story, 100,410 square foot facility housing BH-HSC was constructed in 1979. It includes facilities for surgery, radiology, laboratory, magnetic resonance imaging, physical therapy, emergency medicine, sleep center, respiratory therapy, surgical and medical care, psychiatric treatment, pharmacy, intensive care‚ outpatient services, administration, cafeteria, coffee shop, gift shop, and admissions. Hot Spring County, Arkansas enacted a one-half of one percent (0.5%) sales tax commencing in 2013 dedicated to the benefit of the hospital. The proceeds of the sales tax are used by the County to assist financially in the maintenance, improvement, renovation, expansion and equipping of the hospital facilities. This sales tax will expire on December 31, 2033. The annual sales tax benefit is approximately $1,900,000. The BH-HSC campus also includes a 27,628 square foot medical office building and a 7,300 square foot business office building. The active medical staff of BH-HSC currently is composed of 30 physicians. Approximately 16 of such staff are board certified specialists. Baptist Health operates BH-HSC under a sub-lease agreement with Hot Spring County that commenced on January 1, 2014. Baptist Health exercised its option to renew the lease for an additional 25 years effective November 2019. There is one remaining option to renew for an additional 25 years. Under this agreement, Baptist Health is obligated to make lease payments of $25 per year and assume responsibility for all outstanding debt service, including $462,000 of outstanding bonded indebtedness. Hospitals –West Arkansas The following provides a description of the Baptist Health hospitals located in its West Arkansas Primary Service Area.

BH–Fort Smith (operated by Obligated Group Member)

Baptist Health-Fort Smith (“BH–Fort Smith”) is a 492 licensed bed general acute care hospital. The hospital is approximately 773,000 square feet in total, which is comprised of the Main Hospital 574,261 square feet, Renaissance Building 142,000 square feet and Ambulatory Surgery Center/Information Systems/Administration 56,656 square feet. Adjacent to Baptist Health-Fort Smith is a leased medical plaza which is approximately 181,500 square feet and houses the majority of Baptist Health’s employed physicians and nurse practitioners in its West Arkansas

A-20 4834-5782-6476.3 Primary Service Area and Secondary Service Area. BH-Fort Smith is currently operating 272 of its 492 licensed beds. Specialties include cardiology, cardiothoracic and vascular surgery, emergency medicine, gastroenterology, geriatrics, general surgery, infectious disease, internal medicine, family medicine, pediatrics, nephrology, neurology, obstetrics, hematology/oncology, radiation oncology, orthopedic surgery, bariatric surgery, otolaryngology, podiatry, pulmonology, and urology. Other service highlights include imaging, geriatric acute care, neuro-interventional radiology, robotic-assisted surgery, sleep medicine, telemedicine, laboratory services, wound care/hyperbaric oxygen therapy, GI/Endoscopy, and intensive care. Inside the hospital there is a fitness center and cardiac rehab program which are both open to the public. Also, there is an independently operated childcare center adjacent to the facility. The active medical staff of BH-Fort Smith currently is composed of approximately 114 physicians. Approximately 100 of such staff are board certified specialists.

BH–Van Buren (operated by Obligated Group Member)

Baptist Health-Van Buren (“BH-Van Buren”) is a 103 licensed bed acute care facility located in Van Buren, Arkansas. The facility is approximately 80,975 square feet and includes clinic space on campus, which is currently home to a physical and pulmonary rehabilitation service. BH-Van Buren is currently operating 35 of its 103 licensed beds. Services offered include emergency medicine, intensive care, gastroenterology, GI/Endoscopy, cardiac care, respiratory, orthopedic surgery, plastic surgery, laboratory, pharmacy, telemedicine, physical therapy, pulmonary rehabilitation and imaging. BH-Van Buren hosts a medical stabilization program which allows those suffering from drug and alcohol addiction to take the first step to recovery in a safe environment with 24-hour medical supervision. The active medical staff of BH-Van Buren currently is composed of approximately 54 physicians. Approximately 41 of such staff are board certified specialists. Baptist Health has a lease with the city of Van Buren for the hospital’s land and building that expires January 31, 2028. Baptist Health is obligated to make annual lease payments of $775,000 per year and assume responsibility for maintaining the facility and grounds. Other Controlled Affiliated Organizations Parkway Village, Inc. Parkway Village, Inc. (“Parkway”), a wholly-owned not-for profit corporation, owns and operates the Parkway Village Retirement Center (“Parkway Village”), Parkway Heights, and the Ginny and Bob Shell Alzheimer’s Center. Parkway Village is a 301-unit independent living retirement facility located on approximately 87 acres of land in Little Rock, Arkansas, which opened in 1985. Occupancy at Parkway Village during the fiscal years ended 2016 through 2018 averaged 60%, 59% and 56%, respectively. As of August 31, 2019, occupancy was approximately 56%. Baptist Health regards Parkway Village as an extension of its mission of community service and regards the services provided by Parkway Village as complementary with those provided by its hospital facilities.

A-21 4834-5782-6476.3 Parkway Heights is a 34-bed assisted living facility located on the Parkway Village campus and was 53% occupied as of August 31, 2019. The Ginny and Bob Shell Alzheimer’s Center is a 32-unit facility which specializes in the care of residents with Alzheimer’s disease. Occupancy was 47% as of August 31, 2019. Baptist Health is also affiliated with Parkway Health Center, a 105-bed skilled nursing home facility located on the Parkway Village campus, which was opened in April 1989. Parkway Health Center is owned by Parkway Health Center, Inc., an Arkansas nonprofit corporation wholly owned by Baptist Health. Baptist Health Physician Partners Baptist Health Physician Partners (“BHHP”) is wholly owned by Baptist Health with significant board governance by Baptist Health practicing physicians. BHPP is a physician network and is part of the clinical integration strategy for Baptist Health. For further discussions on the operations of BHPP refer to the “System Vision and Strategic Initiatives”, “Managed Care” and “Management’s Discussion and Analysis of Financial Performance” sections within this Appendix A. Arkansas Health Group Arkansas Health Group (“AHG”) is a wholly owned not-for-profit physician group, which employs 237 physicians and 175 mid-level providers. For a further discussion of the operations and physician compliment of AHG, refer to the “Professional Staff and Employees” and “Management’s Discussion and Analysis of Financial Performance” sections within this Appendix A. Baptist Health Services Baptist Health Services (“BHS”) is a wholly owned not-for-profit physician group, which employs 70 physicians and 13 mid-level providers. For a further discussion of the operations and physician complement of BHS, refer to the “Professional Staff and Employees” and “Management’s Discussion and Analysis of Financial Performance” sections within this Appendix A. Diamond Risk Insurance, LLC Diamond Risk Insurance, LLC (“DRI”) is a special purpose captive insurance company organized under Arkansas law that insures certain risks of Baptist Health and its affiliated organizations. See the “Insurance” section below in this Appendix A for more information about DRI. Baptist Health Foundation Baptist Health Foundation (“BH-Foundation”) was incorporated in 1972 to support the mission of Baptist Health and its affiliated organizations and to raise funds for their program expansions, capital projects and equipment, educational activities and community health and wellness initiatives. Baptist Health is the sole member of the BH-Foundation and elects its Board of Directors. BH-Foundation currently has approximately $40 million in cash and investments

A-22 4834-5782-6476.3 and is not obligated to pay debt service on the proposed Series 2019 Bonds, the Series 2014 Bonds, the Series 2015A Bonds or any other outstanding Baptist Health indebtedness. Multi-Management Services, Inc. Multi-Management Services, Inc. (“MMS”) is a wholly owned for-profit corporation and a holding company that owns most real estate not directly utilized in Baptist Health’s hospital operations. MMS also maintains a controlling interest in, or maintains a non-controlling interest in, the following noteworthy for-profit companies: - MMS maintains a 100% interest in Baptist Medical System HMO, Inc. Please refer to HMO Partners, Inc. d/b/a Health Advantage under the section entitled “Non-Controlled Affiliated Organizations” in this Appendix A for more information on this entity. - Hotel Properties, Inc. is 100% owned by MMS and operates The Inn at Baptist Health which is located on the BH-Little Rock campus. - Baptist MedCare, Inc. d/b/a Practice Plus (“Practice Plus”) is 100% owned by MMS and is a management services organization servicing AHG clinics and other physician practices. Practice Plus owns a 51% ownership in Maumelle Family Practice, LLC, and a 51% ownership in Baptist Health Center for Clinical Research, LLC. Practice Plus also owns 100% of Baptist Imaging Benton, LLC, an outpatient diagnostic imaging center located in Benton, Arkansas. - Autumn Road, LLC is a medical office building located in Little Rock, Arkansas. MMS maintains a 59.72% interest in Autumn Road LLC. - MMS maintains a 65% interest in Two Financial Centre Holding Company LLC which operates an office building located in Little Rock, Arkansas. - Westside Properties, Inc. is 100% owned by MMS and operates residential rental properties close to the BH-Little Rock campus. Ortho Arkansas Surgery Center, LLC OrthoArkansas Surgery Center, LLC (“OSC”) is a freestanding ambulatory surgery center specializing in orthopedic procedures located near the BH-Little Rock campus and is owned 51% by Baptist Health. Complete Health with PACE Complete Health with PACE (“PACE”), an Arkansas not-for-profit corporation, is licensed by the State of Arkansas and the Centers for Medicare and Medicaid Services (“CMS”) to provide a program of all-inclusive care to eligible elderly residents of Pulaski County, Arkansas. PACE began operations in June 2016. Baptist Health owns 60% of PACE, with the remaining 40% owned by Carelink of Central Arkansas.

A-23 4834-5782-6476.3 American Data Network, LLC American Data Network, LLC (“ADN”) exists to help healthcare organizations improve patient care by delivering applications and services tailored to meet the growing demand for accountability in healthcare quality and patient safety. Baptist Health owns 57% of ADN. Non-Controlled Affiliated Organizations Baptist Health maintains non-controlling interests in a number of entities. The following discussion highlights certain noteworthy non-controlled organizations. Springhill Surgery Center, LLC Springhill Surgery Center, LLC is a freestanding ambulatory surgery center located on the BH-North Little Rock campus owned 50% by Baptist Health and providing outpatient surgery care in a broad range of specialties. A2 ACO, LLC A2 ACO, LLC d/b/a Baptist Health UAMS Accountable Care Alliance is a Medicare Shared Savings Program (MSSP) Track 1+ Accountable Care Organization (ACO). This ACO a three year agreement with Medicare that started January 1 2018. The ACO is owned 50% by Baptist Health and 50% by University of Arkansas for Medical Sciences. Baptist Health-UAMS Medical Education Program, LLC Baptist Health-UAMS Medical Education Program, LLC is a joint venture owned 50% by Baptist Health and located on the BH-North Little Rock campus. Baptist Health-UAMS Medical Education Program, LLC provides accredited graduate medical education for residency training of physicians in a private, community-based hospital. Refer to the section “Hospitals – Central Arkansas” and the description of BH-North Little Rock therein for further information on the Baptist Health-UAMS Medical Education Program, LLC. The Partnership for a Healthy Arkansas, LLC Baptist Health is one of four leading healthcare systems headquartered in Arkansas which, along with the state’s largest commercial payer, each own 20% of The Partnership for a Healthy Arkansas, LLC, a Shared Services Organization. The members are Baptist Health, University of Arkansas for Medical Sciences, Washington Regional Medical System, St. Bernards Healthcare, and Arkansas Blue Cross Blue Shield. The innovative collaboration brings together the five organizations to implement programs that improve health care quality and lower health care costs for patients and providers throughout Arkansas. MMS also maintains non-controlling interests in a number of for-profit entities. The following highlights certain of these non-controlled organizations. Surgical Pavilion, LLC Located in the Hickingbotham Outpatient Center on the BH-Little Rock campus, Surgical Pavilion, LLC provides outpatient surgery services and is owned 50% by MMS. HMO Partners, Inc. d/b/a Health Advantage HMO Partners, Inc. is 50% owned by Baptist Medical System HMO, Inc. and is licensed and operates the largest HMO in Central Arkansas with approximately 125,000 enrollees. HMO

A-24 4834-5782-6476.3 Partners, Inc. is a joint venture with Arkansas Blue Cross Blue Shield owning the remaining 50% interest. Baptist Health has not made any material cash transfers or subsidy payments to Health Advantage in recent years. Urgent Care Baptist-Urgent Team JV, LLC (“Urgent Care”) is a for-profit Arkansas limited liability company which is 50% owned by Baptist Health. The remaining interest in Urgent Care is owned by Urgent Team Management of Arkansas, LLC. Urgent Care provides convenient and unscheduled access to healthcare services for urgent, but not emergent patient needs and to support Baptist Health physicians who seek to provide after-hours options to their patients. Urgent Care’s walk-in centers provide a comprehensive range of healthcare services, including treatments for injuries and illnesses, occupational health and wellness care. Urgent Care operates seven locations (six in the Central Arkansas Primary Service Area and one in the West Arkansas Primary Service Area) generating approximately 60,000 visits annually. Service Areas General Baptist Health currently operates a total of eleven hospitals. Nine of the hospitals (seven acute care, one rehabilitation, and one long-term acute care hospital) are located within its Central Arkansas Primary Service Area (“Central PSA”). The Baptist Health hospitals are located within these cities/towns in Arkansas: Little Rock (three), North Little Rock (one), Arkadelphia (one), Conway (one), Heber Springs (one), Malvern (one) and Stuttgart (one). Baptist Health’s two major acute care medical centers, rehabilitation hospital and long-term acute care hospital are located within the most populated county in the state of Arkansas – Pulaski County, with approximately 400,000 residents. Pulaski County is also home to the Arkansas State Government, other major medical facilities – private and public (academic medical center, VA facilities), a major university and a two-year technical college, both affiliated with the University of Arkansas and a few other local colleges. Baptist Health defines its Central PSA as the following sixteen Arkansas counties: Arkansas, Clark, Cleburne, Conway, Faulkner, Grant, Hot Spring, Jefferson, Lonoke, Monroe, Perry, Prairie, Pulaski, Saline, Van Buren and White. Baptist Health defines its Central Arkansas Secondary Service Area (“Central SSA” and when referenced with the Central PSA, the “Central PSA and SSA”) as the following twenty-seven Arkansas counties: Ashley, Bradley, Calhoun, Chicot, Cleveland, Columbia, Dallas, Desha, Drew, Garland, Hempstead, Howard, Independence, Jackson, Johnson, Lincoln, Montgomery, Nevada, Ouachita, Phillips, Pike, Pope, Searcy, Stone, Union, Woodruff and Yell counties. Two Baptist Health hospitals (both acute care) are located within its West Arkansas Primary Service Area (“West PSA”). These Baptist Health hospitals are located within these cities/towns in Arkansas: Fort Smith (one) and Van Buren (one). Sebastian County, where Baptist Health-Fort Smith is located, is home to another private medical facility, a major university affiliated with the University of Arkansas and several major manufacturing employers. Baptist Health defines its West PSA as the following four counties: In Arkansas – Crawford and Sebastian Counties, and in Oklahoma – Le Flore and Sequoyah, Counties. Baptist Health

A-25 4834-5782-6476.3 defines its West Arkansas Secondary Service Area (“West SSA” and when referenced with the West PSA, the “West PSA and SSA”) as the following six counties: In Arkansas – Franklin, Johnson, Logan, Polk and Scott Counties, and in Oklahoma – Haskell County. In addition to sources noted for individual tables and lists in this section, the following provides sources common throughout this section and referenced with numbers within a parenthesis as follows:

(1) SG2 Demographics (2) Little Rock Regional Chamber of Commerce (3) Arkansas Division of Higher Education (4) Baptist Health Patient Discharge Data (5) Arkansas Hospital Association (6) American Hospital Directory (7) Truven Health Analytics Market Expert (CMS Medicare Only Market Share – includes Medicare Advantage enrollees) (8) Fort Smith Chamber of Commerce

BAPTIST HEALTH CENTRAL SERVICE AREA Demographic and Economic Data – Central PSA and SSA The following table represents population estimates and forecasts for the combined Central PSA and SSA by selected age cohorts in the calendar years 2019 and 2024. Population Data BAPTIST HEALTH CENTRAL PSA AND SSA (1)

PRIMARY SECONDARY COMBINED Age % % % 2019 2024 2019 2024 2019 2024 Group Change Change Change 0-17 238,437 238,812 0.16% 125,157 122,337 -2.25% 363,594 361,149 -0.81% 18-44 371,741 373,827 0.56% 183,293 184,309 0.55% 555,034 558,136 0.56% 45-64 257,590 252,046 -2.15% 145,646 134,944 -7.35% 403,236 386,990 -4.03% 65+ 167,701 191,492 14.19% 116,417 128,765 10.61% 284,118 320,257 12.72% TOTAL 1,035,469 1,056,177 2.00% 570,513 570,355 -0.30% 1,605,982 1,626,532 1.25%

The combined service area population is projected to increase by 1.25% in the next five years. The Central PSA is projected to grow by approximately 2.00%. The majority of growth in the combined service area population is projected to be within the 65+ age group (12.72%), which is the age group with the highest utilization of health care services.

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A-26 4834-5782-6476.3 Household Income Data BAPTIST HEALTH CENTRAL PSA ONLY (1) Household 2019 2019 2024 2024 Households % Income Households % of Total Households % of Total Change <$15K 56,214 13.66% 53,090 12.63% -5.56 % $15-25K 44,502 10.81% 42,266 10.05% -5.02 % $25-50K 102,786 24.98% 100,091 23.81% -2.62 % $50-75K 73,641 17.90% 74,401 17.70% 1.03% $75-100K 48,321 11.74% 50,361 11.98% 4.22% $100K-200K 68,295 16.60% 77,691 18.48% 13.76% >$200K 17,727 4.31% 22,458 5.34% 26.69% Total 411,486 100.00 % 420,358 100.00 % 2.16 %

Pulaski County Pulaski County is the largest county within the Central PSA. Over 47% of Baptist Health’s discharges come from patients residing within this county. Demographic and Economic Data – Pulaski County Economic Data Summary – Pulaski County Pulaski County U.S. Unemployment Rate (August 2019) 3.50% 3.80% Recent Job Growth (Annual 2017-18) 0.24% 1.60% Future Job Growth (2016-2026)* 8.15%/11.25% 7.40% Sales Taxes (State+City+County) 9.00% 6.50%** Income Taxes (Individual Maximum) 6.90% 37.00% Per Capita Income (2017) $48,838 $51,885 Median Household Income $48,850 $57,652 Family Median Income $63,863 $70,850

* Total All Occupations 2016-2026 for Central AR Workforce Area; (Includes Faulkner, Lonoke, Monroe, Prairie, Saline, and Pulaski Counties) ** There is no federal sales tax. The rate shown is for the State of Arkansas.

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A-27 4834-5782-6476.3 Estimate Households by Household Income – Pulaski County Pulaski County U.S. Income Less Than $15K 13.80% 11.60% Income between $15K and $24,999 11.70% 9.80% Income between $25K and $34,999 11.10% 9.50% Income between $35K and $49,999 14.40% 13.00% Income between $50K and $74,999 17.70% 17.70% Income between $75K and $99,999 10.50% 12.30% Income between $100K and $149,999 11.50% 14.10% Income between $150K and $199,999 4.50% 5.80% Income $200K or More 4.90% 6.30%

Source: U.S. Census Bureau, American Fact Finder, Table S1901 5-Year Estimate 2013-2017. Population by Occupation – Pulaski County Pulaski County U.S. Management, business, finance 14.80% 15.10% Engineering, computers, science 5.42% 5.60% Community, social services 2.38% 1.71% Legal 1.71% 1.13% Education, training, and library 6.62% 6.04% Arts, design, media, sports, entertainment 1.81% 1.98% Healthcare practitioners and technology 8.42% 5.88% Healthcare support 2.70% 2.39% Firefighters, law enforcement 1.92% 2.16% Food preparation, serving 5.56% 5.80% Building maintenance 3.56% 3.90% Personal care 2.96% 3.72% Sales, office, administrative support 25.40% 23.53% Farming, fishing, forestry 0.24% 0.71% Construction, extraction, maintenance/repair 6.50% 8.17% Production, transportation, material moving 10.00% 12.17%

Source: U.S. Census Bureau, American Fact Finder, Table S2401, 5-Year Estimate 2013-2017.

Major Employers – Pulaski County (2)

PULASKI COUNTY - MAJOR NO OF EMPLOYERS PRODUCT EMPLOYEES 1. Arkansas State Government State government 2,500 + 2. Federal Government Federal government 2,500 + 3. Baptist Health (multiple locations) Health care 2,500 + 4. University of Arkansas for Medical Sciences State-health care/university 2,500 + 5. Little Rock Air Force Base Federal government 2,500 +

A-28 4834-5782-6476.3 6. Arkansas Children's Hospital Health care 2,500 + 7. Little Rock School District Public schools 2,500 + 8. Veterans Hospital (two locations) Health care 2,500 + 9. Wal-Mart Stores, Inc. (multiple locations) Retail department stores 2,500 + 10. Pulaski County Special School District Public schools 2,500 + 11. Union Pacific Railroad Company Railroads 1,000-2,499 12. Arkansas Blue Cross & Blue Shield (two locations) Insurance companies 1,000-2,499 13. CHI St. Vincent (multiple locations) Health care 1,000-2,499 14. Dillard's, Inc. (multiple locations) Retail department stores 1,000-2,499 15. Kroger Food Stores (multiple locations) Retail grocery stores 1,000-2,499 16. University of Arkansas at Little Rock Colleges/universities 1,000-2,499 17. Dassault Falcon Jet Corporation Aircraft (mfg.) 1,000-2,499 18. North Little Rock School District Public schools 1,000-2,499 19. Verizon Corporation (Cellco Partnership) Telecommunications services 1,000-2,499 20. FIS Customer service centers 1,000-2,499 21. AT&T (multiple locations) Telecommunications services 1,000-2,499 22. McDonald's Corporation (multiple locations) Restaurants 1,000-2,499 23. Windstream Corporation Telecommunications services 1,000-2,499 24. Maverick Transportation, Inc. Trucking 1,000-2,499 25. United Parcel Service, Inc. Courier services 500-999 26. Molex, Inc. Electronic connectors (mfg.) 500-999 27. Stephens, Inc. Investment securities 500-999

Higher Education – Pulaski County (3) Pulaski County is home to several offerings of higher education. The largest is the University of Arkansas at Little Rock, which was founded in 1927 and is part of the University of Arkansas System, and has an annual enrollment of around 10,500. Another member of the University of Arkansas System, the University of Arkansas for Medical Sciences (UAMS) consists of five colleges, including one graduate school. UAMS was founded in 1879 and has an enrollment of 2,500+ in the colleges of Medicine, Pharmacy, Nursing, Health Professions, Public Health and the UAMS Graduate School.

A-29 4834-5782-6476.3 Located in Pulaski County with campuses in North Little Rock and Little Rock, and another member of the University of Arkansas System, is the University of Arkansas Pulaski Technical College (UA-PTC). UA-PTC is Arkansas’s largest two-year college with an annual enrollment of nearly 10,000 students. Also located in Pulaski County is Philander Smith College, a private historically African- American college, four-year undergraduate liberal arts institution located in Little Rock. Founded in 1877, Philander Smith enrolls approximately 1,000 students annually. Shorter College, also located in Pulaski County, is a private, faith-based, two-year liberal arts college located in North Little Rock, Arkansas. Founded in 1886 by the African Methodist Episcopal Church, Shorter College is one of the nation’s 110 Historically Black Colleges and Universities (HBCU) and the only private, two-year HBCU in the nation. Other higher education offerings located in Pulaski County include the Criminal Justice Institute (CJI), a campus of the University of Arkansas System that serves a unique population of non-traditional students—certified law enforcement professionals who are actively employed within our state’s police departments and sheriff’s offices. The University of Arkansas Clinton School of Public Service, located in Little Rock, is the first school to offer a Master of Public Service degree, which gives students the knowledge and experience to further their careers in the areas of non-profit, governmental, volunteer or private sector service.

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A-30 4834-5782-6476.3 Central Service Area Map The map below shows the location of all Baptist Health hospitals in the Central PSA and SSA, the boundaries of the Central PSA and SSA, and the locations of the hospital competitors within the Central PSA and SSA. The Central PSA for Baptist Health represents where approximately 80-85% of Baptist Health’s annual inpatient discharges reside/live. Baptist Health accounted for approximately 35% market share in the Central PSA. The Central SSA represents where approximately 10-15% of Baptist Health’s annual inpatient discharges reside/live (4). Baptist Health accounted for approximately 10% market share in the Central SSA.

A-31 4834-5782-6476.3 Competition – Central PSA and SSA Baptist Health has a strong market position in its Central PSA. Baptist Health Medical Center-Little Rock is the largest medical center in its combined Central PSA and SSA. The System (comprised of most of the Baptist Health hospitals) is the largest hospital system within its combined Central PSA and SSA. Baptist Health has seven acute care hospitals, one rehabilitation hospital and one long-term acute care hospital located in its Central PSA. Baptist Health Acute Care Hospitals located within Baptist Health Central PSA Location Licensed Location City County Hospital Beds* Stuttgart, AR Arkansas Baptist Health Medical Center-Stuttgart 49 Arkadelphia, AR Clark Baptist Health Medical Center-Arkadelphia 25** Heber Springs, AR Cleburne Baptist Health Medical Center-Heber Springs 25** Conway, AR Faulkner Baptist Health Medical Center-Conway 111 Malvern, AR Hot Spring Baptist Health Medical Center-Hot Spring County 72 Little Rock, AR Pulaski Baptist Health Medical Center-Little Rock 851 North Little Rock, AR Pulaski Baptist Health Medical Center-North Little Rock 225 Non-Acute Hospitals Little Rock, AR Pulaski Baptist Health Extended Care Hospital 73 Little Rock, AR Pulaski Baptist Health Rehabilitation Institute 120 * Baptist Health bed counts are from internal data sources. ** Critical Access Hospital Other Acute Care Hospitals located within Baptist Health Central PSA Location Licensed Location City County Hospital Beds(5)(6) Dewitt, AR Arkansas DeWitt Hospital and Nursing Home 25* Morrilton, AR Conway CHI St. Vincent – Morrilton 25* Conway, AR Faulkner Conway Regional Medical Center 146 Pine Bluff, AR Jefferson Jefferson Regional Medical Center 471 Jacksonville, AR Pulaski North Metro Medical Center (Acute/ER closed 78 Aug 2019 – Geri-Psych open) Little Rock, AR Pulaski Arkansas Children’s Hospital (ACH) – Pediatric 359 specialty Little Rock, AR Pulaski Arkansas Heart Hospital – specialty 112 Little Rock, AR Pulaski Arkansas Surgical Hospital – specialty 49 Little Rock, AR Pulaski CHI St. Vincent Infirmary Little Rock 615 Little Rock, AR Pulaski Central Arkansas Veterans Healthcare System 635** Little Rock, AR Pulaski UAMS Medical Center 450 Sherwood, AR Pulaski CHI St. Vincent North – Sherwood 69 Benton, AR Saline Saline Memorial Hospital 177 Clinton, AR Van Buren Ozark Health Medical Center 25* Searcy, AR White Unity Health - White County Medical Center 438 * Critical Access Hospital ** Also includes some extended care, rehabilitation and mental health care beds

A-32 4834-5782-6476.3 The majority of Baptist Health’s competition comes from hospitals located within the Central PSA, in particular the competitor hospitals located within Pulaski County. Pulaski County is home to Baptist Health’s two largest hospitals and competition from two CHI St. Vincent hospitals (Infirmary in the City of Little Rock and North in the City of Sherwood), a large academic medical center (UAMS), one pediatric hospital (ACH), two Veterans Affairs hospitals, one community hospital and two limited-service specialty hospitals (Arkansas Heart Hospital and Arkansas Surgical Hospital). Baptist Health does not operate a pediatric hospital, so competition with Arkansas Children’s Hospital is limited primarily to neonatal intensive care services which Baptist Health provides as a component of its Women and Children’s service line. Faulkner County is another key market where Baptist Health Medical Center-Conway has direct competition from Conway Regional Medical Center. Other regional hospital competitors (excluding the Critical Access Hospitals) within the Central PSA and SSA listed above and below offer a broad range of primary and specialty medical services like those offered by Baptist Health. Baptist Health attracts patients throughout its entire Central PSA and SSA for services also offered at competitor hospitals, including, for example, open heart surgery. There is also competition for ambulatory services offered throughout the Central PSA and SSA, both by hospitals as well as free-standing centers such as imaging centers, ambulatory surgery centers, outpatient physical therapy centers, a free-standing ER and physician offices offering diagnostic and surgical procedures within their offices. Acute Care Hospitals located within Baptist Health Central SSA Location Licensed Location City County Hospital Beds(5)(6) Crossett, AR Ashley Ashley County Medical Center 33* Warren, AR Bradley Bradley County Medical Center 33* Lake Village, AR Chicot Chicot Memorial Medical Center 25* Magnolia, AR Columbia Magnolia Regional Medical Center 49 Fordyce, AR Dallas Dallas County Medical Center 25* Dumas, AR Desha Delta Memorial Hospital 25* McGehee, AR Desha McGehee-Desha County Hospital 25* Monticello, AR Drew Drew Memorial Hospital 49 Hot Springs, AR Garland CHI St. Vincent – Hot Springs 282 Hot Springs, AR Garland National Park Medical Center 166 Hope, AR Hempstead Wadley Regional Medical Center at Hope 67 Nashville, AR Howard Howard Memorial Hospital 20* Batesville, AR Independence White River Health System 224 Newport, AR Jackson Unity Health - Harris Medical Center 133 Clarksville, AR Johnson Johnson Regional Medical Center 80 Camden, AR Ouachita Ouachita County Medical Center 98 Helena, AR Phillips Helena Regional Medical Center 155 Russellville, AR Pope Saint Mary’s Regional Medical Center 170 Mountain View, AR Stone Stone County Medical Center 25* El Dorado, AR Union Medical Center of South Arkansas 166 Danville, AR Yell Chambers Memorial Hospital 41 Dardanelle, AR Yell Dardanelle Regional Medical Center 25* * Critical Access Hospital

A-33 4834-5782-6476.3 Central PSA and SSA Market Share – All Services Hospital discharge information on competition is extremely limited within the state of Arkansas. The Arkansas Department of Health (ADH) collects inpatient discharge information from all hospitals within Arkansas; however, the ADH is currently prohibited by law to release competing hospital information. Thus, Baptist Health determines market share for itself and its competition using publicly available information provided by the Federal Government through the Centers for Medicare and Medicaid Services (CMS). This information, however, is limited to services offered to Medicare only patients. Given the limitations of hospital data in Arkansas, Baptist Health uses the Medicare only data (which does include Medicare Advantage products) as a proxy for market share calculations. Medicare only comprises approximately 46% of Baptist Health’s inpatient discharges.

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A-34 4834-5782-6476.3 The following table represents all Medicare inpatient discharges in the Baptist Health Central PSA for calendar years 2015 and 2017 – with 2017 being the latest information available. The table also presents the market share for each of the hospital competitors for those years. Historical Medicare Inpatient Discharges and Market Share Baptist Health Central PSA (excludes newborns)(7)

Discharges Market Share Hospital 2015 2017 2015 2017 BH-Little Rock 10,399 10,557 18.8% 18.5% BH-North Little Rock 6,446 5,999 11.7% 10.5% BH-Conway 0 1,043 0.0% 1.8% BH-Hot Spring County 902 781 1.6% 1.4% BH-Stuttgart 637 681 1.1% 1.2% BH-Heber Springs 656 555 1.2% 1.0% BH-Arkadelphia 375 314 0.7% 0.5% Sparks Regional Medical Center (now BH-Fort Smith)* 22 25 0.0% 0.0% Sparks Medical Center-Van Buren (now BH-Van Buren)* 3 1 0.0% 0 .0%

Subtotal Baptist Health: 19,440 19,956 35.1% 34.9%

CHI St. Vincent Infirmary Little Rock 7,578 7,448 13.7% 13.0% UAMS Medical Center 5,436 6,056 9.8% 10.6% Unity Health White County Medical Center 5,407 5,385 9.8% 9.4% Conway Regional Medical Center 3,563 3,344 6.4% 5.9% Jefferson Regional Medical Center 3,284 3,230 5.9% 5.7% Saline Memorial Hospital 3,165 3,222 5.7% 5.7% Arkansas Heart Hospital 1,661 2,199 3.0% 3.8% Arkansas Surgical Hospital 939 1,150 1.7% 2.0% CHI St. Vincent - Hot Springs* 991 1,020 1.8% 1.8% CHI St. Vincent North – Sherwood 762 954 1.4% 1.7% North Metro Medical Center 908 901 1.6% 1.6% National Park Medical Center* 468 463 0.8% 0.8% CHI St Vincent Morrilton 355 357 0.6% 0.6% Ozark Health 261 305 0.5% 0.5% White River Medical Center* 290 281 0.5% 0.5% Dewitt Hospital & Nursing Home, Inc. 269 204 0.5% 0.4% All Other* 672 653 1.2% 1.1%

Totals: 55,449 57,128 100.0% 100.0%

* Hospital not physically located within Central PSA

A-35 4834-5782-6476.3 The following table represents all Medicare inpatient discharges in the Baptist Health Central SSA for calendar years 2015 and 2017 – with 2017 being the latest information available. The table also presents the market share for each of the hospital competitors for those years. Historical Medicare Inpatient Discharges and Market Share Baptist Health Central SSA excludes Newborns (7) Discharges Market Share Hospital 2015 2017 2015 2017 BH-Little Rock* 2,512 2,866 6.4% 7.4% BH-North Little Rock* 230 212 0.6% 0.5% Sparks Regional Medical Center (now BH-Fort Smith)* 124 133 0.3% 0.3% BH-Hot Spring County* 127 110 0.3% 0.3% BH-Arkadelphia* 97 102 0.3% 0.3% BH-Conway* 0 92 0.0% 0.2% BH-Stuttgart* 6 16 0.0% 0.0% BH-Heber Springs* 16 9 0.1% 0.0% Sparks Medical Center-Van Buren (now BH-Van Buren)* 5 2 0.0% 0.0% Subtotal Baptist Health: 3,117 3,542 8.0% 9.2% CHI St. Vincent - Hot Springs 5,900 5,630 15.1% 14.6% National Park Medical Center 3,247 3,449 8.3% 9.0% White River Medical Center 2,527 2,474 6.4% 6.4% St Mary’s Regional Medical Center 2,315 2,400 5.9% 6.2% CHI St Vincent Infirmary Little Rock* 2,127 2,232 5.4% 5.8% UAMS Medical Center* 1,464 1,723 3.8% 4.5% Jefferson Regional Medical Center* 1,519 1,595 3.9% 4.2% Medical Center of South Arkansas 1,973 1,592 5.1% 4.1% Arkansas Heart Hospital* 1,359 1,586 3.5% 4.1% Unity Health White County Medical Center* 1,266 1,278 3.2% 3.3% Johnson Regional Medical Center 982 946 2.5% 2.5% Chambers Memorial Hospital 889 857 2.3% 2.2% Christus St Michael Health System* 883 846 2.3% 2.2% Drew Memorial Hospital 998 808 2.6% 2.1% Ashley County Medical Center 585 655 1.5% 1.7% Ouachita County Medical Center 570 597 1.5% 1.5% Helena Regional Medical Center 679 594 1.7% 1.5% Magnolia Hospital 721 583 1.8% 1.5% Arkansas Surgical Hospital* 460 503 1.2% 1.3% Wadley Regional Medical Center at Hope 588 501 1.5% 1.3% Wadley Regional Medical Center* 497 445 1.3% 1.2% Bradley County Medical Center 578 391 1.5% 1.0% River Valley Medical Center 453 390 1.2% 1.0% Chicot Memorial Medical Center 581 359 1.5% 0.9% Stone County Medical Center 469 354 1.2% 0.9% St Bernards Medical Center* 301 277 0.8% 0.7% Delta Memorial Hospital 285 257 0.7% 0.7% All Other* 1,674 1,685 4.3% 4.4% Totals: 39,007 38,549 100.0% 100.0% * Hospital not physically located within Central SSA

A-36 4834-5782-6476.3 BAPTIST HEALTH WEST SERVICE AREA Demographic and Economic Data – West PSA and SSA The following table represents population estimates and forecasts for the combined Baptist Health West PSA and SSA by selected age cohorts in the calendar years 2019 and 2024.

Population Data BAPTIST HEALTH WEST PSA AND SSA

PRIMARY SECONDARY COMBINED Age % % % 2019 2024 2019 2024 2019 2024 Group Change Change Change 0-17 66,445 65,601 -1.27% 25,011 24,737 -1.10% 91,456 90,338 -1.22% 18-44 94,474 95,938 1.55% 34,048 34,727 1.99% 128,522 130,665 1.67% 45-64 71,698 68,767 -4.09% 28,081 26,272 -6.44% 99,779 95,039 -4.75% 65+ 47,996 54,687 13.94% 22,059 24,504 11.08% 70,055 79,191 13.04% TOTAL 280,613 284,993 1.56% 109,199 110,240 0.95% 389,812 395,233 1.39%

The combined service area population is projected to increase by 1.39% in the next five years. The West PSA is projected to grow by approximately 1.56%. The majority of growth in the combined service area population is projected to be within the 65+ age group (13.04%), which is the age group with the highest utilization of health care services. Household Income Data BAPTIST HEALTH WEST PSA ONLY

Household 2019 2019 2024 2024 Households % Income Households % of Total Households % of Total Change <$15K 16,580 15.27% 15,989 14.48% -3.56% $15-25K 14,651 13.50% 14,180 12.84% -3.21% $25-50K 30,903 28.46% 30,514 27.63% -1.26% $50-75K 19,791 18.23% 20,269 18.36% 2.42% $75-100K 11,129 10.25% 11,716 10.61% 5.27% $100K-200K 13,246 12.20% 15,037 13.62% 13.52% >$200K 2,269 2.09% 2,721 2.46% 19.92% Total 108,569 100.00% 110,426 100.00% 1.71%

Sebastian County

Sebastian County is the largest county within the West PSA, with a population of approximately 128,000. Over 41% of Baptist Health’s discharges from its West PSA come from patients residing within this county.

A-37 4834-5782-6476.3 Demographic and Economic Data – Sebastian County Economic Data Summary – Sebastian County Sebastian County U.S. Unemployment Rate (August 2019) 3.40% 3.80% Recent Job Growth (Annual 2017-18) -0.28% 1.60% Future Job Growth (2016-2026)* 8.80% 7.40% Sales Taxes (State+City+County) 9.75% 6.50%** Income Taxes (Individual Maximum) 6.90% 37.00% Per Capita Income (2017) $40,280 $51,885 Median Household Income $40,932 $57,652 Family Median Income $51,888 $70,850

* Total All Occupations 2016-2026 for Western Arkansas Workforce Development Area (Includes Crawford, Franklin, Logan, Polk, Scott and Sebastian Counties) ** There is no federal sales tax. The rate shown is for the State of Arkansas. Estimate Households by Household Income – Sebastian County Sebastian County U.S. Income Less Than $15K 16.20% 11.60% Income between $15K and $24,999 14.70% 9.80% Income between $25K and $34,999 13.10% 9.50% Income between $35K and $49,999 13.90% 13.00% Income between $50K and $74,999 18.10% 17.70% Income between $75K and $99,999 10.30% 12.30% Income between $100K and $149,999 9.50% 14.10% Income between $150K and $199,999 1.70% 5.80% Income $200K or More 2.60% 6.30%

Source: U.S. Census Bureau, American Fact Finder, Table S1901 5-Year Estimate 2013-2017 Population by Occupation – Sebastian County Sebastian County U.S. Management, business, finance 11.23% 15.10% Engineering, computers, science 2.84% 5.60% Community, social services 1.31% 1.71% Legal 1.05% 1.13% Education, training, and library 5.77% 6.04% Arts, design, media, sports, entertainment 1.15% 1.98% Healthcare practitioners and technology 6.09% 5.88% Healthcare support 3.03% 2.39% Firefighters, law enforcement 1.29% 2.16% Food preparation, serving 6.51% 5.80% Building maintenance 4.54% 3.90% Personal care 2.71% 3.72% Sales, office, administrative support 23.60% 23.53% Farming, fishing, forestry 0.38% 0.71% Construction, extraction, maintenance/repair 9.49% 8.17% Production, transportation, material moving 19.01% 12.17% Source: U.S. Census Bureau, American Fact Finder, Table S2401, 5-Year Estimate 2013-2017

A-38 4834-5782-6476.3 Major Employers – Sebastian County (8)

SEBASTIAN COUNTY - NO OF MAJOR EMPLOYERS PRODUCT EMPLOYEES 1. Mercy Hospital - Fort Smith (multiple locations) Health care 2,500 + 2. Baptist Health (former Sparks Health System - multiple locations) Health care 1,000-2,499 3. Fort Smith School District Public schools 1,000-2,499 4. OK Foods, Inc. (two locations) Poultry processing 1,000-2,499 5. Wal-Mart Stores, Inc. (multiple locations) Retail department stores 1,000-2,499 6. Baldor Electric Company (multiple locations) Motors and generators (mfg.) 1,000-2,499 7. ArcBest Corporation (multiple locations) Trucking 1,000-2,499 Nursing and convalescent 8. Golden Living (GGNSC) homes 500-999 9. Rheem Manufacturing Company, Air conditioning equipment Inc. (mfg.) 500-999 10. Gerber Products Company Baby foods (wholesale & mfg.) 500-999 11. University of Arkansas Fort Smith Colleges/universities 500-999 12. Bost Human Development Schools; handicapped and Services (multiple locations) special needs 500-999 Steel - bar, sheet, strip, tube 13. Gerdau MacSteel (mfg.) 500-999 14. Greenwood School District Public schools 300-499 15. The Trane Company (two locations) Air conditioning (mfg.) 300-499

Higher Education – Sebastian County (3) Sebastian County is home to another member of the University of Arkansas System – The University of Arkansas at Fort Smith (UAFS). UAFS is a comprehensive regional institution that offers associate, baccalaureate and graduate level studies. Founded in 1928, UAFS currently has an annual enrollment of approximately 6,550 students. The Arkansas Colleges of Health Education (ACHE) is a private, not-for-profit institution also located in Sebastian County. The institution has as its mission the education of a diverse group of highly competent and compassionate health care professionals; to create health and research support facilities and to provide healthy living environments to improve the lives of others. Founded in 2014, current enrollment is approximately 495 students. The initial program is supported by the Arkansas College of Osteopathic Medicine (ARCOM).

A-39 4834-5782-6476.3 West PSA and SSA Map

The map below shows the location of all Baptist Health hospitals in, and the boundaries of, the West PSA and SSA, and the locations of the hospital competitors within the West PSA and SSA. Approximately 80-85% of Baptist Health’s annual inpatient discharges from the West Service Area reside/live there. Baptist Health has an approximately 46% market share in the West PSA. West SSA residents account for approximately 10-15% of Baptist Health’s annual inpatient discharges in its West Service Area. Baptist Health has an approximately 15% market share in the West SSA.

A-40 4834-5782-6476.3 Competition – West PSA and SSA Baptist Health has a strong market position in its West PSA. Baptist Health-Fort Smith is the largest medical center based on the number of licensed beds in its combined West PSA and SSA. Baptist Health has 2 acute care hospitals in its West Primary market area. Baptist Health Acute Care Hospitals located within Baptist Health West PSA

Licensed Location City Location Hospital Beds* County Van Buren, AR Crawford Baptist Health-Van Buren (former Sparks Medical 103 Center – Van Buren) Fort Smith, AR Sebastian Baptist Health-Fort Smith (former Sparks Regional 492 Medical Center) * Baptist Health bed counts are from internal data sources. Other Acute Care Hospitals located within Baptist Health West PSA Location Licensed Location City County Hospital Beds(5)(6) Poteau, OK LeFlore (OK) Eastern Oklahoma Medical Center 25* Fort Smith, AR Sebastian Mercy Hospital – Fort Smith 354 Sallisaw, OK Sequoyah (OK) Sequoyah Memorial Hospital 41 * Critical Access Hospital

The majority of Baptist Health’s competition comes from hospitals located within both the West PSA and SSA. Baptist Health’s largest competitor is Mercy Hospital – Fort Smith, which is also located in Sebastian County where Baptist Health-Fort Smith is located. Baptist Health’s West PSA and SSA also encompass 3 counties within Eastern Oklahoma. Other regional hospital competitors (excluding the Critical Access Hospitals) within the West PSA and SSA listed above and below offer a broad range of primary and specialty medical services like those offered by Baptist Health. The Mercy Hospital System operates 4 critical access hospitals within the West SSA. Baptist Health attracts patients throughout its entire West PSA and SSA for services also offered at competitor hospitals, including, for example, open heart surgery. There is also competition for ambulatory services offered throughout the West PSA and SSA, both by hospitals as well as free-standing centers such as imaging centers, ambulatory surgery centers, outpatient physical therapy centers and physician offices offering diagnostic and surgical procedures within their offices.

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A-41 4834-5782-6476.3 Acute Care Hospitals located within Baptist Health West SSA Location Licensed Location City County Hospital Beds(5)(6) Stigler, OK Haskell (OK) Haskell County Community Hospital 25* Ozark, AR Franklin Mercy Hospital – Ozark 25* Clarksville, AR Johnson Johnson Regional Medical Center 80 Booneville, AR Logan Mercy Hospital – Booneville 25* Paris, AR Logan Mercy Hospital – Paris 16* Mena, AR Polk Mena Regional Health System 65 Waldron, AR Scott Mercy Hospital – Waldron 24* * Critical Access Hospital The following table represents all Medicare inpatient discharges from residents within the Baptist Health West PSA for calendar years 2015 and 2017 – with 2017 being the latest information available. The table also presents the market share for each of the hospital competitors for those years. Historical Medicare Inpatient Discharges and Market Share Baptist Health West PSA (excludes Newborns)(7) Discharges Market Share Hospital 2015 2017 2015 2017 Sparks Regional Medical Center (now BH-Fort Smith) 8,188 7,218 48.5% 43.0% Sparks Medical Center - Van Buren (now BH-Van Buren) 342 405 2.0% 2.4% BH-Little Rock* 32 49 0.2% 0.3% BH-Hot Spring County* 6 12 0.0% 0.1% BH-North Little Rock* 3 5 0.0% 0.0% BH-Conway* 0 3 0.0% 0.0% BH-Arkadelphia* 0 1 0.0% 0.0% BH-Heber Springs* 0 0 0.0% 0.0% BH-Stuttgart* 0 0 0.0% 0.0% Subtotal Baptist Health: 8,571 7,693 50.7% 45.8% Mercy Hospital Fort Smith 5,623 5,908 33.3% 35.2% Eastern Oklahoma Medical Center 764 685 4.5% 4.1% UAMS Medical Center* 172 311 1.0% 1.8% Sequoyah Memorial Hospital 322 262 1.9% 1.6% Washington Regional Medical Center* 184 246 1.1% 1.5% Saint Francis Hospital, Inc* 137 191 0.8% 1.1% St John Medical Center, Inc* 90 153 0.5% 0.9% Northeastern Health System* 106 151 0.6% 0.9% Saint Francis Hospital Muskogee* 147 150 0.9% 0.9% Northwest Medical Center-Springdale* 102 136 0.6% 0.8% CHI St Vincent Infirmary Little Rock* 64 121 0.4% 0.7% Hillcrest Medical Center* 74 102 0.5% 0.6% All Other* 538 690 3.2% 4.1% Totals: 16,894 16,799 100.0% 100.0% * Hospital not physically located within West PSA

A-42 4834-5782-6476.3 The following table represents all Medicare inpatient discharges from residents within the Baptist Health West SSA for calendar years 2015 and 2017 – with 2017 being the latest information available. The table also presents the market share for each of the hospital competitors for those years. Historical Medicare Inpatient Discharges and Market Share Baptist Health West SSA (excludes newborns)(7) Discharges Market Share Hospital 2015 2017 2015 2017 Sparks Regional Medical Center (now BH-Fort Smith)* 916 848 13.1% 12.4% BH-Little Rock* 107 149 1.5% 2.2% Sparks Medical Center - Van Buren (BH-Van Buren)* 25 14 0.4% 0.2% BH-North Little Rock* 13 10 0.2% 0.1% BH-Hot Spring County* 8 8 0.1% 0.1% BH-Conway* 0 4 0.0% 0.1% BH-Heber Springs* 0 1 0.0% 0.0% BH-Arkadelphia* 0 0 0.0% 0.0% BH-Stuttgart* 2 0 0.0% 0.0% Subtotal Baptist Health: 1,071 1,034 15.4% 15.1% Mercy Hospital Fort Smith* 1,820 1,665 26.1% 24.4% Johnson Regional Medical Center 1,024 959 14.7% 14.0% Mena Regional Health System 685 679 9.8% 9.9% CHI St. Vincent - Hot Springs* 292 276 4.2% 4.0% St Mary’s Regional Medical Center* 245 235 3.5% 3.4% UAMS Medical Center* 151 233 2.2% 3.4% Mercy Hospital – Booneville 134 172 1.9% 2.5% Mercy Hospital – Ozark 175 157 2.5% 2.3% Arkansas Heart Hospital* 104 151 1.5% 2.2% CHI St Vincent Infirmary Little Rock* 131 129 1.9% 1.9% Haskell County Community Hospital 102 129 1.5% 1.9% Mercy Hospital – Paris 46 109 0.7% 1.6% Mercy Hospital – Waldron 151 109 2.2% 1.6% Saint Francis Hospital Muskogee* 182 97 2.6% 1.4% Washington Regional Medical Center* 81 96 1.2% 1.4% National Park Medical Center* 80 86 1.1% 1.3% Saint Francis Hospital, Inc* 95 72 1.4% 1.1% River Valley Medical Center* 39 50 0.6% 0.7% Northwest Medical Center-Springdale* 40 47 0.6% 0.7% St John Medical Center, Inc* 30 41 0.4% 0.6% Chambers Memorial Hospital* 28 31 0.4% 0.5% All Other* 263 270 3.8% 4.0% Totals: 6,969 6,827 100.0% 100.0% * Hospital not physically located within West SSA

A-43 4834-5782-6476.3 With the addition of the West PSA and SSA, Baptist Health’s Central and West Service Areas now meet and complement one another to encompass a large majority of the State of Arkansas and 3 counties in Eastern Oklahoma. The only county that was previously in both the Central and West Secondary Service Areas was Johnson County. Based on historical and future potential volumes from Johnson County to Baptist Health, Baptist Health now considers it to be a part of the West Secondary Service Area. While some patients may still travel to Central Arkansas and Little Rock for healthcare services they cannot receive locally, it is much closer to travel to Fort Smith for services than Little Rock. Below is the current Baptist Health Central and West Service Area Map.

Central and West Service Area Map

A-44 4834-5782-6476.3 Historical Utilization A summary of historical utilization data for the System during each of the three fiscal years ended December 31, 2018, and for the eight months ended August 31, 2018 and August 31, 2019, according to System records, is set forth in the following table:

Fiscal Years Ended December 31, Eight Months Ended August 31,

2016(4) 2017 2018(5) 2018 2019(5) Licensed Beds 1,525 1,525 2,138 1,543 2,146 Beds in Service 1,423 1,433 1,712 1,405 1,722 Occupancy(l) 53% 52% 53% 53% 55% Admissions(2) 48,403 50,282 53,369 34,486 43,508 Patient Days(2) 258,757 269,623 282,992 182,527 228,393 Average Length of Stay 5.3 days 5.4 days 5.3 days 5.3 days 5.2 days Average Daily Census 707 739 775 751 940 Observation Cases 9,139 8,474 9,133 5,555 9,002 Outpatient Visits 321,905 334,101 383,797 240,073 364,565 Emergency Room Visits 159,273 175,306 192,234 120,822 172,934 Inpatient Surgical Procedures 11,509 11,700 11,628 7,408 9,525 Outpatient Surgical Procedures 22,971 25,341 26,984 17,258 22,960 Case Mix Index(3) 1.81 1.84 1.87 1.87 1.90

______(1) Based on occupied beds. (2) Excluding newborns. (3) BH-Extended Care case mix is based on long-term care hospital prospective payment system (LTCH-PPS), and BH-Rehab case mix is based on inpatient rehabilitation facility prospective payment system (IRF-PPS). All other case mix values are based on inpatient prospective payment system. (4) Baptist Health Medical Center-Conway opened September 2016. (5) Baptist Health-Fort Smith and Baptist Health-Van Buren acquired November 2018. This table does not reflect statistics for these hospitals prior to November 2018.

Source: Baptist Health records. Sources of Patient Revenue Baptist Health maintains agreements with Blue Cross and Blue Shield of Arkansas (including Health Advantage), a mutual insurance company, the Federal Medicare program and the State of Arkansas Medicaid program, and has entered into various managed care arrangements. These agreements and arrangements govern payments made to the Baptist Health facilities for services rendered to patients covered by these programs and plans. Descriptions of the reimbursement methodologies employed by these third-party payors and summaries of legislation affecting those methodologies are included under the captions “RISK FACTORS” and “REGULATION OF THE HEALTH CARE INDUSTRY” in the Official Statement to which this Appendix A is attached.

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A-45 4834-5782-6476.3 The following table summarizes gross patient revenue by payor source for the nine Baptist Health hospitals located within the Central Arkansas Primary Service Area for the fiscal years ended December 31, 2016 through 2018, and all eleven hospitals operated by Baptist Health for the eight months ended August 31, 2019: Fiscal Years Ended December 31, Eight Months Ended 2016 2017 2018 August 31, 2019 HMO 7.4% 7.3% 7.1% 5.4% Medicare 46.8% 47.6% 47.6% 49.2% Medicaid 11.8% 12.3% 12.7% 13.1% Exchange 9.5% 9.3% 8.9% 7.7% Blue Cross 10.1% 9.1% 9.0% 8.5% Self-Pay 1.6% 1.8% 2.0% 2.4% Other 12.8% 12.6% 12.7% 13.7% 100.0% 100.0% 100.0% 100.0% Source: Baptist Health records Baptist Health participates in the Arkansas Medicaid provider assessment program. Fee assessments of up to 5.5% of patient service revenue are required by the program, and assessment proceeds are used to generate supplemental Medicaid funding from the federal government which are allocated to private hospitals in Arkansas based on each hospital’s share of total Medicaid discharges and outpatient payments. Fee assessments paid under this program are included in other operating expenses. The amounts recorded under this program during the last three fiscal years and for the eight-month periods ending August 31, 2018 and August 31, 2019, are as follows: Medicaid Medicaid Period Revenue Expense Net Benefit FYE 2016 $28,763,000 $12,534,000 $16,229,000 FYE 2017 $27,943,000 $12,417,000 $15,526,000 FYE 2018 $38,728,000 $14,492,000 $24,236,000

Eight months ended: August 2018 $25,872,000 $9,326,000 $16,546,000 August 2019 $34,468,000 $9,900,000 $24,568,000 Source: Baptist Health records Professional Staff and Employees Physician Staff. The administrator of each hospital facility operated by Baptist Health is responsible for assessing the adequacy, in number and mix of specialty, of the physicians practicing at such facility. With the assistance of Baptist Health’s physician recruitment and network development staff, this assessment is performed annually and results in a recruitment plan, if needed, for the coming year. The network development staff works with the various hospital management teams to implement the recruitment plans. Employed Physicians Central Arkansas Service Area. Baptist Health operates 69 medical practices in the Central Arkansas Service Area. Approximately 237 physicians and 175 mid-level providers who work out of these practices are members of AHG which contracts with Baptist MedCare Inc. d/b/a Practice Plus for management services. Baptist MedCare Inc.is a for-profit subsidiary of MMS.

A-46 4834-5782-6476.3 Discharges by Attending Physician (BH-Little Rock and BH-North Little Rock). The following table sets forth the number of active physician staff members by specialty (and the discharges and percentages of discharges by clinical specialty) for BH-Little Rock and BH-North Little Rock as of December 31, 2018. There were no individual physicians who discharged more than 5% of the patients represented in the following table. Number of Active % Discharging Specialty Physicians Physicians Discharges(1) % of Total Cardiology- 5 1.23% 265 0.65% Electrophysiology Cardiology-General 23 5.64 710 1.74 Cardiology-Interventional 22 5.39 1,000 2.45 Emergency Medicine 3 0.74 4 0.01 Family Practice 4 0.98 1,098 2.69 Gastroenterology 14 3.43 45 0.11 Hematology/Oncology 11 2.70 322 0.79 Hospitalist 24 5.88 9,797 24.01 Internal Medicine 11 2.70 5,598 13.72 Neonatology 3 0.74 433 1.06 Nephrology 12 2.94 607 1.49 Neurology 1 0.25 94 0.23 OB/GYN 51 12.46 5,002 12.26 Ophthalmology 2 0.49 4 0.01 Otolaryngology 11 2.70 139 0.34 Pediatrics(1) 61 14.95 3,709 9.09 Physical Medicine & Rehab 6 1.47 743 1.82 Psychiatry 12 2.94 2,587 6.34 Pulmonary Medicine 13 3.19 1,040 2.55 Radiology 7 1.72 90 0.22 Surgery-Cardiovascular 5 1.23 522 1.28 Surgery-General 18 4.41 1,726 4.23 Surgery-Neuro 7 1.72 845 2.07 Surgery-Orthopedics 32 7.84 1,958 4.80 Surgery-Plastic 6 1.47 37 0.09 Surgery-Thoracic 4 0.98 212 0.52 Surgery-Vascular 4 0.98 269 0.66 Urology 11 2.70 567 1.39 Other 25 6.13 1,379 3.38 TOTALS: 408 100.00% 40,802 100.00%

(1) Includes normal newborns. Source: Baptist Health records.

A-47 4834-5782-6476.3 The following table presents the percentage of discharges at BH-Little Rock based on physician ages for the period ending December 31, 2018. Number of Active Physicians Age Discharging Physicians Percent of Total Discharges 34 and under 17 5.9% 35 to 44 101 29.1% 45 to 54 84 25.8% 55 to 64 84 29.6% 65 and over 35 9.6% TOTALS: 321 100.0% Source: Baptist Health records

The following table presents the percentage of discharges at BH-North Little Rock based on physician ages for the period ending December 31, 2018. Number of Active Physicians Age Discharging Physicians Percent of Total Discharges 34 and under 11 11.4% 35 to 44 37 32.6% 45 to 54 37 27.4% 55 to 64 31 24.3% 65 and over 11 4.3% TOTALS: 127 100.00% Source: Baptist Health records

Total number of active discharging physicians in the two tables above will exceed the total number of active physicians due to common physicians admitting to both BH-Little Rock and BH- North Little Rock. These tables only reflect inpatient activity, so physicians with only outpatient activity are not included. As a result, the Active Discharging Physician count will be lower than the count of total active physicians reported in the “Hospitals – Central Arkansas” section. Baptist Health, through AHG, employs 50 hospitalists at the nine hospitals located within Baptist Health’s Central Arkansas Primary Service Area. BH-Little Rock also employs on-site obstetric laborists 24/7 and has an intensivist program. Employed Physicians West Arkansas Service Area. Baptist Health operates 34 medical practices in the West Arkansas Service Area. Approximately 70 physicians and 13 mid-level providers who work out of these practices are employed by Baptist Health Services.

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A-48 4834-5782-6476.3 Discharges by Attending Physician (BH-Fort Smith and BH-Van Buren). The following table sets forth the number of active physician staff members by specialty (and the discharges and percentages of discharges by clinical specialty) for BH-Fort Smith and BH-Van Buren for the period of June 2019 through September 2019. There were no individual physicians who discharged more than 5% of the patients represented in the following table. Number of Active % Discharging Specialty Physicians Physicians Discharges(1) % of Total Cardiology- 1 1.32% 4 0.09% Electrophysiology Cardiology-General 5 6.58 36 0.80 Cardiology-Interventional 1 1.32 9 0.20 Emergency Medicine 1 1.32 1 0.02 Family Practice 14 18.39 751 16.59 Gastroenterology 1 1.32 1 0.02 Hospitalist 19 25.00 2,550 56.33 Internal Medicine 5 6.58 233 5.15 Nephrology 2 2.63 24 0.53 OB/GYN 4 5.26 229 5.06 Otolaryngology 1 1.32 1 0.02 Pediatrics(1) 2 2.63 202 4.46 Podiatry 1 1.32 2 0.04 Psychiatry 2 2.63 150 3.31 Pulmonary Medicine 3 3.95 22 0.49 Radiology 1 1.32 8 0.18 Surgery-General 2 2.63 125 2.76 Surgery-Neuro 2 2.63 24 0.53 Surgery-Orthopedics 5 6.58 94 2.08 Surgery-Thoracic 1 1.32 36 0.80 Urology 2 2.63 23 0.50 Other 1 1.32 2 0.04 TOTALS: 76 100.00% 4,527 100.00%

(1) Includes normal newborns. Source: Baptist Health records

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A-49 4834-5782-6476.3 The following table presents the percentage of discharges at BH-Fort Smith based on physician ages for the period of June 2019 through September 2019. Number of Active Physicians Age Discharging Physicians Percent of Total Discharges 34 and under 10 1.2% 35 to 44 22 58.1% 45 to 54 16 21.4% 55 to 64 18 9.9% 65 and over 7 9.4% TOTALS: 73 100.0% Source: Baptist Health records The following table presents the percentage of discharges at BH-Van Buren based on physician ages for the period of June 2019 through September 2019. Number of Active Physicians Age Discharging Physicians Percent of Total Discharges 34 and under 4 4.6% 35 to 44 4 83.5% 45 to 54 1 1.3% 55 to 64 2 10.6% 65 and over 0 0.0% TOTALS: 11 100.00% Source: Baptist Health records Total number of active discharging physicians in the two tables above will exceed the total number of active physicians due to common physicians admitting to both BH-Fort Smith and BH- Van Buren. Baptist Health, through Baptist Health Services, employs 30 hospitalists at the two hospitals located within Baptist Health’s West Arkansas Primary Service Area. Nursing Staff. The nursing complements supporting all Baptist Health hospital operations as of August 31, 2019, were estimated as follows: RN FTEs LPN FTEs BH-Little Rock 1,149 11 BH-North Little Rock 366 18 BH-Rehab 41 12 BH-Arkadelphia 56 7 BH-Heber Springs 41 9 BH-Stuttgart 58 17 BH-Extended Care 52 18 BH-HSC 57 1 BH-Conway 118 - BH-Fort Smith 365 55 BH-Van Buren 31 3 Baptist Health 138 12 TOTALS: 2,472 163

A-50 4834-5782-6476.3 Currently, the nursing and technical complements at all Baptist Health facilities are staffed to the organization’s core staffing model. Approximately 3% of the nursing FTEs complement is staffed with non-employee contract labor. Full-Time Equivalent Employees. As of August 31, 2019, Baptist Health employed 8,953 full-time employee equivalents. A breakdown of the number of full-time equivalent employees of Baptist Health, by area of service, is as follows: Area of Service Employee FTEs Administrative Services 212 General Services 869 Medical Services 1,445 Nursing Services 3,368 Non-Hospital 1,883 Baptist Health Services 1,176 TOTAL: 8,953 Source: Baptist Health records

Administrative Services includes those employees in the administrative and business offices of the hospitals operated by Baptist Health. General Services includes dietary, housekeeping, maintenance, grounds and security employees. Medical Services includes those employees involved in laboratory, pharmacy, respiratory therapy, physical therapy and occupational therapy services. Nursing Services includes all nurses and nurse’s aides located in the eleven hospital facilities, and Baptist Health Services refers to employees affiliated with Financial Services and the Baptist School of Nursing. There are no collective bargaining agreements presently in effect with respect to Baptist Health employees, nor, to management’s knowledge, are any attempts being made currently to seek organized employee representation. Management considers its relations with employees to be good. Management believes that salaries and benefits for nursing and other employees are competitive with or comparable to salaries and benefits provided by other facilities in Baptist Health’s primary service areas. Pension Plan. Baptist Health previously maintained a retirement plan for employees who attained the age of 25 and completed one full year of employment with Baptist Health. This plan was funded to provide a defined benefit upon normal retirement at age 65. Effective January 1, 2009, this pension plan was frozen and a defined contribution plan was put in place for all Baptist Health entity employees. Baptist Health will continue to fund current obligations under the frozen retirement plan, but employees will earn no additional benefits thereunder. Under the new defined contribution plan, a base contribution is determined based on years of service. A match opportunity is also available. All Baptist Health contributions are vested after three years of employment. For the defined benefit plan (the “Plan”), Baptist Health records annual amounts relating to its pension plan based on calculations that incorporate discount rate, mortality, assumed rates of return, compensation rates, turnover rates and healthcare cost trends based on an independent

A-51 4834-5782-6476.3 actuary report. Baptist Health reviews its assumptions on an annual basis and makes modifications to assumptions based on current interest rates and trends when it is appropriate to do so. The Plan’s funding policy is to make annual contributions as determined by the Plan’s actuary, subject to adjustment for full funding as defined by the Internal Revenue Code. The projected benefit obligation at the end of December 31, 2018 was $363 million and the market value of the Plan assets was $324 million, a difference of $39 million. Consequently, the Plan was 89% funded as of that fiscal year end, according to GAAP. The assumptions used to determine net periodic pension costs were as follows:

Discount rate 4.13% Expected long-term rate of return on assets 4.25% The long-term rate of return on Plan assets is based upon management’s estimate of future long-term rates of return on similar assets and is consistent with historical returns on such assets. Baptist Health anticipates that it will contribute approximately $10 million per year to the Plan. See footnote (18) in Appendix C for additional information about the Plan. Baptist Health does not provide post-retirement healthcare benefits. Financial Information Set forth in Appendix C to this Official Statement are the consolidated financial statements of Baptist Health for the fiscal years ended December 31, 2017 and 2018, which consolidated financial statements have been audited by BKD, LLP, Little Rock, Arkansas, independent certified public accountants, as stated in their report appearing in Appendix C. The notes set forth in Appendix C are an integral part of such consolidated financial statements, and the statements and notes should be read in their entirety. Baptist Health did not request BKD, LLP to perform any updating procedures subsequent to the date of its audit report on the December 31, 2018, financial statements. Set forth in Appendix D to this Official Statement are the unaudited consolidated financial statements of Baptist Health as of and for the eight months ended August 31, 2018 and August 31, 2019. In the opinion of management, the unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations for the indicated periods. The results of operations for the eight months ended August 31, 2019 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2019.

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A-52 4834-5782-6476.3 Following is a summary of the consolidated statements of operations and balance sheets of Baptist Health for the three fiscal years ended December 31, 2018, and for the eight months ended August 31, 2018 and August 31, 2019. Information for the summary was derived from the audited and the unaudited consolidated financial statements of Baptist Health. The following table should be read in conjunction with the financial statements in Appendix C and Appendix D.

Baptist Health Consolidated Statements of Operations

(Dollars in Thousands)

Fiscal Year Ending Eight Months Ending (Audited) (Unaudited) 12/31/2016 12/31/2017 12/31/2018 8/31/2018 8/31/2019 Revenues, Gains, and Other Support Without Donor Restrictions Patient service revenue $ 946,106 $ 1,005,139 $ 1,125,244 $ 723,116 $ 947,203 Management fees, lease income and other 79,294 84,127 90,670 56,952 70,172 Total revenues, gains and other support without 1,025,400 1,089,266 1,215,914 780,068 1,017,375 donor restrictions

Expenses and Losses Salaries and wages 476,585 526,021 583,663 376,071 464,814 Employee benefits 113,968 115,803 124,512 80,059 92,248 Supplies 193,866 203,542 225,857 146,052 199,122 Professional fees 36,370 36,271 36,194 22,299 34,345 Other operating expenses 162,853 172,826 192,569 121,187 166,575 Depreciation and amortization 50,054 60,177 65,965 41,095 47,877 Interest 938 4,678 8,032 4,645 10,479 Total expenses and losses 1,034,634 1,119,318 1,236,792 791,408 1,015,460

Operating Income (Loss) (9,234)(30,052) (20,878) (11,340) 1,915

Other Income (Expense) Investment return 26,854 48,941 (26,250) 11,112 40,362 Gain on investment in equity investees 2,526 3,571 3,401 2,728 5,477 Other (2,585) 141 (1,352) (60) (1,258)

Total other income (expense) 26,795 2,653 (24,201) 13,780 44,581

Excess (Deficiency) of Revenues Over Expenses $ 17,561 $ 22,601 $ (45,079) $ 2,440 $ 46,496

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A-53 4834-5782-6476.3 Baptist Health Consolidated Balance Sheets

(Dollars in Thousands)

(Audited) (Unaudited) As of As of 12/31/2016 12/31/2017 12/31/2018 8/31/2018 8/31/2019 Assets Current Assets Cash and cash equivalents $ 33,123 $ 26,332 $ 58,915 $ 63,031 $ 83,083 Short-term investments and other 10,736 10,174 5,922 5,514 6,335 Patient accounts receivable 97,740 109,565 144,945 122,750 174,655 Estimated amounts due from third-party payors 20,194 21,238 22,062 17,769 17,907 Supplies, prepaid expenses and other 52,645 56,930 79,098 45,838 87,906 Total current assets 214,438 224,239 310,942 254,902 369,886

Assets Limited as to Use 461,415 454,279 402,764 444,560 434,747

Property and Equipment, Net 582,062 608,896 741,140 600,955 736,960

Other Assets 69,959 76,763 78,411 80,506 99,899

Total assets $ 1,327,874 $ 1,364,177 $ 1,533,257 $ 1,380,923 $ 1,641,492

Liabilities and Net Assets Current Liabilities Line of credit and current maturities of long-term debt $ 32,279 $ 32,313 $ 14,288 $ 39,610 $ 15,236 Accounts payable and accrued expense 120,612 120,431 167,424 127,604 178,229 Estimated amounts due to third-party payors 1,447 2,065 1,246 2,439 - Current portion of deposits by residents 2,368 999 1,563 1,315 1,478 Total current liabilities 156,706 155,808 184,521 170,968 194,943

Other Liabilities Long-term debt, net 238,894 250,035 436,752 253,478 479,578 Pension liabilities 57,399 51,108 39,084 45,715 58,900 Other liabilities 54,543 56,013 57,503 55,273 69,763

Total liabilities 507,542 512,964 717,860 525,434 803,184

Net Assets Without donor restrictions Baptist Health 793,002 823,961 787,452 827,034 805,807 Noncontrolling interests 2,478 4,508 4,979 4,800 4,603 Total net assets without donor restrictions 795,480 828,469 792,431 831,834 810,410 With donor restrictions 24,852 22,744 22,966 23,655 27,898

Total net assets 820,332 851,213 815,397 855,489 838,308

Total liabilities and net assets $ 1,327,874 $ 1,364,177 $ 1,533,257 $ 1,380,923 $ 1,641,492

A-54 4834-5782-6476.3 Management’s Discussion and Analysis of Financial Performance Below is a discussion of key financial and business results for Baptist Health during the past three fiscal years.

In fiscal years 2017 and 2018, Baptist Health experienced a decline in profitability due to various cost and industry pressures, as well as larger than expected losses associated with the new BH–Conway hospital, during which years the new hospital posted operating losses of $31.7 million and $25.5 million, respectively. In fiscal year 2018, Baptist Health also incurred $3.9 million in losses associated with the acquisition of BH–Fort Smith and BH–Van Buren. Consolidated operating losses were $30 million in fiscal year 2017 and narrowed to $21 million in fiscal year 2018. Excluding BH–Conway, BH–Fort Smith and BH–Van Buren, Baptist Health generated $1.6 million in operating income in 2017, which improved to $8.5 million in operating income in 2018.

Following the losses in fiscal year 2017 and 2018, Baptist Health had a positive operating margin of $1.9 million (0.2%) for the first eight months of the 2019 fiscal year (ended August 31, 2019). The first eight-month result for fiscal year 2019 includes $11.2 million of operating losses associated with BH–Conway which represents continued and significant improvement from fiscal year 2018 results as management continues to address physician staffing difficulties. The first eight-month results for fiscal year 2019 also includes $16.5 million in operating losses for BH– Fort Smith and BH–Van Buren primarily driven by transition and integration costs, many of which were one-time costs. Excluding BH–Conway, BH–Fort Smith and BH–Van Buren, Baptist Health generated $29.6 million of operating income for the eight months ending August 31, 2019 which represents significant improvement from fiscal year 2018 performance. This improvement was primarily driven by an extensive action plan in which we targeted $56 million in performance improvement in fiscal 2019. The plan addresses the areas of the workforce and medical group, clinical quality, purchased services, and other internal divisions. Through the eight months ended August 31, 2019, actual improvements in operating performance slightly exceed the target by about $8 million.

Total Excess of Revenues Over Expenses was $22.6 million for fiscal year 2017 due to positive non-operating and investment results. Investment losses in fiscal year 2018 resulted in a Deficiency of Revenues Over Expenses of $45 million. Investment returns for the first eight months of fiscal year 2019 exceeded the investment losses from fiscal year 2018, resulting in Excess of Revenues Over Expense of $46 million. Baptist Health maintains a strong balance sheet, with total assets growing as of August 31, 2019, to over $1.6 billion. Baptist Health’s cash and investments have grown; however, the acquisition of BH–Fort Smith and BH–Van Buren increased cash operating expenses, negatively impacting days cash on hand, which was 128 as of August 31, 2019 (compared to 140 as of December 31, 2018). With the acquisition of BH–Fort Smith and BH–Van Buren with interim bank financing, the long-term debt to capitalization increased to 35.8% and unrestricted cash to long-term debt was 106.6% as of August 31, 2019. Positive investment returns increased Baptist Health’s pension assets, but a decrease in interest rates resulted in an increased pension liability. At the end of fiscal year 2018, the pension

A-55 4834-5782-6476.3 funding ratio was over 89% and pension liability was reduced to $39 million. At August 31, 2019, the pension funding ratio was over 86% and pension liability increased to $59 million. Management continues to work towards fully funding the frozen pension plan and terminating such plan, thereby eliminating the investment risk of a defined benefit plan from Baptist Health’s balance sheet while still providing retirements benefits for employees through funding annuities and continuing a defined contribution (403b) plan. In fiscal year 2019, Baptist Health is settling another part of its pension liability with certain vested employees by making lump-sum cash payments to or purchasing annuity contracts for these employees in exchange for their rights to receive specific benefits. BH-Foundation continues to benefit from successful fundraising events, and positive investment results. Its total assets were over $40 million as of August 31, 2019. Baptist Health is well positioned with AHG, BHS, Practice Plus and other physician joint venture partners to provide the most comprehensive access to primary care and specialty services of any health care organization in Arkansas. BHPP’s clinical integration partnership with approximately 1,000 physicians in Central Arkansas is fully organized and is expected to continue to provide improved outcomes and higher quality care at a lower cost. Because of the partnership Baptist Health is well-positioned for contracting with local self-funded insurance plans, and local and national insurance payors at improved rates for its hospitals and physician partners. Baptist Health remains committed to its long-term partnership with Arkansas Blue Cross Blue Shield and their joint ownership of Health Advantage, the largest HMO insurer in Central Arkansas and throughout the state. Baptist Health continues to look for ways to provide the most effective care coverage models and insurance products for its patients. Several BHPP contracts are administered through Health Advantage. Health Advantage also remains stable financially, with Baptist Health’s share of equity earnings in fiscal year 2018 totaling $307,000. Capitalization Historical and Pro Forma Debt to Capitalization Ratio The following table shows the debt to capitalization ratio for the System for the fiscal years ended December 31, 2016 through 2018 and the eight months ended August 31, 2018 and August 31, 2019. The pro forma August 31, 2019, column reflects the amounts and debt to capitalization ratio as if the Series 2019 Bonds and the Series 2019 Baptist Health Corporate Bonds had been issued as of that date.

(Audited) (Unaudited) (Amounts shown in thousands) As of As of August 31st Pro Forma 2016 2017 2018 2018 2019 8/31/2019 Net Long-Term Debt $238,894 $250,035 $436,752 $253,478 $479,578 $474,255 Unrestricted Net Assets $795,480 $828,469 $792,431 $831,834 $810,410 $810,410 Total Capitalization $1,034,374 $1,078,504 $1,229,183 $1,085,312 $1,289,988 $1,284,665 Capitalization Ratio 23.1% 23.2% 35.5% 23.4% 37.2% 36.9%

A-56 4834-5782-6476.3 Investments and Liquidity Investment Policy and Procedures All non-retirement investments are governed by a System-wide investment policy developed and overseen by the Finance Committee of the Board. Baptist Health has retained various professional investment managers to oversee its long- term investments in different classes of securities according to asset allocation targets that are set in conjunction with Baptist Health’s overall strategic and financial plan. In addition, Baptist Health retains a consultant to provide recommendations on investment manager performance and selection of new managers. The various fixed income and equity portfolios have investment guidelines for style, objectives, concentration limitations, credit quality, performance benchmarks, and allowable/non-allowable investments. The Finance Committee meets with its investment consultants periodically to review investments and their performance and to ensure compliance with the asset allocation guidelines. Cash and cash equivalents, $83.1 million at August 31, 2019, are maintained on hand for day-to-day operational needs and are maintained separately from the investments shown in the table below. Liquidity The following table sets forth liquidity for the System measured by operating cash, general fund investments and funded depreciation investments. (Audited) (Unaudited) As of As of August 31

2016 2017 2018 2018 2019 Cash and cash equivalents $ 33,123 $ 26,332 $58,915 $ 63,031 $ 83,083 Funded Depreciation Investments 332,330 365,167 337,483 373,145 372,972 General Fund Investments 41,743 36,198 31,287 34,632 31,619 Other Investments 20,781 24,855 21,755 21,980 23,754 Total Cash and Investments $427,977 $452,552 $449,440 $492,788 $511,428

Cash Operating Expenses $984,580 $1,059,141 $1,170,827 $750,313 $967,583 Measurement Days 366 365 365 243 243

Days’ Cash on Hand 159 156 140 160 128 Long-Term Debt and Hedge Agreement Plan of Financing The Series 2019 Bonds and Series 2019 Baptist Health Corporate Bonds are being issued as part of a common plan of financing in order to (i) refinance a portion of Baptist Health’s 2016 Bank of America line of credit, (ii) refinance Baptist Health’s 2018 Bank of America credit facility in full, (iii) refinance Baptist Health’s 2018 Bank of America interim loan in full, (iv) finance certain capital improvements to the health care facilities of Baptist Health, and (v) pay all costs of issuance for the Series 2019 Bonds and Series 2019 Baptist Health Corporate Bonds. See “PLAN OF FINANCING” in the front portion of this Official Statement.

A-57 4834-5782-6476.3 Insurance Baptist Health maintains a self-insurance trust (“DRI”) to pay malpractice and general liability claims, including both patient and non-patient claims up to a retention limit, self-insures a portion over that limit and carries excess coverage above that limit. DRI was formed and licensed in the State of Arkansas to assume the retained portion of medical malpractice, general liability, and workers’ compensation claims arising on or after December 16, 2015. Automobile liability and physical damage coverage was added to DRI in December 2017. Cash transfers to DRI are based on premium levels established by DRI, management, as well as State of Arkansas statutory capital requirements. DRI in turn reinsures this liability. The reserve for claims represents asserted and unasserted malpractice and general liability, automobile liability, and workers’ compensation claims against BH. The reserve for claims is estimated by BH management using information supplied by legal counsel and an independent actuarial firm. Workers’ Compensation and Unemployment Benefits. Baptist Health is self-insured (through DRI) with respect to workers’ compensation benefits for employees in accordance with Arkansas law. Baptist Health has established a reserve for payment of claims, and payments to the reserve are charged against income in the year paid. Both salary continuation benefits and medical benefits are available, and employees are permitted to use sickness and disability insurance benefits provided by Baptist Health to supplement workers’ compensation payments up to the limit of an employee’s regular salary. Baptist Health also provides hospitalization and major medical insurance, term life insurance, accidental death and dismemberment coverage, and long- term disability insurance for all permanent employees. Baptist Health maintains commercial insurance policies for:

 Physician professional liability more than amounts required by Arkansas Law, General Liability, Helipad and Excess/Umbrella Liability Coverage

 Excess Workers Compensation Insurance

 Directors & Officers, Cyber Breach Response and Liability, Kidnap/Ransom/Extortion, Active Shooter, Employee Theft, Environmental Liability

 Liability Coverage extends to include subsidiaries Independent insurance representatives review the insurance program annually for appropriate limits and competitive market pricing and assess if any additional coverage is necessary. Management believes that the current levels of insurance are satisfactory. Capital Project Plans Except for the expenditure of the proceeds of the Series 2019 Bonds to refinance the acquisition of certain hospital and healthcare equipment, furnishings and other personal property for, and to make certain capital improvements to BH–Fort Smith and BH–Van Buren, Baptist Health has no current plans to incur additional debt to finance capital projects.

A-58 4834-5782-6476.3 Other than the BH–Fort Smith and BH–Van Buren acquisition and related capital projects primarily financed with the proceeds of the Series 2019 Bonds, there are no other major building projects underway or planned at the present time. However, Baptist Health expects to make routine capital expenditures for equipment and technology purchases and fund them with available operating revenues and cash reserves. Baptist Health does not currently intend to issue additional debt for such expenditures. Information Technology In 2009, based on an independent consulting firm’s assessment of Baptist Health’s Information Services organization and strategy, Baptist Health began to reduce the number of its departmental information systems and to adopt a “Best of Suite” strategy. This strategy has allowed Baptist Health to reduce the number of “interfaced systems” and through fewer integrated data bases, reduce data fragmentation, complexity and expense. In 2010, Baptist Health selected Epic as its integrated care delivery platform. Epic is an industry leader in advanced electronic medical record technology. From 2010 through 2017, Baptist Health implemented the core modules of Epic’s integrated clinical and revenue cycle systems across all of its hospitals and clinics. These same modules were fully implemented for BH–Fort Smith and BH–Van Buren hospitals and clinics in 2019. Epic products and services have enabled Baptist Health to improve areas of clinical safety such as electronic medication administration and physician order entry and delivers the capabilities to continue improvements of revenue cycle performance. The deployment of Epic products and services allowed Baptist Health’s hospitals and clinics to achieve HIMSS Analytics Stage 6 designation. Stage 6 hospitals and clinics are deemed to possess the technical capabilities necessary to provide the highest level of patient safety and quality outcomes. On the business side of Baptist Health has standardized the Lawson (Infor) software suite and continues to make investments in modules to allow for better management of supplies and labor. In 2014, Baptist Health deployed a “Source of Truth” data warehouse that allows analysis of labor, supply and clinical activities from one integrated data base. All Baptist Health information services offerings are supported by system management principles which allow for highly available, secure, recoverable data and systems. Baptist Health has, and will continue, to undergo internal and independent risk assessments to help eliminate vulnerabilities and risk associated with the extensive use of information systems and technology. Managed Care Over the past several years, increased sensitivity to the cost of health care and the desire to reduce health care costs have led to substantial growth among health maintenance organizations, preferred provider organizations and other alternative delivery systems. This trend has had, and will continue to have, a profound impact on the source of Baptist Health’s revenues. Revenues derived from managed care arrangements accounted for 44.6%, 44.2% and 45.1% of the gross revenues of Baptist Health for the fiscal years ended December 31, 2016, 2017 and 2018, respectively.

A-59 4834-5782-6476.3 Baptist Health, through its for-profit subsidiary MMS, is a partner with Blue Cross and Blue Shield of Arkansas in a joint venture which formed Health Advantage, the largest health maintenance organization in the State of Arkansas. Baptist Health Physician Partners (“BHPP”). On November 28, 2012, Baptist Health filed Articles of Organization for BHPP. This entity, with the participation of a steering committee of Little Rock physicians, was formed to develop a physician network to work in conjunction with Baptist Health to engage in the process of clinical integration, which is defined by relevant guidance and enforcement policy of the U.S. Department of Justice and the Federal Trade Commission to mean the implementation of an active and ongoing program to evaluate and modify practice patterns by the network’s physician participants and create a high degree of interdependence and cooperation among the physician members to control costs and ensure quality. Goals of this network include: (1) establishing mechanisms to monitor and control utilization of health care services that are designed to control costs and assure quality of care, (2) selectively choosing network physicians who are likely to further these efficiency objectives, and (3) the significant investment of capital‚ both monetary and human, in the necessary infrastructure and capability to realize the claimed efficiencies. Effective January 2, 2014, BHPP entered into an agreement with the Baptist Health Employee Plan (“Health Plan”) to manage Health Plan’s 13,700 members in a shared savings contract. BHPP has subsequently assisted in the management of the Health Plan for the last 5 years and has participated in evolving this plan into a large employer self-insured narrow-network health plan with quality and efficiency performance enhanced by the participation of the physician network. BHPP has also in that time collaborated with Arkansas Blue Cross Blue Shield and United Health Care attributed health plans with plan participant attribution ranging variably for 75,000 to 100,000 lives. BHPP has also contributed as the main driving force for the Bundled Payment Care Improvement – Advanced Strategy CMS Innovation project for the Little Rock and North Little Rock hospitals for 2018-2019 with clinically and financially successful execution on the initiative. BHPP has also contributed substantially to the success of hospital quality and efficiency improvement projects including Blood Utilization, Outpatient Surgical Start Times, Postoperative Overnight Stay, and Surgical Preference Card Standardization. BHPP has partnered with the Revenue Cycle Division of the System to improve the quality of the physician documentation in the hospitals to optimize the accuracy of physician quality performance data acquisition and reporting for quality activity in the CIN. The BHPP clinical pharmacist has participated very productively in the achievement of pharmacy utilization and optimization in support of patient care and health plan performance as well as vigorous participation in a meaningful response to the opioid crisis. The clinical pharmacist has also been crucial in decisions regarding the employee health plan PBM activities and the formulation of a 340B drug pricing strategy. BHPP has played a central role in the System management of diabetes. BHPP has lent meaningful support to the System in execution on the joint ventured Medicare Shared Savings Track 1+ ACO which is owned by Baptist Health and UAMS covering 36,000 Medicare participants. BHPP also supports the management of the risk model Medicare Advantage plan jointly conducted by Baptist Health and Health Advantage with 1,000 plan participants.

A-60 4834-5782-6476.3 System Vision and Strategic Initiatives

The System’s vision is to “improve the health of Arkansas by changing the way healthcare is delivered” The System has committed to a strategic framework, which includes the following pillars:

 Access — Attracting new customers, providing exceptional experience, creating loyalty and investing in new care delivery models.

 Population-Health Management — Succeeding in new payment models, driving high-quality care and diversifying the portfolio.

 Strategic Growth — Targeting initiatives to drive growth in untapped markets and/or services in support of access and population-health efforts.

 Operational Effectiveness — Transforming and optimizing the way we care for people and delivering highly reliable and effective care.

 Partnerships and Community — Partnering with community organizations, physicians, health systems and payers to support our mission and vision.

 Workforce Development and Engagement — Attracting, retaining and developing the next generation of caregivers, physicians and leaders.

The following list highlights some of the key strategic initiatives undertaken by the System since 2016 to achieve its vision.

Jan 2016 Baptist Health Urgent Care opens new urgent care centers in North Little Rock and Bryant

July 2016 BH-Little Rock installs Angel Eye Camera Systems with 30 cameras in the Neonatal Intensive Care Unit (NICU), allowing parents to view their baby remotely

July 2016 Baptist Health and Carelink start operations of the new partnership, Complete Health with PACE, which provides coordinated care and services for seniors

Sep 2016 BH-Conway officially opens to patients

Dec 2016 Baptist Health first health care system in Arkansas to go live with integrated CareFusion IV pumps for increased patient safety

Jan 2017 Baptist Health Urgent Care opens new urgent care center in Jacksonville

A-61 4834-5782-6476.3 Feb 2017 Baptist Health Women’s Center-Conway, a 50,000-square-foot facility with laborists and a Level II specialty care nursery, opens at BH-Conway

Apr 2017 BH-Little Rock implants Arkansas’ first Total Artificial Heart

July 2017 Baptist Health holds ribbon cutting for new 75,000-square-foot Medical Office Building on BH-Conway campus

Aug 2017 Baptist Health and the University of Arkansas for Medical Sciences announce an alliance to offer a wider range of educational opportunities and deliver clinical care more efficiently

Sep 2017 BH-Conway becomes first hospital in state to offer latest, full robotic-assisted da Vinci XI Surgical System

Oct 2017 Baptist Health Urgent Care opens new urgent care center in Benton

Dec 2017 Baptist Health Urgent care opens new urgent care center in Cabot

Jan 2018 BH-Little Rock performs first-of-its-kind procedure on bile duct stones in Arkansas

Jan 2018 Baptist Health and UAMS joint venture starts first year measurement under new Medicare MSSP Track 1+ program with more than 30,000 attributed lives

Feb 2018 Baptist Health starts offering innovative Mako robotic technology that can personalize joint replacement procedures for patients in Little Rock and North Little Rock

Apr 2018 Baptist Health begins providing Halo Sleep Sacks to every baby born at its hospitals to help reduce the incidence of Sudden Infant Death Syndrome (SIDS)

Nov 2018 Baptist Health officially assumes operations of Sparks Health System, which includes approximately 1,600 employees across hospitals in Fort Smith and Van Buren as well as affiliated physician clinics

Dec 2018 Baptist Health Urgent Care opens new urgent care center in Little Rock

Dec 2018 Neurosurgeons perform Arkansas’ first spine surgery using the Mazor X Robotic Guidance Platform at BH-Little Rock

A-62 4834-5782-6476.3 Dec 2018 BH-Conway becomes first hospital in Arkansas to utilize Stryker Pivot Guardian Distraction System for hip arthroscopy

Jan 2019 Baptist Health opens two new community clinics in North Little Rock – Baptist Health Family Medicine Residency Clinic and Baptist Health Internal Medicine Clinic

Mar 2019 Baptist Health, Navaux Inc. begin offering blood test that can detect the earliest stages of cancer based on identification of the protein Hepsin in blood

July 2019 BH-Little Rock first hospital in U.S. to adopt EleGARD Patient Positioning System for CPR

July 2019 First class of residents begin studies in Internal Medicine and Family Medicine as part of the Baptist Health-UAMS GME Program

Aug 2019 BH-Heber Springs Campus Clinic opens

Sep 2019 Baptist Health Urgent Care opens new urgent care center in Fort Smith

Sep 2019 Baptist Health launches myBaptistHealth app, providing mobile access to Arkansas’ largest, most trusted health care provider

Oct 2019 BH-Conway first hospital in Arkansas to offer innovative Inspire sleep apnea therapy

Oct 2019 BH-Conway earns first, only Baby-Friendly hospital designation in Faulkner County

Corporate Compliance Baptist Health has a long-standing reputation for conducting both business and patient care activities with the highest level of ethical behavior and in compliance with applicable governing laws, rules and regulations. Baptist Health recognizes the problems that both deliberate and accidental misconduct in the healthcare industry can pose when non-compliance with applicable laws and regulations occurs. As a Christian-based, values-driven organization, Baptist Health is committed to ensuring that it consistently operates under the highest ethical and moral standards as well as legal standards. As evidence of Baptist Health’s commitment to continued compliance with all applicable federal, state and local laws, rules and regulations, the Board of Trustees has directed, by resolution, the development and implementation of a comprehensive Corporate Compliance Program, which is administered by Baptist Health’s Corporate Compliance Officer. The program

A-63 4834-5782-6476.3 is developed around the seven essential elements of an effective corporate compliance program as described by the Office of Inspector General. 1. Implementing written policies, procedures, and standards of conduct. 2. Designating a compliance officer and compliance committee. 3. Conducting effective training and education. 4. Developing effective lines of communication. 5. Conducting internal monitoring and auditing. 6. Enforcing standards through well-publicized disciplinary guidelines. 7. Responding promptly to detected offenses and undertaking corrective action In February 2015, Baptist Health entered into corporate integrity agreement (CIA) with the United State Office of Inspector General (OIG). The terms of the CIA obligate the Corporation to maintain the seven essential elements enumerated above, provide certain additional training and education, have Medicare and Medicaid claims for zero-day and one-day inpatient admissions reviewed by an independent review organization, and provide various periodic reports to the OIG. The CIA is effective for five years. Educational Affiliations In addition to its own nursing education programs, Baptist Health maintains affiliations with the University of Central Arkansas, the University of Arkansas at Little Rock, Harding University, Arkansas Tech University, National Park Community College and the University of Arkansas College of Nursing to provide clinical experiences for nursing students in Associate, Bachelor, Master and Doctorate degree programs. Baptist Health also maintains a Department of Medical Education at BH-Little Rock, which is affiliated with the UAMS Campus and through which residents, interns and medical students have assignments in several specialty areas at BH-Little Rock. In addition, Baptist Health affiliates with Trinity University in San Antonio, Texas, Washington University in St. Louis, Missouri, and the University of Alabama at Birmingham, Alabama in the awarding of a master’s degree in Health Care Administration. In the field of pastoral care education, Baptist Health participates in a chaplain internship and hospital ministry program with Ouachita Baptist University for seminary and graduate students. Various BH-Little Rock schools and the Pastoral Care Department jointly continue to support a program that provides a chaplain as a faculty member for all schools operated by the organization. BH-Little Rock maintains affiliations with the University of Tennessee, the University of Southwestern Louisiana, Arkansas Tech University and Louisiana Tech University in connection with degree programs in medical records administration. Quality, Risk Management and Patient Safety Overview All Baptist Health hospitals are committed to achieving the highest level of clinical quality and patient safety. From the chief medical officers to the bedside and ancillary staff, all play an active role in providing best quality and patient centered care. Some methods and examples of such care are briefly detailed below.

A-64 4834-5782-6476.3 Quality All Baptist Health hospitals comply with the Centers for Medicare and Medicaid Services (CMS) Conditions of Participation requirements pertaining to Quality Assurance and Performance Improvement (QA & PI). Hospital specific QA & PI plans align with the Baptist Health mission, vision and values promoting quality, patient-centered, safe, cost effective and efficacious care, while providing for the spiritual, emotional and physical needs of the populations served. A quarterly report depicting clinical quality and patient safety measures is provided to the Baptist Health Board of Trustees. The goals of the hospital specific QA & PI Plans are to:  Align quality improvement efforts with the organization’s strategic plan and continuous improvement objectives.  Utilize internal and external comparator data to identify and prioritize improvement opportunities within and across program areas.  Promote the performance improvement process to achieve desired outcomes utilizing evidence based best practices and to evaluate the effectiveness of quality improvement initiatives.  Identify, prevent and reduce potential risks in patient care and safety through coordination of information with the Baptist Health Patient Safety Program and Risk Management Programs. Quality/patient safety multidisciplinary committees meet regularly at each of the Baptist Health hospitals. These committees establish metrics, baselines and targets for their department, program, units or function. For example, there are patient care/safety specific committees that review the unit specific audits pertaining to compliance with The Joint Commission (TJC) National Patient Safety Goals as well as other care specific items such as pain control, central line care, falls, etc. Program Line Reports are also reported quarterly for such service lines as Bariatrics, Stroke, Transplant, Surgery, Women and Children. Any issues that are not resolved or need further review due to tracking and trending patterns are referred to the medical and administrative staff for the hospital specific Quality Review Committees (QRC) and/or the hospital Medical Executive Committees as indicated. Some basic hospital functions that are routinely reported to the Quality Review Committees are Pharmacy & Therapeutics, Infection Control, Blood Product Usage, Patient Safety, and defined Clinical Quality Metrics. All Baptist Health hospitals comply with reporting of any variance to typical patient care as a Quality Assurance Communication (QAC) to the Baptist Health Risk Management Dept. Some examples of common initiatives that all Baptist Health hospitals have embraced for quality improvement are improving central line blood stream infection rates, improving urinary catheter associated infection rates, decreasing Early Elective Deliveries (EED), decreasing mortality related to sepsis, decreasing surgical site infections, improving the patient experience survey responses, improving the care of acute myocardial infarction, community acquired pneumonia, and surgical care improvement projects.

A-65 4834-5782-6476.3 Risk Management Clinical Risk Management. Baptist Health’s Risk Management Department supports its mission by providing a patient-centered risk management program through collaborative partnerships between the risk management staff and members of the health care team. The focus is on reducing serious patient safety events and preventable harm to patients. The objective is to improve patient outcomes by implementing practice standards and procedures that will result in quality/performance improvement, infection control, and overall improvement of our organization’s care management environment. Processes to identify and address patient safety risks include: occurrence reporting, on-site patient safety rounds, daily patient safety huddles, patient safety committees, reviewing and responding to patient complaints and grievances, complying with regulatory and Joint Commission standards, and conducting root cause analyses on sentinel events. Focused clinical risk reviews have been conducted in high risk clinical areas such as obstetrics and emergency department. Referrals regarding unexpected patient outcomes, serious safety events causing harm and patient grievances are reported to the nursing peer review committees and medical staff control committees for their review and follow-up. Claims Management. Claims Management includes (i) early investigation and intervention in instances when patients have unexpected outcomes or are harmed by a serious safety event; (ii) early reporting of potentially compensable events and claims to the captive re- insurers; (iii) facilitate bi-monthly System Claims Committee meetings set to review litigation strategy, review and approve claim reserve changes and case resolution strategy; (iv) oversee, select and evaluate defense counsel management of litigation files; (v) maintain an electronic claim file to include discovery reports and documents and track indemnity and expense reserves; (vi) attend mediations and witness depositions, and trials; (viii) secure patient records and other evidence needed for litigation and asserted claims. Insurance Program Management. Insurance Program Management includes the assessment and evaluation of organizational financial and enterprise risks, and the procurement of appropriate insurance products and policies that help to protect the organization from catastrophic losses by transferring financial risk to the relevant insurance markets. Litigation For all claims discussed below, as of the date of this Official Statement, management of Baptist Health does not know of any facts or set of facts in connection with such claims from which liability might arise which individually, or collectively, would materially adversely affect the revenues of Baptist Health. All claims are being defended by counsel. Civil Rights Proceedings. There are a number of claims for alleged employment discrimination by Baptist Health, either directly or indirectly through one of the hospital facilities operated by Baptist Health. Medical Malpractice Claims. Baptist Health is a defendant or co-defendant with certain physicians in a number of separate claims for damages involving allegations of lack of informed consent or personal injury arising in the course of providing care or treatment to patients of the hospital facilities operated by Baptist Health.

A-66 4834-5782-6476.3 Class Action Lawsuit. Baptist Health is a defendant in a lawsuit that has recently been certified by the trial court as a class action. The class consists of all Arkansas residents who, since July 30, 2011, received any type of healthcare treatment from any Arkansas entity owned, controlled, or managed by Baptist Health or Baptist Health Hospitals: (i) the treatment was covered by valid, in-network, health coverage that was underwritten, administered, or supported by (a) QualChoice of Arkansas, (b) Health Advantage, (c) Blue Cross Blue Shield, (d) Humana, (e) Aetna, or (f) UnitedHealthcare; (ii) Baptist submitted the charges for the treatment to the patient’s health insurer for payment; (iii) Baptist accepted payment from the health insurer for the treatment; (iv) Baptist (itself or through its agents) sought payment for the treatment from sources other than the health insurer by maintaining or asserting hospital lien(s) for the treatment after accepting payment from the health insurer; and (v) the individual sustained damages. The members of the class have not yet been identified and the amount of potential damages has not been susceptible of calculation at this point. An estimate of gross claims prior to the identification of a class was $6,000,000 and that amount should not increase, and may decline, when the class members are identified. Stark Law Self-Report. Baptist Health has self-reported to CMS several potential technical violations of the Ethics in Patient Referrals Act (the “Stark Law”) under the voluntary Self-Referral Disclosure Protocol (“SRPD”). Technical violations are generally failures to strictly comply with the Stark documentation requirements, such as the failure to obtain all the signatures on a lease before its commencement date or upon renewal. Since there is no intent element necessary under the Stark Law, minor failures may be viewed as technical violations. If CMS determines that the self-reported incidents are indeed Stark Law violations, Baptist Health could be required to repay all, or a negotiated portion of the amount previously collected as Medicare and Medicaid payments with respect to referrals by the physicians who were involved with said violations.

On Baptist Health’s SRPD self-disclosure document, a total of approximately $14.9 million was reported as the payment number relating to referrals by physicians who were involved with the reported violations. During Baptist Health’s investigation, several cases were discovered on which the involved physicians provided services and in which the referring physician could not be determined. If those cases were also attributed to the involved physicians, the potential overpayment could increase to approximately $23 million.

Historically, CMS has negotiated self-reported technical violations in such a manner so that only a relatively small percentage of the potential reported overpayments are required to be repaid. However, CMS is not obligated to negotiate a smaller repayment, and there will probably be no resolution of the matter for one to two years. While CMS has proposed new regulations that would provide favorable treatment to several of Baptist Health’s self-reported event, such regulations have not been adopted and their application to past actions is unclear. While there is substantial uncertainty as to the likely amount of any settlement with CMS, management believes that the ultimate repayment will not have a material adverse effect on Baptist Health’s business or financial position.

See the caption “REGULATION OF THE HEALTH CARE INDUSTRY – Fraud and Abuse Laws and Regulations – Restrictions on Referrals” in the Official Statement to which this Appendix A is attached for a more complete description of the Stark Law and the SRPD.

A-67 4834-5782-6476.3 APPENDIX B DEFINITIONS Set forth below are the definitions of certain terms used in this Official Statement, the Loan Agreement, the Indenture and the Master Indenture. “Accountant” or “Accountants” shall mean an Independent certified public accountant or a firm of Independent certified public accountants to whom the Trustee makes no reasonable objection. “Accounts” shall mean, collectively, the respective instruments and accounts of the Members of the Obligated Group, as instruments and accounts are defined in Section 4-9-102 of the Arkansas Code of 1987 Annotated, as amended. “Act” shall mean Title 15, Chapter 5, Subchapter 3 of the Arkansas Code of 1987 Annotated, as amended and enacted from time to time. “Additional ADFA Obligations” shall mean ADFA Obligations of the Obligated Group issued under the Loan Agreement and the Master Indenture to secure Additional Bonds. “Additional Bonds” shall mean Bonds authorized to be issued by the Issuer on a parity with the Series 2019 Bonds and other then Outstanding Bonds pursuant to the provisions of Article IV of the Indenture. “Additional Indebtedness” shall mean any Indebtedness incurred by any Member of the Obligated Group under the Master Indenture or incurred by any other Member of the Obligated Group subsequent to or contemporaneously with its becoming a Member of the Obligated Group. “Additional Payments” shall mean payments to be made by the Obligated Group pursuant to Section 402 of the Loan Agreement. “ADFA Obligation” or “ADFA Obligations” shall mean Obligation No. 9 and any Additional ADFA Obligations. “Administrator” shall mean the officer or officers performing functions of the president, chief executive officer, chief operating officer or chief financial officer of the Obligated Group Representative or chief operating officer or officers of any health care facility comprising the Facility, or a portion thereof, and so designated by the Obligated Group Representative and any additional person authorized by the Obligated Group Representative to act as Administrator for purposes of the Loan Agreement and the Indenture. “Affiliate” shall mean any corporation, partnership, joint venture, association, business trust, governmental unit or similar entity organized under the laws of the United States of America or any state thereof (i) which directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Corporation or any other Member of the Obligated Group; or (ii) a majority of the members of the Governing Body of which are the same as the Corporation. For purposes of this definition, "control" means the power to direct the management and policies of a Person through the ownership of a majority of its voting securities or the right to designate or elect or approve and remove a majority of the members of its Governing Body (or, in the event that any corporate action of such Governing Body requires a super-majority vote, the number of members of such Governing Body constituting such super-majority of the members of such Governing Body), by contract or otherwise. “Annual Debt Service” shall mean, for any period of 12 consecutive calendar months for which such determination is made, the aggregate of the payments to be made in respect of principal and interest (whether or not separately stated) on Outstanding Long-Term Indebtedness of the Obligated Group during such period, also taking into account:

B - 1 (i) with respect to Balloon Long-Term Indebtedness, (a) the amount of principal and interest which would be payable in such period if such principal were amortized from the date of incurrence thereof over a period of not to exceed thirty (30) years, as determined by the Obligated Group Representative in an Officer’s Certificate, on a level debt service basis at an interest rate equal to the rate borne by such Indebtedness on the date calculated, except that if the date of calculation is within twelve (12) months of the actual maturity of such Balloon Long- Term Indebtedness, the full amount of principal payable at maturity shall be included in such calculation; or (b) principal payments or deposits with respect to Balloon Long-Term Indebtedness secured by an irrevocable letter of credit issued by, or an irrevocable line of credit with, a bank rated in either of the three highest long-term rating categories or the two highest short-term rating categories, in each case without regard to gradations within such categories, by any of Moody’s, S&P or Fitch, nominally due in the last Fiscal Year in which such Balloon Long-Term Indebtedness matures may, at the option of the Member of the Obligated Group which issued such Indebtedness, be treated as if such principal payments or deposits were due as specified in any loan agreement issued in connection with such letter of credit, line of credit or insurance policy or pursuant to the repayment provisions of such letter of credit, line of credit or insurance policy, and interest on such Balloon Long-Term Indebtedness after such Fiscal Year shall be assumed to be payable pursuant to the terms of such loan agreement or repayment provisions; or (c) if the Obligated Group shall have obtained an agreement with an investment banking company or partnership to underwrite (on a best efforts basis or otherwise) Indebtedness or Related Bonds, the proceeds of which would be sufficient to retire such Balloon Long-Term Indebtedness, the Obligated Group may use the principal amortization schedule estimated by such investment banking company or partnership for such Indebtedness or Related Bonds in a report filed with the Master Trustee or (d) if the Obligated Group Representative shall have provided the Master Trustee with an Officer’s Certificate, dated within 90 days of the date of calculation of such Annual Debt Service, stating that financing of a stated term (which shall not extend beyond 30 years after such date of calculation), amortization, and interest rate is reasonably attainable to refund or otherwise directly or indirectly to refinance any amount of such Balloon Long-Term Indebtedness, then the principal of and premium, if any, and interest and other debt service charges on the amount of such Balloon Long-Term Indebtedness so certified to be refundable or refinanceable shall be excluded from such calculation and the principal of and premium, if any, and interest and other debt service charges on the refunding Indebtedness as so certified which would result from such refunding or refinancing in such Fiscal Year, if incurred on the first day of the Fiscal Year for which Annual Debt Service is being calculated, shall be added; provided, however, that if the interest on such refunding Indebtedness so certified is less than interest thereon at the most recent Thirty-Year Revenue Bond Index or any substitute index most recently published by The Bond Buyer or any successor publication, interest at such index shall be utilized instead. (ii) with respect to Long-Term Indebtedness which is Variable Rate Indebtedness, the interest on such Indebtedness shall be calculated at the rate which is equal to the average of the actual interest rates which were in effect (weighted according to the length of the period during which each such interest rate was in effect) for the most recent twelve-month period immediately preceding the date of calculation for which such information is available (or shorter period if such information is not available for a twelve-month period), except that with respect to new Variable Rate Indebtedness (and the incurrence thereof) the interest rate for such Indebtedness for the initial interest rate period shall be the initial rate at which such Indebtedness is issued and thereafter shall be calculated as set forth above; (iii) with respect to any Credit Facility, to the extent that such Credit Facility has not been used or drawn upon (or in the case of direct pay letters of credit, to the extent any drawings

B - 2 thereunder have been repaid within one business day of the due date thereof), the principal and interest relating to such Credit Facility shall not be included in the Annual Debt Service; (iv) with respect to any Derivative Indebtedness, the interest on such Indebtedness during any Derivative Period shall be calculated by adding (x) the amount of interest payable by a Member of the Combined Group on such Derivative Indebtedness pursuant to its terms and (y) the amounts payable by such Member of the Combined Group under the Derivative Agreement (based on a notional amount equal to the principal amount of the Derivative Indebtedness and the interest rate assumptions stated therein) and subtracting (z) the amounts payable by the counterparty provider under the Derivative Agreement, using the same notional amount and at interest rate assumptions specified in the Derivative Agreement; provided, however, that termination payments due under any Derivative Agreement shall not be taken into account and that from and after the termination of any Derivative Agreement, the amount of interest payable by the Member of the Combined Group shall be the interest calculated as if such Derivative Agreement had not been executed; provided, however, that Escrowed Interest and Escrowed Principal shall be excluded from the determination of Annual Debt Service. “Architect” shall mean such architect or architects duly registered in the State and employed by a Member of the Obligated Group. “Audited Financial Statements” shall mean consolidated financial statements of the Corporation, including consolidated or combined information of the Combined Group for a twelve-month period, or for such other period for which an audit has been performed, prepared in accordance with GAAP, which have been audited and reported upon by independent certified public accountants; provided, however, that for purposes of adding the accounts of a Member of the Obligated Group which is not an Affiliate, the balances of such accounts shall be extracted from audited financial statements of such Member of the Combined Group and its affiliates, if any. “Authorized Representative” shall mean, with respect to the Corporation, the President or any Vice President of the Corporation, and, with respect to each other Member of the Obligated Group, the President or any Vice President of the Corporation or the President or any Vice President of such Member or any other person or persons designated an Authorized Representative of the Corporation or any other Member of the Obligated Group by an Officer’s Certificate of such Member of the Obligated Group, respectively, signed by the President or any Vice President of the Corporation and filed with the Master Trustee. “Balloon Long-Term Indebtedness” shall mean Long-Term Indebtedness which, at the original issuance thereof, 20% or more of the principal payments are due in a single year, and which principal is not required by the documents pursuant to which such Indebtedness is issued to be amortized by redemption prior to such date. “BHRH” means Baptist Health Regional Hospitals, a nonprofit corporation organized and existing under the laws of the State, and its successors and assigns having ownership and/or control over the Facility or any portion thereof. “Bond Counsel” shall mean Friday, Eldredge & Clark, LLP and its successors, or such other nationally recognized bond counsel as may be designated by the Issuer or the Trustee. “Bond Fund” shall mean the Bond Fund created pursuant to Section 6.01 of the Indenture. “2015 Bond Obligations” shall mean, collectively, Obligation No. 2 and Obligation No. 3. “Bond Redemption Fund” shall mean the Bond Redemption Fund created pursuant to Section 6.01 of the Indenture. “Bonds” shall mean the Series 2019 Bonds and Additional Bonds.

B - 3 “Book Value” when used in connection with Property, Plant and Equipment or other Property of any Person, shall mean the value of such property, net of accumulated depreciation, as it is carried on the books of such Person in conformity with GAAP, and when used in connection with Property, Plant and Equipment or other Property of the Obligated Group, means the aggregate of the values so determined with respect to such Property, Plant and Equipment or other Property of the Obligated Group determined in such a manner that no portion of such value of Property, Plant and Equipment or other Property is included more than once. “Business Day” or “business day” shall mean any day other than a Saturday or Sunday or a day on which banks in the State or in the state in which the Trustee is located are not open for business. “Capital Leases” shall mean, for purposes of the Master Indenture and, except as set forth below, notwithstanding any conflict between such term and similar terms used for GAAP, leases having an original term, or renewable at the option of the lessee, for a period from the date originally incurred, longer than one year and having one or more of the following characteristics: (a) The ownership of the property is transferred to the Obligated Group Member during the lease term; (b) The Member may buy the property at a nominal price at lease expiration; (c) The property will be leased for at least 75% of its economic life; or (d) The present value of the minimum lease payments equal at least 90% of the value of the property; provided, however, that should there be a conflict between the definition of “Capital Leases” set forth above and the meaning of such term for purposes of GAAP, the definition contained in the Master Indenture may be amended to conform with the definition set forth in GAAP at the direction of the Obligated Group Representative set forth in an Officer’s Certificate of the Obligated Group Representative and upon delivery to the Master Trustee of the following: (i) a statement of an Independent certified public accountant to the effect that the proposed amended definition of “Capital Leases” conforms to the definition as set forth in GAAP, (ii) a statement of an Independent certified public accountant to the effect that such amendment will not cause the Obligated Group to fail to comply with the financial covenants contained in the Master Indenture, and (iii) an Officer’s Certificate of the Obligated Group Representative to the effect that the amendment will not have a material adverse effect on the Holders of the Obligations. “Code” shall mean the Internal Revenue Code of 1986, as amended, or any corresponding provision of any future laws of the United States of America relating to federal income taxation, and except as otherwise provided herein or required by the context hereof, includes interpretations thereof contained or set forth in the applicable regulations of the Department of Treasury (including applicable final regulations or temporary regulations), the applicable rulings of the Internal Revenue Service (including published Revenue Rulings and private letter rulings) and applicable court decisions. “Combined Group” shall mean, collectively, each Member of the Obligated Group and each Restricted Affiliate. “Completion Indebtedness” shall mean any Long-Term Indebtedness incurred by any Member of the Obligated Group for the purpose of financing the completion of facilities for the acquisition, construction or equipping of which Long-Term Indebtedness has theretofore been incurred in accordance with the provisions of the Master Indenture, to the extent necessary to provide a completed and equipped facility of the type and scope contemplated at the time that such Long-Term Indebtedness theretofore incurred was originally incurred, and, to the extent the same shall be applicable, in accordance with the general plans and specifications for such facility as originally prepared with only such changes as have

B - 4 been made in conformance with the documents pursuant to which such Long-Term Indebtedness theretofore incurred was originally incurred. “Consultant” shall mean a firm or firms which is a professional management consultant of national repute for having the skill and experience necessary to render the particular report required by the provision of the Master Indenture in which such requirement appears and which is not unacceptable to the Master Trustee and that is Independent. The word “continuing” as applied to an Event of Default under the Indenture shall mean any Event of Default not cured or waived. “Corporation” shall mean Baptist Health, a nonprofit corporation organized and existing under the laws of the State, and its successors and assigns having ownership and/or control over the Facility. “Corporation Representative” shall mean any person or persons designated to act on behalf of the Corporation by an Officer’s Certificate. “Corporate Charter” shall mean, with respect to any corporation, the articles of incorporation, certificate of incorporation, corporate charter or other organic document pursuant to which such corporation is organized and existing under the laws of the United States of America or any state thereof. “Cost” or “Costs,” as applied to a Project, shall mean, without intending thereby to limit or restrict any proper definition of such term under the provisions of law, all costs of acquisition, construction, equipping and furnishing, and all obligations and expenses and all items of cost which are permitted by the Act. “Counsel” shall mean an attorney duly admitted to practice law before the highest court of any state. “Credit Facility” shall mean a municipal bond insurance policy, line of credit, letter of credit, standby bond purchase agreement or similar credit enhancement or liquidity facility established in connection with the issuance of Indebtedness to provide credit or liquidity support for such Indebtedness, or to serve as a surety in lieu of cash or investments in a debt service reserve fund under any Related Bond Indenture. "Cross-over Date" shall mean, with respect to Cross-over Refunding Indebtedness, the last date on which the principal portion of the related Cross-over Refunded Indebtedness is to be paid or redeemed from the proceeds of such Cross-over Refunding Indebtedness. "Cross-over Refunded Indebtedness" shall mean Indebtedness refunded by Cross-over Refunding Indebtedness. "Cross-over Refunding Indebtedness" shall mean Indebtedness issued for the purpose of refunding Cross-over Refunded Indebtedness if the proceeds of such Cross-over Refunding Indebtedness are irrevocably deposited in escrow to secure the payment on the applicable redemption date or dates or maturity date of the Cross-over Refunded Indebtedness, and the earnings on such escrow deposit are required to be applied to pay interest on such Cross-over Refunding Indebtedness until the Cross-over Date. “Defeasance Obligations” shall mean, unless modified by the terms of a particular Supplement, (i) non-callable, nonprepayable Government Obligations, (ii) evidences of ownership of a proportionate interest in specified non-callable, nonprepayable Government Obligations, which Government Obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian, (iii) Defeased Municipal Obligations, and (iv) evidences of ownership of a proportionate interest in specified Defeased Municipal Obligations, which Defeased Municipal Obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity as custodian.

B - 5 "Defeased Municipal Obligations" means obligations of state or local government municipal bond issuers rated in the highest rating category by S&P and Moody’s, provision for the payment of the principal of and interest on which shall have been made or provided for by irrevocable deposit with a trustee or escrow agent of (i) noncallable, nonprepayable Government Obligations, (ii) evidences of ownership of a proportionate interest in specified noncallable, nonprepayable Government Obligations, which Government Obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity as custodian, or (iii) the obligations of (A) Federal Home Loan Mortgage Corp., (B) Farm Credit System, (C) Federal Home Loan Banks, (D) Federal National Mortgage Association, (E) Student Loan Marketing Association, (F) Financing Corp., (G) Resolution Funding Corp., and (H) U.S. Agency for International Development, the maturing principal of and interest on such obligations listed in (i) to (iii) above, when due and payable without any reinvestment thereof, shall provide sufficient money to pay the principal of, redemption premium, if any, and interest on such obligations of state or local government municipal bond issuers, and for which Defeased Municipal Obligations a specific call date has been established or for which the issuer has waived the ability to call such Defeased Municipal Obligations prior to a date certain. “Defeased Obligations” shall mean Obligations issued under a Supplement that have been discharged in accordance with Article VIII of the Master Indenture, or provision for the discharge of which has been so made, pursuant to the terms of such Supplement. “Derivative Agreement” shall mean, without limitation, (i) any contract known as or referred to or which performs the function of an interest rate swap agreement, currency swap agreement, forward payment conversion agreement or futures contract; (ii) any contract providing for payments based on levels of, or changes or differences in, interest rates, currency exchange rates, or stock or other indices; (iii) any contract to exchange cash flows or payments or series of payments; (iv) any type of contract called, or designed to perform the function of, interest rate floors or caps, options, puts or calls, to hedge or minimize any type of financial risk, including, without limitation, payment, currency, rate or other financial risk; and (v) any other type of contract or arrangement that the Member of the Combined Group entering into such contract or arrangement determines is to be used, or is intended to be used, to manage or reduce the cost of Indebtedness, to convert any element of Indebtedness from one form to another, to maximize or increase investment return, to minimize investment return risk or to protect against any type of financial risk or uncertainty. "Derivative Indebtedness" shall mean Indebtedness for which a Member of the Combined Group shall have entered into a Derivative Agreement in respect of all or a portion of such Indebtedness. "Derivative Period" shall mean the period during which a Derivative Agreement is in effect. “Escrowed Interest” shall mean amounts of interest on Long-Term Indebtedness for which moneys or Defeasance Obligations have been deposited in escrow (the "Escrowed Interest Deposit") which Escrowed Interest Deposit has been determined by an independent accounting firm to be sufficient to pay such Escrowed Interest. “Escrowed Principal” shall mean amounts of principal on Long-Term Indebtedness for which moneys or Defeasance Obligations have been deposited in escrow (the "Escrowed Principal Deposit") which Escrowed Principal Deposit has been determined by an independent accounting firm to be sufficient to pay such Escrowed Principal. “Event of Default” shall mean an event of default as set forth in Section 5.01 of the Master Indenture or an event of default as set forth in Section 8.01 of the Indenture (as modified or qualified in the reference thereto). “Exposure on Guaranteed Debt” shall mean, with respect to the period of time for which calculated, an amount equal to one hundred percent (100%) of the maximum annual debt service requirement (calculated in the same manner as Maximum Annual Debt Service) on the Indebtedness of

B - 6 the Primary Obligor which is guaranteed; provided, however, that if the guarantor has not been required, by reason of its guaranty, to make any payment in respect of the Indebtedness which is guaranteed within the immediately preceding twenty-four (24) months, none of the debt service requirement on such Indebtedness shall be included in such calculation. “Facility” shall mean, collectively, the following hospital and health care facilities: Baptist Health Medical Center – Little Rock and Baptist Health Rehabilitation Institute, 9601 Interstate 630, Exit 7, Little Rock, Arkansas; Baptist Health Medical Center – North Little Rock, 3333 Springhill Drive, North Little Rock, Arkansas; Baptist Health Medical Center – Heber Springs, 1800 Bypass Road, Heber Springs, Arkansas; Baptist Health – Fort Smith, 1001 Towson Avenue, Fort Smith, Arkansas; and Baptist Health – Van Buren, 211 Crawford Memorial Drive, Van Buren, Arkansas. “Financed Facility” means the portions of the facility being permanently financed with proceeds of the Series 2019 Bonds, consisting of portions of Baptist Health – Fort Smith and certain portions of Baptist Health – Van Buren. “Fiscal Year” shall mean any period of twelve (12) consecutive months adopted by the Corporation as its fiscal year for financial reporting purposes. “GAAP” shall mean accounting principles generally accepted in the United States of America, as promulgated by the Financial Accounting Standards Board. “Governing Body” shall mean the board of directors, board of trustees or similar body which pursuant to law or charter documents acts as the governing body of any Member of the Obligated Group or a committee of such board of directors, board of trustees or similar body which is duly authorized to undertake the contemplated action. “Government Obligations” shall mean direct general (full faith and credit) obligations of, or obligations the prompt payment of the principal and interest on which are fully and unconditionally guaranteed by, the United States of America (including obligations issued or held in book entry form). “Governmental Restrictions” shall mean federal, state or other applicable governmental laws or regulations affecting any Member of the Combined Group and its health care facilities placing restrictions and limitations on the (i) fees and charges to be fixed, charged and collected by any Member of the Combined Group or (ii) the amount or timing of the receipt of such revenues. “Gross Revenues” shall mean, for any particular period, all combined and consolidated gross revenues, Accounts, income, receipts and other money received in such period by or on behalf of the Obligated Group, including, but without limiting the generality thereof, gross revenues derived from the operation and possession of the Operating Assets, proceeds derived from accounts receivable, inventory and other tangible and intangible property, agreements respecting Medicare, Medicaid, Blue Cross and other third party payors, accounts, contract rights and other rights and assets, whether now or hereafter owned, held or possessed by or on behalf of the Obligated Group, net payments due from a counterparty under a Derivative Agreement, and all cash (or cash equivalent), donations, grants, bequests, gifts, pledges and other contributions of principal and interest, including the income and profits therefrom and proceeds from casualty insurance policies and condemnation awards to the extent not obligated to a particular use hereunder, in each case made or received with respect to the Property, Plant and Equipment exclusive of (i) donations, grants, bequests, legislative appropriations, gifts, pledges and other contributions, to the extent they are obligated to a purpose inconsistent with their use for the payment of debt service on Related Bonds issued under the Related Bond Indenture, (ii) the proceeds of any additional borrowing and (iii) the Rebate Amount, as that term is defined in the Related Bond Indenture. “Guaranty” shall mean any obligation of any Member of the Obligated Group guaranteeing in any manner, directly or indirectly, any obligation of any Person that is not a Member of the Obligated Group which obligation of such other Person would, if such obligation were the obligation of a Member

B - 7 of the Obligated Group, constitute Indebtedness under the Master Indenture. For the purposes of the Master Indenture, the aggregate annual principal and interest payments on any indebtedness in respect of which any Member of the Obligated Group shall have executed and delivered its Guaranty shall be determined in accordance with such Member’s Exposure on Guaranteed Debt. “Holder” or “holder” or “Bondholder” shall mean, with respect to Bonds, the registered owner of a Bond. Notwithstanding the previous sentence, the Trustee may recognize any Person as the true and lawful owner of any Bond as the Trustee, in its discretion and with such indemnity, if any, as the Trustee may require, shall determine. “Income Available for Debt Service” shall mean, as to any period of 12 consecutive calendar months, the excess of revenues, gains and supports (including interest earnings on restricted funds, unless such interest is restricted, and the sum of all gifts, grants, bequests, contributions, state funded, unrestricted annual appropriations and donations unrestricted as to their use), over expenses before depreciation, amortization and interest expense on Long-Term Indebtedness, as determined in accordance with GAAP consistently applied (except with respect to Capital Leases which shall be treated in accordance with the definition of such term), plus (i) Restricted Affiliate Income Available for Debt Service, (ii) amortization of discount on Indebtedness, issuance expense and goodwill, (iii) retirement, depletion, obsolescence and impairment of Property, Plant and Equipment and (iv) with respect to any Exposure on Guaranteed Debt (not to exceed the amount of Guaranteed Indebtedness), the revenues of the Primary Obligor available to pay the Indebtedness being guaranteed; provided, however, that (1) no determination of Income Available for Debt Service shall take into account any (a) gain or loss resulting from either the extinguishment or refinancing of Indebtedness or the sale, exchange or other disposition of capital assets not made in the ordinary course of business, or (b) unrealized gains and losses on investments of any Member of the Combined Group, or (c) termination amounts or mark to market on Derivative Agreements, or (d) audit restatements, or (e) any "other than temporary" impairment loss, or (f) non-recurring, unanticipated gains or losses that are considered to be extraordinary under GAAP; or (g) unusual, infrequent or extraordinary non-cash items; provided, however, at the option of the Obligated Group Representative, net realized gains and losses from the sale of investments may be included in the computation of Income Available for Debt Service on the basis of the average annual amount of those gains and losses for the three Fiscal Years preceding the computation date, rather than including the actual amount of net realized gains (and losses) from the sale of investments for the period for which computation is being made if the value of such net realized gains (or loss) is greater than the value of any similar such gain (or loss) recorded in any of the prior three Fiscal Years; (2) revenues shall not include earnings from the investment of Escrowed Interest or Escrowed Principal or earnings constituting Escrowed Interest or Escrowed Principal to the extent that such earnings are applied to the payment of principal or interest on Long-Term Indebtedness which is excluded from the determination of Annual Debt Service or Related Bonds secured by such Long-Term Indebtedness; and (3) revenues shall not include any moneys received (whether in respect to principal or interest) by any Member of the Obligated Group pursuant to any loan agreement or promissory note under which the Member of the Obligated Group has loaned (but not guaranteed) the proceeds of Indebtedness to any Person, including any Restricted Affiliate. “Indebtedness” shall mean (i) all indebtedness of Members of the Obligated Group for borrowed money or credit extended, (ii) all installment sales, conditional sales and Capital Lease obligations incurred or assumed by any Member of the Obligated Group, and (iii) all Guaranties, whether constituting Long-Term Indebtedness or Short-Term Indebtedness. Indebtedness shall not include obligations of any Member of the Obligated Group to another Member of the Obligated Group. The term "Indebtedness" shall not include trade payables. For purposes of the financial tests in the Master Indenture, obligations of any Member of the Obligated Group under Guaranties shall be included within the term "Indebtedness" only to the extent of the Exposure on Guaranteed Debt.

B - 8 “Indenture” shall mean the Trust Indenture to be dated as of the date of delivery of the Series 2019 Bonds, between the Issuer and the Trustee, securing the Bonds, as from time to time supplemented and amended. “Independent” shall mean that no member, director, officer, trustee, employee or major stockholder of the entity to which such term is applied and such entity itself is not an officer, director, trustee, member or employee of any Member of the Combined Group. For the purpose of this definition, major stockholder means the holder or owner of more than ten percent of the outstanding shares of stock of a company. “Interest Account” shall mean the Interest Account in the Bond Fund created pursuant to Section 6.01 of the Indenture. “Issuance Costs” shall mean legal, accounting and underwriting fees and expenses, hospital and management consultant fees, economic feasibility consultant fees, recording expenses, printing costs, state license fees, rating agency fees, Trustee’s and depositary’s fees, title insurance costs, builder’s risk and other insurance costs, costs incurred in connection with accomplishing a refunding or refinancing, and other reasonable fees and expenses incurred or to be incurred by or on behalf of the Corporation or another Member of the Obligated Group as may be necessary or incident to financing, the preparation of documents, and the issuance and sale of the Bonds. “Issuer” shall mean the Arkansas Development Finance Authority, a body politic and corporate organized and existing under the laws of the State, in its capacity as issuer of the Bonds, and its successors and assigns in such capacity. “Lien” shall mean any mortgage, pledge or lease of, security interest in or lien, charge, restriction or encumbrance on any Property of the Person involved, including those which secure any Indebtedness, and a capitalized lease under which a Member of the Obligated Group is lessee. “Loan Agreement” shall mean the Loan Agreement and Security Agreement to be dated as of the date of delivery of the Series 2019 Bonds, between the Issuer and the Corporation, as Obligated Group Representative, as from time to time supplemented and amended. “Long-Term Debt Service Coverage Ratio” shall mean for any period of time the ratio determined by dividing the Income Available for Debt Service by Maximum Annual Debt Service. “Long-Term Indebtedness” shall mean all Indebtedness having a maturity longer than one year incurred or assumed by any Member of the Combined Group, including: (i) money borrowed for an original term, or renewable at the option of the borrower for a period from the date originally incurred, longer than one year; (ii) Capital Leases; (iii) installment sale or conditional sale contracts having an original term in excess of one year; (iv) Short-Term Indebtedness if a commitment by a financial lender exists to provide financing to retire such Short-Term Indebtedness, such commitment provides for the repayment of principal on terms which would, if such commitment were implemented, constitute Long-Term Indebtedness and the Obligated Group shall have caused the Short-Term Indebtedness to be retired, paid, defeased or through a borrowing under such commitment; and (v) the current portion of Long-Term Indebtedness. “Management Consultant” shall mean an Independent corporation or an Independent partnership, qualified to study operations and financial affairs of hospitals, having a favorable national reputation for

B - 9 skill and experience in such work and, unless otherwise specified in the Loan Agreement, selected and employed by the Corporation or another member of the Obligated Group. “Master Indenture” shall mean the Master Trust Indenture dated as of December 1, 2014, including all supplements and amendments thereto and modifications thereof, by and between the Corporation, as Obligated Group Representative, and the Master Trustee. “Master Trustee” shall mean Regions Bank, a banking association duly organized under the laws of the State of Alabama, and its successors in the trust created under the Master Indenture. “Maximum Annual Debt Service” shall mean the highest Annual Debt Service for any succeeding Fiscal Year. “Member” or “Members” shall mean, when used with reference to the Obligated Group, the Corporation, BHRH and each additional Person which is added to and has not been subsequently removed from the Obligated Group. The term "Member" shall apply to such entities only during the period when they are parties to and obligated by the terms of the Master Indenture. “Member of the Combined Group” shall mean each Member of the Obligated Group and each Restricted Affiliate. “Moody’s” shall mean Moody’s Investors Service Inc., its successors and their assigns. If, for any reason, such corporation shall no longer perform the functions of a securities rating agency, "Moody’s" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Obligated Group Representative. “Net Proceeds,” when used with respect to any insurance claims, condemnation award or proceeds from a sale under a reasonably apprehended threat of condemnation, shall mean the gross proceeds from the insurance claims, condemnation award or sale price remaining after payment of all expenses (including attorneys’ fees and any expenses of the Issuer, the Corporation, any other Member of the Obligated Group and the Trustee) incurred in the collection of such gross proceeds. “Non-Recourse Indebtedness” shall mean (i) any Indebtedness incurred to finance the purchase of or improvements to distinct items of Property, Plant and Equipment of the Obligated Group, which Indebtedness is secured exclusively by a Lien on such Property, Plant and Equipment being acquired or on such distinct improvements and liability for which is limited to such Property, Plant and Equipment or such improvements subject to such Lien, or the revenues produced by such property or improvements, or both, with no recourse, directly or indirectly, to any other Property of any Member of the Obligated Group, and (ii) any Indebtedness secured by and payable solely from any revenues of the Obligated Group which are excluded from Gross Revenues, with no other recourse to any Member of the Obligated Group or to the Property, Plant and Equipment of the Obligated Group or Gross Revenues. “Obligated Group” shall mean the Corporation and any other Person which may from time to time be added as a Member of and has not been removed from the Obligated Group. Currently, the Members of the Obligated Group are the Corporation and BHRH. “Obligated Group Representative” shall mean initially the Corporation and thereafter such Member of the Obligated Group as may be designated from time to time pursuant to a written notice to the Master Trustee executed by the president or chairman of the Governing Body of each Member of the Obligated Group. Currently, the Obligated Group Representative is the Corporation. “Obligation No. 1” shall mean Baptist Health Obligated Group Obligation No. 1 (Series 2014 Bonds) dated September 15, 2015 and in the aggregate principal amount of $138,910,000 and issued under the Master Indenture and Supplemental Indenture for Obligation No. 1 dated as of September 15, 2015.

B - 10 “Obligation No. 2” shall mean Baptist Health Obligated Group Obligation No. 2 (Series 2015A Bonds) issued under the Master Indenture and Supplemental Indenture for Obligations No. 2 and No. 3 dated as of September 15, 2015. “Obligation No. 4” shall mean Baptist Health Obligated Group Obligation No. 4 (2016 Bank of America Indebtedness) issued under the Master Indenture and Supplemental Indenture for Obligation No. 4 dated as of September 27, 2016. “Obligation No. 5” shall mean Baptist Health Obligated Group Obligation No. 5 (2016 JPMorgan Derivative Agreement) issued under the Master Indenture and Supplemental Indenture for Obligation No. 5 dated as of November 21, 2016. “Obligation No. 6” shall mean Baptist Health Obligated Group Obligation No. 6 (2018 Bank of America Credit Facility) issued under the Master Indenture and Supplemental Indenture for Obligation No. 6 dated as of August 31, 2018. “Obligation No. 7” shall mean Baptist Health Obligated Group Obligation No. 7 (2018 Bank of America Interim Loan - Sparks) issued under the Master Indenture and Supplemental Indenture for Obligation No. 7 dated as of October 2, 2018. “Obligation No. 8” shall mean Baptist Health Obligated Group Obligation No. 8 (Series 2019 Bonds) issued under the Master Indenture and Supplemental Indenture for Obligation No. 8 dated as of the date of delivery of the Series 2019 Baptist Health Corporate Bonds. “Obligation No. 9” shall mean Baptist Health Obligated Group Obligation No. 9 (Series 2019 ADFA Bonds) issued under the Master Indenture and the Supplement. “Obligation Payments” shall mean payments made by the Obligated Group on the ADFA Obligation or ADFA Obligations pursuant to the terms of the Indenture or the Loan Agreement. “Obligation” or “Obligations” shall mean the evidence of particular Indebtedness issued under the Master Indenture as a joint and several obligation of the Corporation and each other Member of the Obligated Group. “Officer’s Certificate” with reference to the Corporation or any other Member of the Obligated Group shall mean a certificate signed (i) by the President or any Vice President and (ii) by the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Corporation, as Obligated Group Representative (or such other Obligated Group Representative), and with reference to the Issuer shall mean a certificate in writing signed by the Chair or the President of the Issuer. “Operating Assets” shall mean any or all land, leasehold interests, buildings, machinery, equipment, hardware, tangible personal property and inventory owned, leased or operated by each Member of the Obligated Group and used in its respective trade or business, whether separately or together with other such assets, and all additions, improvements, extensions, alterations, machinery, equipment and appurtenances thereto and thereof, whether now existing or to be constructed, installed or acquired during the term of the Master Indenture, including, without limitation, the Corporation’s hospital facilities located on the Land at Baptist Health Medical Center - Little Rock, 9601 Interstate 630, Exit 7, Little Rock, Arkansas; Baptist Health Rehabilitation Institute, 9601 Baptist Health Drive, Little Rock, Arkansas; Baptist Health Medical Center - North Little Rock, 3333 Springhill Drive, North Little Rock, Arkansas; Baptist Health Medical Center-Arkadelphia, 3050 Twin Rivers Drive, Arkadelphia, Arkansas; Baptist Health Medical Center-Heber Springs, 1800 Bypass Road, Heber Springs, Arkansas; Baptist Health Medical Center-Hot Spring County, 1001 Schneider Drive, Malvern, Arkansas; Baptist Health-Fort Smith, 1001 Towson Avenue, Fort Smith, Arkansas; and Baptist Health-Van Buren, 211 Crawford Memorial Drive, Van Buren, Arkansas, but not including cash, investment securities and other Property held for investment purposes.

B - 11 “Operating Expenses” shall mean the expenses of operating any Member of the Obligated Group excluding depreciation, amortization and interest expense, as determined in accordance with GAAP consistently applied. The term "Operating Expenses" shall include, without intending to limit the foregoing, the fees, costs and expenses of the Master Trustee and the Related Bond Trustees under any Related Bond Indenture. “Operating Revenues” shall mean, for any period, the consolidated or combined revenues of the Obligated Group equal to the sum of (a) net patient service revenues, plus (b) other operating revenues, plus (c) non-operating gains, all as determined in accordance with GAAP consistently applied; however Operating Revenues shall (i) not include or take into account any: (a) gain or loss resulting from either the extinguishment of Indebtedness or the sale, exchange or other disposition of capital assets not made in the ordinary course of business or (b) unrealized gains and losses on investments of any Member of the Combined Group, or (c) non-recurring, unanticipated gains or losses that are considered to be extraordinary under GAAP, or (d) earnings from the investment of Escrowed Interest or Escrowed Principal or earnings constituting Escrowed Interest or Escrowed Principal to the extent that such earnings are applied to the payment of principal or interest on Long-Term Indebtedness which is excluded from the determination of Annual Debt Service or Related Bonds secured by such Long-Term Indebtedness and (ii) include any moneys received (whether in respect to principal or interest) by any Member of the Obligated Group pursuant to any loan agreement or promissory note under which the Member of the Obligated Group has loaned (but not guaranteed) the proceeds of Indebtedness to any Person, including any Restricted Affiliate. “Opinion of Bond Counsel” shall mean a written opinion of counsel experienced in matters relating to the validity of, and the tax exemption of interest on, obligations of states and their political subdivisions, selected by the Obligated Group and reasonably acceptable to the Trustee. “Opinion of Counsel” shall mean a written opinion of Counsel who may be (except as otherwise specifically provided in the Loan Agreement or the Indenture) counsel for the Issuer or the Corporation (or any other Member of the Obligated Group) or both. “Outstanding” or “outstanding,” when used with reference to Bonds, shall mean, as of the date of determination or computation, all Bonds theretofore issued and delivered under the Indenture except: (a) Bonds theretofore cancelled by the Trustee or delivered to the Trustee canceled or for cancellation; (b) Bonds and portions of Bonds for whose payment or redemption moneys or Government Obligations shall have been theretofore deposited in trust with the Trustee for the holders of such Bonds; provided that if such Bonds are to be redeemed, notice of such redemption shall have been duly given pursuant to this Indenture, or irrevocable instructions to call the same for redemption at a stated redemption date shall have been given to the Trustee; (c) Bonds in exchange for or in lieu of which other Bonds shall have been issued and delivered pursuant to the Indenture; provided, however, that in determining whether the holders of the requisite principal amount of Outstanding Bonds have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, Bonds owned by the Issuer or the Corporation or Members of the Obligated Group shall be disregarded and deemed not to be outstanding, except that in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which the Trustee knows to be so owned shall be disregarded. The work “Outstanding or “outstanding,” when used with reference to any Obligations or Permitted Indebtedness other than Bonds, shall have the meaning assigned thereto in Master Indenture or in the instrument authorizing such indebtedness.

B - 12 “Paying Agent” shall mean the Paying Agent or Agents, or any successors from time to time, under the Indenture. “Permitted Encumbrances” shall mean, as of any particular time: (a) the Indenture, the Loan Agreement and the Supplement; and (b) the Master Indenture and liens securing Permitted Indebtedness thereunder, and all of the following “Permitted Encumbrances” under the Master Indenture: (i) any Lien which is existing on the date of authentication and delivery of the initial Obligation issued under the Master Indenture or created on Property of a Member of the Obligated Group prior to such Member becoming a Member provided that no such Lien may be increased, extended, renewed or modified to apply to any Property of any Member of the Obligated Group not subject to such Lien on such date or to secure Indebtedness not Outstanding as of the date of the Master Indenture, unless such Lien as so extended, renewed or modified otherwise qualifies as a Permitted Encumbrance under the Master Indenture; (ii) Liens for taxes and special assessments, if any, which are not then delinquent, or if then delinquent are being contested in good faith; (iii) utility, access and other easements and rights-of-way, restrictions and exceptions which will not materially interfere with or materially impair the operation of the Property (or, if they are not being then operated, the operation for which they were designed or last modified); (iv) any mechanic’s, laborer’s, materialman’s, supplier’s or vendor’s lien or right in respect thereof, if any, if payment is not yet due under the contract in question or if such lien is being contested; (v) such minor defects and irregularities of title as normally exist with respect to properties similar in character to the land and which do not materially adversely affect the value of the Property or materially impair the use thereof for the purpose for which it was acquired or is held; (vi) landlord’s liens and leases to other than Members of the Obligated Group which relate to portions of the Property, Plant and Equipment which are customarily the subject of such leases, such as office space for physicians and educational institutions, food service facilities, gift shops and radiology, pharmacy and similar departments to the extent that such leases will not adversely affect the exemption from federal income taxation of any Related Bonds; (vii) zoning laws and similar restrictions which are not violated by the Obligated Group; (viii) statutory rights under Section 291, Title 42 of the United States Code, as a result of what are commonly known as Hill-Burton grants, and similar rights under other federal and state statutes; (ix) all right, title and interest of the State, municipalities and the public in and to access over, under or upon a public way; (x) any Liens on revenues of the Obligated Group which are subordinate to the Lien described in clause (xxii) of this definition to secure Subordinated Indebtedness; (xi) any Liens securing Non-Recourse Indebtedness to the extent permitted by Section 3.06(e) of the Master Indenture; provided, however, that such Liens may

B - 13 encumber only those assets acquired with such Non-Recourse Indebtedness, or revenues derived solely from the operation thereof; (xii) any Lien on Property acquired by a Member of the Obligated Group if the indebtedness secured by the Lien is Additional Indebtedness permitted under the provisions of Section 3.06 of the Master Indenture, and if an Officer’s Certificate is delivered to the Master Trustee certifying that (A) the Lien and the indebtedness secured thereby were created and incurred by a Person other than the Member of the Obligated Group, and, (B) the Lien was not created for the purpose of enabling the Member of the Obligated Group to avoid the limitations hereof on creation of Liens on Property of the Obligated Group; (xiii) leases of Property entered into by a Member of the Obligated Group in order to obtain the use of such Property and which constitute Indebtedness authorized under Section 3.06 of the Master Indenture; (xiv) liens arising by reason of good faith deposits with any Member of the Obligated Group in connection with leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by any Member of the Obligated Group to secure public or statutory obligations, or to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges; (xv) any Lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable any Member of the Obligated Group to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workers’ compensation, unemployment insurance, pension or profit sharing plans or other social security, or to share in the privileges or benefits required for companies participating in such arrangements; (xvi) any judgment lien against any Member of the Obligated Group so long as such judgment is being contested in good faith and execution thereon is stayed; (xvii) any Lien on Property (other than Accounts) in an aggregate amount not exceeding 15% of the Book Value of all Property (other than Accounts); (xviii) any Lien in favor of a creditor or a trustee on the proceeds of Indebtedness and any earnings thereon prior to the application of such proceeds and such earnings; (xix) liens on moneys deposited by patients or others with any Member of the Obligated Group as security for or as prepayment for the cost of patient care; (xx) liens on Property due to rights of third party payors for recoupment of amounts paid to any Member of the Obligated Group; (xxi) any Lien on the unrestricted funds of a Member of the Obligated Group if such Lien is given or made in connection with (i) the investment of such unrestricted funds by such Member of the Combined Group or (ii) the posting of collateral pursuant to a Derivative Agreement; (xxii) any Lien securing all Obligations on a parity basis; (xxiii) liens in favor of another Member of the Obligated Group;

B - 14 (xxiv) liens created on amounts deposited with Members of the Obligated Group to secure capitated insurance contracts and risk-sharing arrangements with insurers, health maintenance organizations, preferred provider organizations, physician groups and other parties; (xxv) any Lien on Accounts and the proceeds thereof if such Lien is given or made in connection with a sale, pledge, assignment or transfer permitted by the provisions of subsection 3.06(i) or subsection 3.08(b) of the Master Indenture; provided, however, that the carrying value of the Accounts in accordance with GAAP, as determined by an Officer’s Certificate of the Obligated Group Representative, subject to a Lien to secure Indebtedness authorized in Section 3.06(i) of the Master Indenture, may not exceed the amount of such Indebtedness by more than 15%; (xxvi) Liens on Property received by any Member of the Obligated Group through gifts, grants or bequests, such Liens being due to restrictions on such gifts, grants or bequests of Property or income thereon; (xxvii) Liens securing Prior Related Bonds; or (xxviii) any Lien securing any Derivative Indebtedness permitted by the Master Indenture. “Permitted Indebtedness” shall mean the indebtedness described in Section 3.06 of the Master Indenture. “Permitted Investments” shall mean any of the following which at the time are legal investments under the laws of the State for moneys held under the Indenture and then proposed to be invested therein; (a) Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America; (b) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): 1. U.S. Export-Import Bank (Eximbank): Direct obligations or fully guaranteed certificates of beneficial ownership; 2. Farmers Home Administration (FmHA): certificates of beneficial ownership; 3. Federal Financing Bank; 4. Federal Housing Administration Debentures (FHA); 5. General Services Administration: Participation certificates; 6. Government National Mortgage Association (GNMA or "Ginnie-Mae"): GNMA - guaranteed mortgage-backed bonds, GNMA - guaranteed pass-through obligations (not acceptable for certain cash-flow sensitive issues); 7. U.S. Maritime Administration: Guaranteed Title XI financing; 8. U.S. Department of Housing and Urban Development (HUD): Project Notes, Local Authority Bonds, New Communities Debentures - U.S. government guaranteed debentures, U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds; (c) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): 1. Federal Home Loan Bank System: Senior debt obligations; 2. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie-Mac"): Participation Certificates, Senior debt obligations; 3. Federal National Mortgage Association (FNMA or "Fannie-Mae"): Mortgage-backed securities and senior debt obligations; 4. Student Loan Marketing Association (SLMA or "Sallie-Mae"): Senior debt

B - 15 obligations; 5. Resolution Funding Corp. (REFCORP) obligations; 6. Farm Credit System: Consolidated systemwide bonds and notes; (d) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G; AAA-m; or AA-m and if rated by Moody’s rated Aaa, Aa1 or Aa2; (e) Certificates of deposit secured at all times by collateral described in (a) and/or (b) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks which, in each instance, are rated BBB- by S&P or Baa3 by Moody’s, or higher. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral; (f) Certificates of deposit, savings accounts, deposit accounts or money market deposits, including accounts or funds held or managed by the Trustee or the Master Trustee, which are fully insured by FDIC or which are secured by collateral described in (a) and/or (b) above, including BIF and SAIF; (g) Investment agreements, including guaranteed investment contracts, issued by providers whose long-term unsecured, unsubordinated debt obligations are rated AA or higher by S&P, without regard to qualifiers, numerical or otherwise; (h) Commercial paper rated, at the time of purchase "Prime-1" by Moody’s and "A-1" or better by S&P; (i) Bonds or notes issued by any state or municipality which are rated by Moody’s and S&P in one of the two highest rating categories assigned by such agencies; (j) Federal funds or bankers’ acceptances with a maximum term of one year which has an unsecured, uninsured and unguaranteed obligation rating of "Prime-1" or "A3" or better by Moody’s and "A-1" or "A" better by S&P; (k) (1) Debt obligations of any United States corporation or trust, which obligations are rated by at least two nationally recognized rating agencies in one of the three highest rating categories, or (2) commercial paper of same rated by at least two nationally recognized rating agencies in the highest rating category (without incorporating refinements or gradation of rating category by numerical modifier or otherwise); (l) Money market mutual funds (i) that invest in investments described in (a) and/or (b) above that are registered with the federal Securities and Exchange Commission meeting the requirements of Rule 2a-7 under the Investment Company Act of 1940, and (ii) that are rated at the time of purchase in either of the two highest categories by a nationally recognized rating service, including those for which the Trustee or the Master Trustee or an affiliate performs services for a fee, whether as a custodian, transfer agent, investment advisor or otherwise; and (m) Repurchase agreements; provided, however, that repurchase agreements for 30 days or less must follow the following criteria and repurchase agreements which exceed 30 days must be acceptable to any provider of a Credit Facility with respect to the Bonds: Repurchase agreements must provide for the transfer of securities the transfer of securities from a dealer bank or securities firm (seller/borrower) to the municipal entity (or the Trustee) (buyer/lender), and the transfer of cash from a the municipal entity (or the Trustee) to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the municipal entity (or the Trustee) in exchange for the securities at a specified date.

B - 16 1. Repurchase agreement must be between the municipal entity (or the Trustee) and a dealer bank or securities firm, (a) Primary dealers on the Federal Reserve reporting dealer list which are rated "A" or better by S&P and Moody’s, or (b) Banks rated "A" or above by S&P and Moody’s. 2. The written repurchase agreement contract must include the following: (a) Securities which are acceptable for transfer are; 1. Direct U.S. governments, or 2. Federal agencies backed by the full faith and credit of the U.S. government (and FNMA & FHLMC). (b) The term of the repurchase agreement may be up to 30 days. (c) The collateral must be delivered to the municipal entity, trustee (if trustee is not supplying the collateral) or third party acting as agent for the trustee (if the trustee is supplying the collateral) before/simultaneous with payment (perfection by possession of certificated securities). (d) Valuation of Collateral 1. The securities must be valued weekly, marked-to-market at current market price plus accrued interest. (A) The value of collateral must be equal to 104% of the amount of cash transferred by the municipal entity (or the Master Trustee) to the dealer bank or security firm under the repo plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by municipality, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%. Any investment in a repurchase agreement shall be considered to mature on the date the bank, trust company or recognized securities dealer providing the repurchase agreement is obligated to repurchase the Permitted Investments. “Person” shall mean any natural person, firm, joint venture, association, partnership, business trust, corporation, public body, agency or political subdivision thereof or any other similar entity, including each Member of the Obligated Group. “Principal Account” shall mean the Principal Account in the Bond Fund created pursuant to Section 6.01 of the Indenture. “Primary Obligor” shall mean the Person who is primarily obligated on an obligation which is guaranteed by another Person. “Project” shall mean, with respect to the Series 2019 Bonds, (i) the acquisition of the Sparks Hospital Assets, and (ii) the Sparks Improvements. The term “Project” with respect to Additional Bonds shall have the meaning set forth in a Supplemental Indenture. “Project Fund” means the fund created in Section 6.01 of the Indenture.

B - 17 “Property” shall mean when used in connection with a particular Person or group of Persons, any and all rights, titles and interests in and to any and all property whether real or personal, tangible or intangible, and wherever situated. "Property, Plant and Equipment" shall mean all Property of the Members of the Obligated Group which is considered as property, plant and equipment of such Members under GAAP. “Record Date” shall mean, in the case of the Series 2019 Bonds, the date which is the 15th day of the month preceding an interest payment date. “Related Bond Indenture” shall mean any indenture, bond resolution or other comparable instrument pursuant to which a series of Related Bonds is issued. “Related Bonds” shall mean the revenue bonds or other obligations issued by any state, territory or possession of the United States or any municipal corporation or political subdivision formed under the laws thereof or any constituted authority or agency or instrumentality of any of the foregoing empowered to issue obligations on behalf thereof (“governmental issuer”), pursuant to a single Related Bond Indenture, the proceeds of which are loaned or otherwise made available to (i) a Member of the Obligated Group in consideration of the execution, authentication and delivery of an Obligation to or for the order of such governmental issuer, or (ii) any Person other than a Member of the Obligated Group in consideration of the issuance to such governmental issuer (A) by such Person of any indebtedness or other obligation of such Person, and (B) by a Member of the Obligated Group of a Guaranty in respect of such indebtedness or other obligation, which Guaranty is represented by an Obligation. “Related Bond Trustee” shall mean the trustee and its successors in the trusts created under any Related Bond Indenture. “Related Loan Agreement” shall mean any loan agreement, financing agreement or similar instrument between one or more Members of the Obligated Group and a governmental issuer which is entered into in connection with the issuance of Related Bonds. “Restricted Affiliate” shall mean any Affiliate of a Member of the Obligated Group that: (1) is either (a) a non-stock membership corporation of which one or more Members of the Obligated Group or Affiliates of Members of the Obligated Group (a "Controlling Affiliate") are the sole members, or (b) a non-stock, non-membership corporation or a trust of which the sole beneficiaries or controlling Persons are one or more Members of the Obligated Group or a Controlling Affiliate, or (c) a stock corporation all of the outstanding shares of stock of which are owned by one or more Members of the Obligated Group or a Controlling Affiliate, and (2) (a) if such Affiliate is a non-stock corporation or a trust, the Corporate Charter or bylaws, in the case of a non-stock corporation, and the applicable organizational documents, in the case of a trust, shall provide that the net assets of such Affiliate shall be transferred to the Member or Members of the Obligated Group or a Controlling Affiliate that is (are) its sole member(s), beneficiary(ies) or controlling person(s) upon liquidation or dissolution of such Affiliate provided that if such Affiliate is a Tax Exempt Organization, then for so long as the applicable Member of the Obligated Group or a Controlling Affiliate is a Tax Exempt Organization, the organizational documents of such Affiliate and applicable law may (A) provide for the naming of another Member of the Obligated Group or a Controlling Affiliate as a substitute beneficiary if the then current beneficiary ceases to be a Tax Exempt Organization and (B) prohibit transfers to organizations that are not Tax Exempt Organizations, and (b) (i) the power to alter, amend or repeal the Corporate Charter or bylaws or other applicable organizational documents of such Affiliate, or to adopt new bylaws for such entity, will be reserved to the Member or Members of the Obligated Group or

B - 18 the Controlling Affiliate that is its sole member, beneficiary or controlling person and (ii) the Member or Members of the Obligated Group or the Controlling Affiliate that is (are) its sole member(s), beneficiary(ies) or controlling Person(s) shall have the sole right to appoint and dismiss, with or without cause, the members of the board of directors of such Affiliate, and (c) has (i) the legal power, with approval of a majority of its Governing Body but without the consent of any other Person, to transfer to any Member of the Obligated Group or the Controlling Affiliate money required for the payment of Indebtedness of any Member of the Obligated Group, and (ii) the ability under applicable law and its organizational documents, with approval of a majority of the members of its Governing Body, to transfer all assets of such Affiliate remaining after payment of its debts to any Member of the Obligated Group or the Controlling Affiliate provided that if such Affiliate is a Tax Exempt Organization, then for so long as the applicable Member of the Obligated Group or the Controlling Affiliate is a Tax Exempt Organization, the organizational documents of such Affiliate and applicable law may (A) provide for the naming of another Member of the Obligated Group or a Controlling Affiliate as a substitute beneficiary if the then current beneficiary ceases to be a Tax Exempt Organization, and (B) prohibit transfers to organizations that are not Tax Exempt Organizations, and (3) if such Affiliate is organized in any of the other forms mentioned in the definition of Affiliate herein, one or more Members of the Obligated Group or a Controlling Affiliate has the power and authority, by contract or otherwise, to control the operations and assets of such Affiliate, and (4) has satisfied (or a predecessor has satisfied) the requirements set forth in the Master Indenture for becoming a Restricted Affiliate and has not thereafter ceased to satisfy the requirements of clauses (1) and (2) above or satisfied the requirements set forth in the Master Indenture for ceasing to be a Restricted Affiliate. “Restricted Affiliate Income Available for Debt Service” shall mean the amount equal to the difference between (a) the excess of revenues (including interest earnings on restricted funds) over expenses before depreciation, amortization and interest on Restricted Affiliate Long-Term Indebtedness, of the Restricted Affiliates, as determined in accordance with GAAP consistently applied minus (b) the debt service paid or payable on Restricted Affiliate Long-Term Indebtedness in such 12-month period if not already excluded in clause (a) of this definition. "Restricted Affiliate Long-Term Indebtedness" has the same meaning as Long-Term Indebtedness with "Restricted Affiliate" substituted for "Obligated Group." “S&P” shall mean S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC, its successors and assigns. If, for any reason, such firm shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Obligated Group Representative. “Series 2014 Bonds” shall mean the Issuer’s Healthcare Revenue Bonds (Baptist Health), Series 2014, in the original aggregate principal amount of $138,910,000. “Series 2015 Bonds” shall mean, collectively, the Series 2015A Bonds and the Series 2015B Bonds. “Series 2015A Bonds” shall mean the Arkansas Development Finance Authority Healthcare Revenue Refunding Bonds (Baptist Health), Series 2015A, in the original aggregate principal amount of $61,730,000.

B - 19 “Series 2015B Bonds” shall mean the Arkansas Development Finance Authority Healthcare Revenue Refunding Bonds (Baptist Health), Series 2015B, in the original aggregate principal amount of $1,035,000. “Series 2019 Bonds” shall mean the Arkansas Development Finance Authority Healthcare Revenue Bonds (Baptist Health), Tax Exempt Series 2019, in the original aggregate principal amount of $94,840,000. “Series 2019 Baptist Health Corporate Bonds” shall mean the Baptist Health Obligated Group Healthcare Revenue Bonds, Taxable Series 2019, in the original aggregate principal amount of $111,060,000, issued under a Trust Indenture to be dated as of the date of delivery of the Series 2019 Baptist Health Corporate Bonds, by and between the Corporation, as Obligated Group Representative, and Regions Bank, as trustee. “Short-Term Indebtedness” shall mean all Indebtedness having a maturity of one year or less, other than the current portion of Long-Term Indebtedness, incurred or assumed by any Member of the Obligated Group, including: (i) money borrowed for an original term, or renewable at the option of the borrower for a period from the date originally incurred, of one year or less; (ii) leases which are capitalized in accordance with GAAP having an original term, or renewable at the option of the lessee for a period from the date originally incurred, of one year or less; and (iii) installment purchase or conditional sale contracts having an original term of one year or less. “Sparks Hospital Assets” shall mean the assets of Sparks health System, consisting of particularly, without limitation, Sparks Regional Medical Center in Fort Smith, Arkansas (now known as Baptist Health-Fort Smith), and Sparks Medical Center in Van Buren, Arkansas (now known as Baptist Health–Van Buren), which were acquired by the Corporation and BHRH. “Sparks Improvements” shall mean the acquisition and the installation of furnishings and equipment for the Sparks Hospital Assets. “State” shall mean the State of Arkansas. "Subordinated Indebtedness" means Indebtedness the payment of which is specifically subordinated to the payment of principal and interest on Obligations, which satisfies the criteria set forth in Exhibit A to the Master Indenture. “Supplement” shall mean the Supplemental Indenture for Obligation No. 9, to be dated as of the date of delivery of the Series 2019 Bonds, as the same may be supplemented and amended from time to time as permitted thereby and by the Master Indenture, which Supplement supplements the Master Indenture in connection with the issuance of the Series 2019 Bonds and Obligation No. 9. “Supplemental Indenture” shall mean a supplement to the Indenture that supplements and amended the terms thereof. “Tax-Exempt Bonds” shall mean, collectively, the Series 2019 Bonds and any Additional Bonds that are issued with an opinion of Bond Counsel to the effect that the interest on such Additional Bonds is exempt from regular federal income taxation.

 Preliminary; subject to change.

B - 20 “Tax-Exempt Organization” shall mean a nonprofit corporation organized and existing under the laws of one of the states of the United States of America which is (i) an organization described in Section 501(c)(3) of the Code, exempt from federal income tax under Section 501(a) of the Code or any successor provision of similar import hereafter enacted, and (ii) a “government unit” within the meaning of Section 145 of the Code. “Transaction Test” shall mean, for purposes of any consolidation, merger, sale or conveyance under Section 3.09 of the Master Indenture (a "Merger"), a party becoming a Member of the Obligated Group under Section 3.11 of the Master Indenture (an "Admission"), a withdrawal from the Obligated Group under Section 3.12 of the Master Indenture (a "Withdrawal"), the designation of a Restricted Affiliate under Section 3.14 of the Master Indenture (a "Designation"), or the release of a Restricted Affiliate under Section 3.15 of the Master Indenture (a "Release"), any of the following: (A) an Officer’s Certificate of the Obligated Group Representative demonstrating that either of the conditions described in Section 3.06(a)(i) or (ii) of the Master Indenture would have been satisfied for the issuance of an additional one dollar ($1.00) of Additional Indebtedness, assuming such Merger, Admission, Withdrawal, Designation or Release, as applicable, had occurred at the beginning of the most recent period of 12 full consecutive calendar months for which Audited Financial Statements are available, or (B) a written report of a Consultant indicating that the forecasted average Long-Term Debt Service Coverage Ratio for the two periods of 12 full consecutive calendar months succeeding the proposed date of such Merger, Admission, Withdrawal, Designation or Release, as applicable is greater than 1.25 to 1.00 or (C) an Officer’s Certificate of the Obligated Group Representative demonstrating that the unrestricted net assets (or excess of assets over liabilities, as the case may be) of the Obligated Group after giving effect to said Merger, Admission, Withdrawal, Designation or Release, as applicable is not less than 70% of the net assets (excess of assets over liabilities, as the case may be) of the Obligated Group prior to such Merger, Admission, Withdrawal, Designation or Release, as applicable, as reflected in the most recent Audited Financial Statements. “Trust Estate” or “trust estate” shall have the meaning stated in the Granting Clauses of the Indenture. “Trust Moneys” shall mean all moneys received by the Trustee: A. as compensation for, or proceeds of sale of, any part of the Facility taken by eminent domain or purchased by, or sold pursuant to an order of, a governmental authority or otherwise disposed of; B. as proceeds of insurance with respect to any part of the Facility; C. as elsewhere provided in the Indenture to be held and applied under the Indenture, or required to be paid to the Trustee and whose disposition is not elsewhere in the Indenture otherwise specifically provided for, including, but not limited to, the investment income of all funds and accounts held by the Trustee under the Indenture; D. as proceeds from the sale of the Bonds, including, but not limited to, moneys and/or Government Obligations received by the Trustee from the proceeds of Additional Bonds issued under the Indenture; E. as Obligation Payments, Additional Payments (except as to moneys payable for Trustee’s and Paying Agent’s fees or similar charges) or as otherwise payable under the Loan Agreement; and F. as proceeds of the lease or sale of the Facility in an Event of Default. “Trustee” shall mean the Regions Bank, with offices in Little Rock, Arkansas, or its successor trustee or successors from time to time under the Indenture.

B - 21 “Variable Rate Indebtedness” shall mean any portion of Indebtedness the interest rate on which has not been established at a fixed or constant rate to maturity. “Written Request” with reference to the Issuer, shall mean a request in writing signed by the Chair or the President of the Issuer; with reference to the Obligated Group Representative, shall mean a request in writing signed by the President or the Chief Financial Officer, or any Vice President and the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Corporation (or the Obligated Group Representative, if other than the Corporation).

B - 22 APPENDIX C

Audited Consolidated Financial Statements of Baptist Health as of and for the Fiscal Years ended December 31, 2017 and December 31, 2018

C - 1 [This Page Intentionally Blank]

C - 2

Baptist Health

Independent Auditor’s Report and Consolidated Financial Statements

December 31, 2018 and 2017

C-3 Baptist Health December 31, 2018 and 2017

Contents

Independent Auditor’s Report ...... 1

Consolidated Financial Statements Balance Sheets ...... 3 Statements of Operations and Changes in Net Assets ...... 4 Statements of Cash Flows ...... 6 Notes to Financial Statements ...... 7

C-4

Independent Auditor’s Report

Board of Trustees Baptist Health Little Rock, Arkansas

We have audited the accompanying consolidated financial statements of Baptist Health (the Corporation), which comprise the consolidated balance sheets as of December 31, 2018 and 2017, and the related consolidated statements of operations and changes in net assets and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

C-5 Board of Trustees Baptist Health Page 2

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Baptist Health as of December 31, 2018 and 2017, and the results of its operations, changes in net assets and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matters

As discussed in Note 1 to the consolidated financial statements, in 2018, the Corporation adopted new accounting guidance regarding recognition of revenue with customers (Topic 606). Our opinion is not modified with respect to this matter.

As discussed in Note 23 to the consolidated financial statements, effective November 1, 2018, the Corporation acquired substantially all of the assets of Sparks Health System. Our opinion is not modified with respect to this matter.

Little Rock, Arkansas May 16, 2019

C-6 Baptist Health Consolidated Balance Sheets December 31, 2018 and 2017 (In thousands)

Assets 2018 2017 Current Assets Cash and cash equivalents$ 58,915 $ 26,332 Short-term investments and other 5,922 10,174 Patient accounts receivable 144,945 109,565 Estimated amounts due from third-party payors 22,062 21,238 Supplies, prepaid expenses and other 79,098 56,930

Total current assets 310,942 224,239

Assets Limited as to Use 402,764 454,279

Property and Equipment, Net 741,140 608,896

Other Assets 78,411 76,763

Total assets $ 1,533,257 $ 1,364,177

Liabilities and Net Assets

Current Liabilities Line of credit and current maturities of long-term debt$ 14,288 $ 32,313 Accounts payable and accrued expenses 167,424 120,431 Estimated amounts due to third-party payors 1,246 2,065 Current portion of deposits by residents 1,563 999

Total current liabilities 184,521 155,808

Other Liabilities Long-term debt, net 436,752 250,035 Pension liabilities 39,084 51,108 Other liabilities 57,503 56,013

Total liabilities 717,860 512,964

Net Assets Without donor restrictions Baptist Health 787,452 823,961 Noncontrolling interests 4,979 4,508 Total net assets without donor restrictions 792,431 828,469 With donor restrictions 22,966 22,744

Total net assets 815,397 851,213

Total liabilities and net assets $ 1,533,257 $ 1,364,177

See Notes to Consolidated Financial Statements C-7 3 Baptist Health Consolidated Statements of Operations and Changes in Net Assets Years Ended December 31, 2018 and 2017 (In thousands)

2018 2017 Revenues, Gains and Other Support Without Donor Restrictions Patient service revenue $ 1,125,244 $ 1,005,139 Management fees, lease income and other 90,670 84,127

Total revenues, gains and other support without donor restrictions 1,215,914 1,089,266

Expe ns e s and Los s e s Salaries and wages 583,663 526,021 Employee benefits 124,512 115,803 Supplies 225,857 203,542 Professional fees 36,194 36,271 Other operating expenses 192,569 172,826 Depreciation and amortization 65,965 60,177 Interest 8,032 4,678

Total expenses and losses 1,236,792 1,119,318

Operating Loss (20,878) (30,052)

Other Income (Expense) Investment return (26,250) 48,941 Gain on investment in equity investees 3,401 3,571 Other (1,352) 141

Total other income (expense) (24,201) 52,653

Excess (Deficiency) of Revenues over Expenses $ (45,079) $ 22,601

See Notes to Consolidated Financial Statements C-8 4 Baptist Health Consolidated Statements of Operations and Changes in Net Assets (Continued) Years Ended December 31, 2018 and 2017 (In thousands)

2018 2017 Net Assets Without Donor Restrictions Excess (deficiency) of revenues over expenses $ (45,079) $ 22,601 Contributions for acquisition of property and equipment 530 6,806 Sales tax proceeds for acquisition of property and equipment 888 1,122 Other (354) (31) Change in fair value of cash flow hedge 887 (4) Change in defined benefit pension plan gains and losses 8,196 2,021 Contributions from noncontrolling interests - 4,241 Distributions to noncontrolling interests (1,106) (3,767)

Increase (decrease) in net assets without donor restrictions (36,038) 32,989

Net Assets with Donor Restrictions Contributions received and other 1,999 2,433 Investment return 680 2,587 Change in unrealized gains and losses on investments (1,054) (1,128) Change in value of split-interest agreements (467) 275 Change in interest in net assets of affiliated foundations 7 220 Net assets released from restriction (943) (6,495)

Increase (decrease) in net assets with donor restrictions 222 (2,108)

Change in Net Assets (35,816) 30,881

Net Assets, Beginning of Year 851,213 820,332

Net Assets, End of Year $ 815,397 $ 851,213

See Notes to Consolidated Financial Statements C-9 5 Baptist Health Consolidated Statements of Cash Flows Years Ended December 31, 2018 and 2017 (In thousands)

2018 2017 Operating Activities Change in net assets $ (35,816) $ 30,881 Items not requiring (providing) operating cash flow Depreciation and amortization 65,965 60,177 Gain on investment in equity investees (3,401) (3,571) Net (gains) losses on investments 35,376 (43,424) Restricted contributions, investment income received and other (1,165) (4,386) Contributions for acquisition of property and equipment and other (1,064) (6,427) Change in pension liabilities (12,024) (6,291) Contributions from noncontrolling interests - (4,241) Distributions to noncontrolling interests 1,106 3,767 Other (2,944) (167) Changes in Patient accounts receivable (35,380) (11,825) Supplies, prepaid expenses and other (10,435) (5,546) Accounts payable and accrued expenses 42,550 7,785 Estimated amounts due from and to third-party payors (1,643) (426)

Net cash provided by operating activities 41,125 16,306

Inves ti ng Acti vi ti e s Purchase of property and equipment (64,404) (89,634) Payment for purchase of Sparks Health System, net of cash acquired(A) (105,275) - Net change in trading securities (877) 17,743 Change in project fund 20,558 35,608 Distributions from equity investees and other investing activities 4,821 (5,951)

Net cash used in investing activities (145,177) (42,234)

Financing Activities Principal payments on long-term debt (10,287) (13,462) Proceeds from issuance of long-term debt 137,394 21,656 Net borrowings on line of credit 7,500 3,500 Net activity from entrance deposits (229) (897) Proceeds from restricted contributions, investment income and other 1,945 3,671 Proceeds from contributions for acquisition of property and equipment 1,418 7,928 Contributions from noncontrolling interests - 508 Distributions to noncontrolling interests (1,106) (3,767)

Net cash provided by financing activities 136,635 19,137

Increase (Decrease) in Cash and Cash Equivalents 32,583 (6,791)

Cash and Cash Equivalents, Beginning of Year 26,332 33,123

Cash and Cash Equivalents, End of Year $ 58,915 $ 26,332

Supplemental Cash Flows Information

Interest paid (net of amount capitalized) $ 8,381 $ 4,690

Change in capital expenditures included in accounts payable $ 2,116 $ (6,310)

Finance agreement incurred for equipment acquisition $ - $ 233

Capital lease assumed related to acquisition of Sparks Health System(A) $ 35,158 $ -

Due from seller related to acquisition of Sparks Health System(A) $ 1,815 $ -

Assumption of asset retirement obligation$ 1,218 $ -

Line of credit refinanced with note payable$ 30,000 $ -

Contributions from noncontrolling interests for acquisition of property $ - $ 3,733

(A) See Note 23 for assets acquired and liabilities assumed related to the acquisition of Sparks Health System. See Notes to Consolidated Financial Statements C-10 6 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Note 1: Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Baptist Health (the Corporation), is a not-for-profit charitable membership corporation that provides a wide range of health care related services in Arkansas. The Corporation operates various divisions and companies providing these health care related services throughout Arkansas as described below. Baptist Health Medical Center – Little Rock, Baptist Health Rehabilitation Institute, Baptist Health Medical Center – North Little Rock, Baptist Health Medical Center – Arkadelphia, Baptist Health Medical Center – Heber Springs and Baptist Health Medical Center – Hot Spring County are hospitals organized as divisions of the Corporation. Baptist Health Hospitals, Inc., a separate legal entity, operates Baptist Health Medical Center – Stuttgart. Conway Community Services, a separate legal entity, operates Baptist Health Medical Center – Conway. Baptist Health Extended Care Hospital – Little Rock, Inc., a separate legal entity, independently operates a long-term acute care hospital in Little Rock. Baptist Health Regional Hospitals, a separate legal entity, operates Baptist Health – Fort Smith and Baptist Health – Van Buren. When consolidated, these hospitals aggregate approximately 2,100 beds for patient care. The hospitals earn revenue by providing inpatient, outpatient and emergency services to patients in central and west Arkansas and surrounding areas. The Corporation also owns 100% of Baptist Health Physician Partners, LLC; 100% of Baptist Health Services; 51% of Ortho Arkansas Surgery Center, LLC; 60% of Complete Health with PACE; and 57% of American Data Network, LLC. The Corporation has an investment in the following unconsolidated subsidiaries, which are accounted for using the equity method in as much as control rests with other parties or there is no party with control: Entity Springhill Surgery Center, LLC The Partnership for a Healthy Arkansas, LLC A2 ACO, LLC d/b/a Baptist Health UAMS Accountable Care Alliance Baptist Health-UAMS Medical Education Program, LLC The Corporation is the sole member of Diamond Risk Insurance, LLC (Diamond Risk), which is a special purpose captive insurance company organized under Arkansas law that insures certain risks of the Corporation. Any intercompany premium revenue and expense has been eliminated in consolidation. The Corporation is the sole member of Parkway Village, Inc., Parkway Health Center, Inc. and Arkansas Health Group (AHG). Parkway Village, Inc. is a retirement community in Little Rock that provides residential and recreational facilities and certain medical services to residents under long-term rental agreements. Parkway Health Center, Inc. provides residential care nursing services to residents in and around Little Rock. Arkansas Health Group provides physician services from clinics located throughout the Corporation’s service area. Baptist Health Foundation, Inc. (the Foundation) conducts fundraising activities for the Corporation.

C-11 7 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Multi-Management Services, Inc. (MMS) is a diversified holding company whose consolidated and unconsolidated subsidiaries primarily provide physician management services, radiology services, rental services and consulting services. MMS or its affiliates include the accounts of the following consolidated subsidiaries: Entity Hotel Properties, Inc. Baptist Medical System HMO, Inc. (BHMO) Baptist MedCare, Inc. d/b/a Practice Plus (Practice Plus) Baptist Imaging Benton, LLC Baptist Health Center for Clinical Research, LLC Autumn Road, LLC West Side Properties, Inc. Two Financial Centre Holding Company LLC MMS or its affiliates own investments in the following unconsolidated subsidiaries, which are accounted for using the equity method in as much as control rests with other parties: Entity Alliance Homecare, Inc. HMO Partners, Inc. d/b/a Health Advantage BHWC Corporation Maumelle Family Practice, LLC Surgical Pavilion, LLC Baptist-Urgent Team JV, LLC Dollar amounts included in tables throughout these footnotes are presented in thousands.

Noncontrolling Interests

Noncontrolling interests represent the following amounts not owned by the Corporation – a 49% interest in Ortho Arkansas Surgery Center, LLC; a 49% interest in Baptist Health Center for Clinical Research, LLC; a 40% interest in Autumn Road, LLC; a 40% interest in Complete Health with PACE; a 43% interest in American Data Network, LLC; and a 35% interest in Two Financial Centre Holding Company LLC. Losses attributable to the noncontrolling interests are allocated to the noncontrolling interests even if the carrying amount of the noncontrolling interests is reduced below zero. At December 31, 2018 and 2017, there were no noncontrolling interests that have been reduced below zero.

C-12 8 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

For the years ended December 31, 2018 and 2017, changes in consolidated unrestricted net assets attributable to the controlling financial interest of the Corporation and the noncontrolling interests are:

Controlling Noncontrolling Total Interest Interests

Balance, December 31, 2016 $ 795,480 $ 793,002 $ 2,478

Excess of revenues over expenses 22,601 21,331 1,270 Contributions for acquisition of property and equipment 6,806 6,520 286 Sales tax proceeds for acquisition of property and equipment 1,122 1,122 - Other (31) (31) - Change in fair value of cash flow hedge (4) (4) - Change in defined benefit pension plan gains and losses 2,021 2,021 - Contributions from noncontrolling interests 4,241 - 4,241 Distributions to noncontrolling interests (3,767) - (3,767)

Increase in net assets without donor restrictions 32,989 30,959 2,030

Balance, December 31, 2017 828,469 823,961 4,508

Excess (deficiency) of revenues over expenses (45,079) (46,532) 1,453 Contributions for acquisition of property and equipment 530 406 124 Sales tax proceeds for acquisition of property and equipment 888 888 - Other (354) (354) - Change in fair value of cash flow hedge 887 887 - Change in defined benefit pension plan gains and losses 8,196 8,196 - Distributions to noncontrolling interests (1,106) - (1,106)

Increase (decrease) in net assets without donor restrictions (36,038) (36,509) 471

Balance, December 31, 2018 $ 792,431 $ 787,452 $ 4,979

The change in net assets with donor restrictions related solely to the controlling interest.

Principles of Consolidation

The consolidated financial statements include the accounts of the Corporation and its wholly owned or controlled subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

C-13 9 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Corporation considers all liquid investments with original maturities of three months or less to be cash equivalents, other than those included in assets limited as to use or held in brokerage accounts. At December 31, 2018 and 2017, cash equivalents consisted primarily of certificates of deposit. At December 31, 2018, the Corporation’s cash accounts included in cash and cash equivalents exceeded federally insured limits by approximately $59,032,000 and the Corporation’s cash accounts included in assets limited as to use exceeded federally insured limits by approximately $3,883,000.

Investments and Investment Return

Investments in equity securities having a readily determinable fair value and in all debt securities are carried at fair value. Investments in equity investees are reported using the equity method of accounting. Other investments are valued at the lower of cost (or fair value at time of donation, if acquired by contribution) or fair value. Investments in private equity funds and hedge funds are recorded at net asset value (NAV), as a practical expedient. Investment return includes dividend, interest and other investment income; realized and unrealized gains and losses on investments carried at fair value; and realized gains and losses on other investments, less external and direct internal investment expense. Investment return that is initially restricted by donor stipulation and for which the restriction will be satisfied in the same year is included in net assets without donor restrictions. Other investment return is reflected in the consolidated statements of operations and changes in net assets as with or without donor restrictions based upon the existence and nature of any donor or legally imposed restrictions.

Split-Interest Agreements

Funds held in trust by others are recorded at fair value based on the Corporation’s share of the trust. Irrevocable charitable remainder trusts held by others are recorded as a contribution in the year the trust is established. The contribution is recorded at the fair value of the trust less the present value of the estimated future cash payments to the beneficiaries.

C-14 10 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Assets Limited as to Use

Assets limited as to use include (1) assets held by trustees; (2) assets restricted by donors; (3) assets set aside by the Board of Trustees (the Board) for future capital improvements or other specific uses over which the Board retains control and may, at its discretion, subsequently use for other purposes; and (4) Parkway Village residents’ funds held in escrow. Amounts required to meet current liabilities of the Corporation are included in current assets.

Patient Accounts Receivable

Patient accounts receivable reflects the outstanding amount of consideration to which the Corporation expects to be entitled in exchange for providing patient care. These amounts are due from patients, third-party payors (including health insurers and government programs) and others. As a service to the patient, the Corporation bills third-party payors directly and bills the patient when the patient’s responsibility for co-pays, coinsurance and deductibles is determined. Patient accounts receivable are due in full when billed.

Contract Assets

Amounts related to health care services provided to patients which have not been billed and that do not meet the conditions of an unconditional right to payment at the end of the reporting period are contract assets. Contract assets consist primarily of health care services provided to patients who are still receiving inpatient care in the Corporation at the end of the year. Contract assets are included in supplies, prepaid expenses and other on the consolidated balance sheets.

Supplies

The Corporation states supply inventories at the lower of cost, determined using the first-in, first- out method, or net realizable value.

Property and Equipment

Property and equipment acquisitions are recorded at cost and are depreciated using the straight-line method over the estimated useful life of each asset. Assets under capital lease obligations and leasehold improvements are depreciated over the shorter of the lease term or their respective estimated useful lives. The estimated useful lives for each major depreciable classification of property and equipment are as follows: Buildings and improvements 5–40 years Leasehold improvements 3–20 years Equipment 3–20 years

C-15 11 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Donations of property and equipment are reported at fair value as an increase in net assets without donor restrictions unless use of the assets is restricted by the donor. Monetary gifts that must be used to acquire property and equipment are reported as restricted support. The expiration of such restrictions is reported as an increase in net assets without donor restrictions when the donated asset is placed in service. The Corporation capitalizes interest costs as a component of construction in progress, based on interest costs of borrowing specifically for the projects funded by tax-exempt debt, net of interest earned on investments acquired with the proceeds of the borrowing. Total interest capitalized and incurred during 2018 and 2017 was:

2018 2017

Total interest expense incurred on borrowings for projects$ 6,802 $ 6,802 Interest income from investment proceeds of borrowings for projects 389 262

Net interest cost capitalized $ 6,413 $ 6,540

Interest capitalized $ 3,681 $ 4,951 Interest charged to expense 3,121 1,851

Total interest incurred $ 6,802 $ 6,802

The Corporation also capitalizes interest costs as a component of construction in progress for projects not funded by tax-exempt debt, based on the weighted-average rates paid for long-term borrowing. Total such interest incurred was:

2018 2017

Interest costs capitalized $ 153 $ 735 Interest costs charged to expense 4,911 2,827

Total interest incurred $ 5,064 $ 3,562

Long-lived Asset Impairment

The Corporation evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset is less than the carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value. There was no impairment loss recorded during the years ended December 31, 2018 and 2017. C-16 12 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Interest in Net Assets of Affiliated Foundations

Baptist Health Foundation Cleburne County, Stuttgart Memorial Hospital Foundation and Hot Spring County Medical Foundation (collectively Foundations) and the Corporation are financially interrelated organizations. These Foundations seek private support for, and hold net assets on behalf of, the Corporation’s facilities that are located in Heber Springs, Stuttgart and Malvern, Arkansas, respectively. The Corporation accounts for its interest in the net assets of the Foundations (Interest) in a manner similar to the equity method. Changes in the Interest are included in change in net assets. Transfers of assets between the Foundations and the Corporation are recognized as increases or decreases in the Interest.

Deferred Financing Costs

Deferred financing costs represent costs incurred in connection with the issuance of long-term debt. The Corporation records these costs as direct deductions from the related debt consistent with debt discounts or premiums. Such costs are being amortized over the term of the respective debt using the straight-line method, which is not significantly different than the effective interest method.

Deposits by Residents

The nonrefundable portion of resident entrance deposits for Parkway Village, Inc. is 15% during the first year of residency agreements and increases by 5% each year thereafter until a maximum of 30% is reached. The maximum nonrefundable portion is dependent upon the residency agreement signed by each resident and the resident’s length of stay. The total nonrefundable portion is recorded as deferred revenue and amortized to income on a straight-line basis over the remaining life expectancy of each resident. The refundable resident entrance deposits are recorded as a long- term liability except for the portion expected to be refunded within one year. In the event that resident agreements are terminated, the nonrefundable portion is recognized as revenue in the year of termination. Deposits from residents who have not yet taken occupancy are also recorded as long-term liabilities.

Net Assets

Net assets, revenues, gains and losses are classified based on the existence or absence of donor restrictions. Net assets without donor restrictions are available for use in general operations and not subject to donor restrictions. Net assets with donor restrictions are subject to donor restrictions. Some restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Other restrictions are perpetual in nature, where the donor stipulates that resources be maintained in perpetuity.

C-17 13 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Patient Service Revenue

Patient service revenue is recognized as the Corporation satisfies performance obligations under its contracts with patients. Patient service revenue is reported at the estimated transaction price or amount that reflects the consideration to which the Corporation expects to be entitled in exchange for providing patient care. The Corporation determines the transaction price based on standard charges for goods and services provided, reduced by contractual adjustments provided to third- party payors, discounts provided to uninsured patients in accordance with the Corporation’s policies and implicit price concessions provided to uninsured patients. The Corporation determines its estimates of explicit price concessions which represent adjustments and discounts based on contractual agreements, its discount policies and historical experience by payor groups. The Corporation determines its estimate of implicit price concessions based on its historical collection experience by classes of patients. The estimated amounts also include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews and investigations by third-party payors.

Charity Care

The Corporation provides care without charge or at amounts less than its established rates to patients meeting certain criteria under its charity care policy. Because the Corporation does not pursue collection of amounts determined to qualify as charity care, these amounts are not reported as patient service revenue. The Corporation’s direct and indirect costs for services furnished under its charity care policy aggregated approximately $23,840,000 and $14,989,000 for 2018 and 2017, respectively. The cost of charity care is estimated by applying the ratio of cost to gross charges to the gross uncompensated charges.

Contributions

Unconditional gifts expected to be collected within one year are reported at their net realizable value. Unconditional gifts expected to be collected in future years are initially reported at fair value determined using the discounted present value of estimated future cash flows technique. The resulting discount is amortized using the level-yield method and is reported as contribution revenue. Gifts received with donor stipulations are reported as changes in net assets with donor restrictions. When a donor restriction expires, that is, when a time restriction ends or purpose restriction is accomplished, net assets with donor restrictions are reclassified and reported as an increase in net assets without donor restrictions and are reported in the consolidated statements of operations and changes in net assets as net assets released from restrictions. Donor-restricted contributions whose restrictions are met within the same year as received are reported as revenue and net assets without donor restrictions. Conditional contributions are not recognized until the gift becomes unconditional, i.e. the donor-imposed barrier is met.

C-18 14 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Professional and General Liability and Workers’ Compensation Claims

The Corporation recognizes an accrual for claim liabilities based on estimated ultimate losses and costs associated with settling claims. In addition, the Corporation recognizes a receivable for the estimated insurance recoveries, if any, for its subsidiaries that are for-profit corporations. A receivable is not recorded for the Corporation’s not-for-profit subsidiaries based on Arkansas charitable immunity laws and case precedent. Professional and general liability and workers’ compensation claims are described more fully in Note 9.

Income Taxes

The Corporation and its wholly owned or controlled not-for-profit companies are exempt from income taxes under Section 501 of the Internal Revenue Code and a similar provision of state law; however, they are subject to federal income tax on any unrelated business taxable income. The Corporation accounts for income taxes for all other taxable subsidiaries in accordance with income tax accounting guidance (ASC 740, Income Taxes) depending on legal structure. The Corporation’s C corporations are subject to income tax and the income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Corporation determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Corporation’s limited liability companies are not directly subject to income taxes under the provisions of the Internal Revenue Code and applicable state law. Therefore, taxable income or loss is reported to the individual partners for inclusion in their respective tax returns, and no provision for federal and state income taxes has been included in the accompanying consolidated financial statements. The Corporation files tax returns in the U.S. federal jurisdiction. The Corporation and its subsidiaries are generally no longer subject to U.S. federal and state income tax examinations by tax authorities for income tax returns filed for years before 2015. There were no material deferred tax items as of December 31, 2018 or 2017. Total income tax expense (benefit) for the Corporation’s taxable subsidiaries was approximately $872,000 and ($164,000) for 2018 and 2017, respectively, and is included in other nonoperating expenses on the consolidated statements of operations and changes in net assets.

C-19 15 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Excess (Deficiency) of Revenues over Expenses

The consolidated statements of operations and changes in net assets include excess (deficiency) of revenues over expenses. Changes in net assets without donor restrictions which are excluded from excess (deficiency) of revenues over expenses, consistent with industry practice, include contributions of long-lived assets (including assets acquired using contributions, which by donor restriction was to be used for the purpose of acquiring such assets), distributions to noncontrolling interests, changes in fair value of cash flow hedge and changes in defined benefit pension plan gains and losses.

Self-Insured Employee Health Claims

The Corporation has elected to self-insure certain costs related to employee health claims. Costs resulting from uninsured losses are charged to income when incurred. The Corporation has purchased insurance that limits its annual exposure for individual claims to $500,000 per covered individual.

Transfers Between Fair Value Hierarchy Levels

Transfers in and out of Level 1 (quoted market prices), Level 2 (other significant observable inputs) and Level 3 (significant unobservable inputs) are recognized on the actual transfer date.

Change in Accounting Principle

On January 1, 2018, the Corporation adopted Topic 606, Revenue from Contracts with Customers (Topic 606), using a full-retrospective method of adoption to all contracts with patients and customers at January 1, 2018. The core guidance in Topic 606 is to recognize revenue to depict the transfer of promised goods or services to customers or patients in an amount that reflects the consideration to which the Corporation expects to be entitled in exchange for those goods or services. The amount to which the Corporation expects to be entitled is calculated as the transaction price and recorded as revenue in exchange for providing patient care services to its patients and goods or services to its customers. Adoption of Topic 606 resulted in changes in presentation of the consolidated financial statements and related disclosures in the notes to the consolidated financial statements. Because contracts are generally completed within a year, the Corporation used the actual transaction price rather than estimating variable consideration amounts for contracts completed during the year ending December 31, 2017. Prior to the adoption of Topic 606, the majority of the provision for doubtful accounts related to patients without insurance, as well as patient responsibility balances for co-pays, co-insurance and deductibles for patients with insurance. Under Topic 606, the estimated amounts due from patients for which the Corporation does not expect to be entitled or collect from the patients are considered implicit price concessions and excluded from the Corporation’s estimation of the transaction price or revenue recorded.

C-20 16 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

The adoption had no material impact on operating income, overall change in net assets or net cash provided by operating activities. The adoption did impact the classification of provider assessment fees paid under the state Medicaid program, which are further discussed in Note 2. Provider assessment fees were previously classified as a deduction from patient service revenue, and are currently classified as an operating expense upon adoption. A summary of the impact after reclassification of those fees is as follows:

December 31, 2017 As Previously Adoption Reported As Adjusted Impact Revenues, Gains and Other Support Without Donor Restrictions Patient service revenue$ 992,722 $ 1,005,139 $ 12,417

Total revenues, gains and other support without donor restrictions 1,076,849 1,089,266 12,417

Expenses and Losses Other operating expenses 160,409 172,826 12,417

Total expenses and losses 1,106,901 1,119,318 12,417

In 2018, the Corporation also adopted Accounting Standards Update (ASU) 2016-14, Not-for- Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. A summary of the changes is as follows:

Balance Sheets

 The balance sheets distinguish between two new classes of net assets—those with donor- imposed restrictions and those without. This is a change from the previously required three classes of net assets—unrestricted, temporarily restricted and permanently restricted.

Statements of Operations and Changes in Net Assets

 Investment income is shown net of external and direct internal investment expenses. Disclosure of the expenses netted against investment income is no longer required.

Notes to the Consolidated Financial Statements

 Enhanced quantitative and qualitative disclosures provide additional information useful in assessing liquidity and cash flows available to meet operating expenses for one year from the date of the balance sheets.  Amounts and purposes of board designations and appropriations as of the end of each year are disclosed.  Expenses are now reported by both nature and function. This change had no impact on previously reported total change in net assets. C-21 17 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Subsequent Events

Subsequent events have been evaluated through May 16, 2019, which is the date the consolidated financial statements were available to be issued.

Note 2: Patient Service Revenue

Patient service revenue is reported at the amount that reflects the consideration to which the Corporation expects to be entitled in exchange for providing patient care. These amounts are due from patients, third-party payors (including health insurers and government programs) and others and includes variable consideration for retroactive revenue adjustments due to settlement of audits, reviews and investigations. Generally, the Corporation bills the patients and third-party payors several days after the services are performed or the patient is discharged from the facility and patient accounts receivable are due in full when billed. Revenue is recognized as performance obligations are satisfied.

Performance Obligations

Performance obligations are determined based on the nature of the services provided by the Corporation. Revenue for performance obligations satisfied over time is recognized based on charges accumulated over the period of service. The Corporation believes that this method provides a faithful depiction of the transfer of services over the term of the performance obligation based on the inputs needed to satisfy the obligation. Generally, performance obligations satisfied over time relate to patients in the Corporation receiving inpatient acute care services or patients receiving services in its outpatient centers or in their homes (home care). The Corporation measures the performance obligation from inpatient admission, or the commencement of an outpatient service, to the point when it is no longer required to provide services to that patient, which is generally at the time of discharge or completion of the outpatient services. Revenue for performance obligations satisfied at a point in time is generally recognized when goods are provided to its patients and customers in a retail setting (for example, pharmaceuticals and medical equipment) and the Corporation does not believe it is required to provide additional goods related to the patient. Because practically all of its performance obligations relate to contracts with a duration of less than one year, the Corporation has elected to apply the optional exemption provided in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 606-10-50-14(a) and, therefore, is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The unsatisfied or partially unsatisfied performance obligations referred to above are primarily related to inpatient acute care services at the end of the reporting period. The performance obligations for these contracts are generally completed when the patients are discharged, which generally occurs within days or weeks of the end of the reporting period.

C-22 18 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Transaction Price

The Corporation determines the transaction price based on standard charges for goods and services provided, reduced by explicit price concessions which consist of contractual adjustments provided to third-party payors, discounts provided to uninsured patients in accordance with the Corporation‘s policy and implicit price concessions provided to uninsured patients. The Corporation determines its estimates of contractual adjustments and discounts based on contractual agreements, its discount policies and historical experience. The Corporation determines its estimate of implicit price concessions based on its historical collection experience with this class of patients.

Third-Party Payors

Agreements with third-party payors typically provide for payments at amounts less than established charges. A summary of the payment arrangements with major third-party payors follows: Medicare – Most inpatient acute care services and outpatient services rendered to Medicare program beneficiaries are paid at prospectively determined rates. These rates vary according to a patient classification system that is based on clinical, diagnostic and other factors. Baptist Health Medical Center – Heber Springs and Baptist Health Medical Center – Arkadelphia are critical access hospitals whose services are paid based on a cost reimbursement methodology. The Corporation is reimbursed for certain services at tentative rates with final settlement determined after submission of annual cost reports by the Corporation and audits thereof by the Medicare administrative contractor. Medicaid – Inpatient services rendered to Medicaid program beneficiaries are reimbursed under a cost reimbursement methodology subject to certain cost limitations. Outpatient services are reimbursed based on defined allowable charges. The Corporation is reimbursed at a tentative rate with final settlement determined after submission of annual cost reports by the Corporation and audits thereof by the Medicaid fiscal intermediary. The Corporation participates in the Arkansas Medicaid provider assessment program. Fee assessments of up to 5.5% of patient service revenue are required by the program, and assessment proceeds are used to generate supplemental Medicaid funding from the federal government which are allocated to private hospitals in Arkansas based on each hospital’s share of total Medicaid discharges and outpatient payments. Fee assessments paid under this program are included in other operating expenses. Such amounts were approximately $14,492,000 and $12,417,000 for the years ended December 31, 2018 and 2017, respectively. The payments received under the provider assessment program are considered variable consideration and are included in the determination of the transaction price. Such amounts were approximately $38,728,000 and $27,943,000 for the years ended December 31, 2018 and 2017, respectively. In addition, the state of Arkansas enacted a form of Medicaid expansion, which uses the expansion funding to purchase private insurance policies on health care exchanges for qualifying beneficiaries. Arkansas Medicaid expansion is further described in Note 22.

C-23 19 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Other – Payment agreements with certain commercial insurance carriers, health maintenance organizations and preferred provider organizations provide for payment using prospectively determined rates per discharge, discounts from established charges and prospectively determined daily rates. Laws and regulations concerning government programs, including Medicare and Medicaid, are complex and subject to varying interpretation. As a result of investigations by governmental agencies, various health care organizations have received requests for information and notices regarding alleged noncompliance with those laws and regulations, which, in some instances, have resulted in organizations entering into significant settlement agreements. Compliance with such laws and regulations may also be subject to future government review and interpretation, as well as significant regulatory action, including fines, penalties and potential exclusion from the related programs. There can be no assurance that regulatory authorities will not challenge the Corporation’s compliance with these laws and regulations, and it is not possible to determine the impact (if any) such claims or penalties would have upon the Corporation. In addition, the contracts the Corporation has with commercial payors also provide for retroactive audit and review of claims. Settlements with third-party payors for retroactive adjustments due to cost report or other audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Corporation’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known based on newly available information or as years are settled or are no longer subject to such audits, reviews and investigations. Adjustments arising from a change in the transaction price were not significant in 2018 and 2017.

Patient and Uninsured Payors

Generally, patients who are covered by third-party payors are responsible for related deductibles and coinsurance, which vary in amount. The Corporation also provides services to uninsured patients and offers those uninsured patients a discount, either by policy or law, from standard charges. The Corporation estimates the transaction price for patients with deductibles and coinsurance and from those who are uninsured based on historical experience and current market conditions. The initial estimate of the transaction price is determined by reducing the standard charge by any contractual adjustments, discounts and implicit price concessions based on historical collection experience. Subsequent changes to the estimate of the transaction price are generally recorded as adjustments to patient service revenue in the period of the change. Subsequent changes that are determined to be the result of an adverse change in the patient’s ability to pay are recorded as bad debt expense.

C-24 20 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Consistent with the Corporation’s mission, care is provided to patients regardless of their ability to pay. Therefore, the Corporation has determined it has provided implicit price concessions to uninsured patients and patients with other uninsured balances, such as co-pays and deductibles. The implicit price concessions included in estimating the transaction price represent the difference between amounts billed to patients and the amounts the Corporation expects to collect based on its collection history with those patients. Patients who meet the Corporation’s criteria for charity care are provided care without charge or at amounts less than established rates. Such amounts determined to qualify as charity care are not reported as revenue.

Refund Liabilities

From time to time the Corporation will receive overpayments of patient balances from third-party payors or patients resulting in amounts owed back to either the patients or third-party payors. These amounts are excluded from revenues and are recorded as liabilities until they are refunded. As of December 31, 2018 and 2017, the Corporation has a liability for refunds to third-party payors and patients recorded of approximately $2,535,000 and $1,757,000, respectively. These amounts are included in accounts payable on the consolidated balance sheets.

Revenue Composition

The Corporation has determined that the nature, amount, timing and uncertainty of revenue and cash flows are affected by the following factors: payors and service lines. Tables providing details of these factors are presented below. The composition of patient service revenue by primary payor for the years ended December 31, 2018 and 2017, is as follows:

2018 2017

Medicare $ 500,500 $ 455,532 Medicaid 114,905 93,114 Other third-party payors 490,401 446,146 Uninsured 19,438 10,347

$ 1,125,244 $ 1,005,139

Revenue from patients’ deductibles and coinsurance is included in the categories presented above based on the primary payor.

C-25 21 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

The composition of patient service revenue by service lines for the years ended December 31, 2018 and 2017, is as follows:

2018 2017

Hospital-based services $ 959,398 $ 861,666 Clinical services 136,246 117,096 Home health and hospice 16,420 14,413 Other 13,180 11,964

$ 1,125,244 $ 1,005,139

Revenue is recognized as health care services are provided over time. Revenue recognized at a point in time, such as retail pharmacy, is not significant.

Contract Assets

Contract assets consist primarily of health care services provided to patients who are still receiving inpatient care in the Corporation’s hospitals at the end of the year. Contract assets are transferred to receivables when the rights become unconditional and are included in supplies, prepaid expenses and other on the consolidated balance sheets as of December 31, 2018 and 2017. Significant changes in contract assets during the period are as follows:

2018 2017

Balance, beginning of year $ 12,079 $ 10,836 Effects of Transferred to receivables from contract assets recognized as the beginning of period (12,079) (10,836) Revenue recognized on contracts in process as of the end of the year 12,954 12,079

Balance, end of year $ 12,954 $ 12,079

Financing Component

The Corporation has elected the practical expedient allowed under FASB ASC 606-10-32-18 and does not adjust the promised amount of consideration from patients and third-party payors for the effects of a significant financing component due to the Corporation’s expectation that the period between the time the service is provided to a patient and the time the patient or a third-party payor pays for that service will be one year or less.

C-26 22 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

However, the Corporation does, in certain instances, enter into payment agreements with patients that allow payments in excess of one year. For those cases, the financing component is not deemed to be significant to the contract.

Note 3: Concentration of Credit Risk

The Corporation grants credit without collateral to its patients, most of whom are area residents and are insured under third-party payor agreements. The mix of net receivables from patients and third-party payors at December 31, 2018 and 2017, is:

2018 2017

Medicare 37 % 38 % Medicaid 7 6 Other third-party payors 52 53 Uninsured 4 3

100 % 100 %

Note 4: Investments and Investment Return

Total investments at December 31, 2018 and 2017, include the following:

2018 2017

Cash and cash equivalents $ 5,990 $ 10,998 Money market mutual funds 28,315 58,131 Marketable equity securities 72,239 78,478 Mutual funds 91,599 94,652 Alternative investments – hedge funds 46,159 55,823 Alternative investments – fund of funds 37,219 39,994 U.S. government and agency obligations 18,636 22,368 State and municipal obligations 31,798 28,899 Corporate debt obligations 59,512 54,290 Mortgage-backed securities 34,346 37,345 Held under split-interest agreements 2,801 3,247 Interest receivable 1,323 1,284

$ 429,937 $ 485,509

C-27 23 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Total investments are summarized at December 31, 2018 and 2017, as follows:

2018 2017 Curre nt Asse ts Short-term investments and other$ 5,922 $ 10,174

Assets Limited as to Use Internally designated Capital improvements 337,483 365,167 Other uses 31,287 36,198 Held by trustee under indenture agreement Project fund 19,494 40,050 Externally restricted by donors 19,724 19,046 Other arrangements 194 193 408,182 460,654 Less amount required to meet current obligations 5,418 6,375

402,764 454,279

Other Assets Investments 21,251 21,056

Total investments $ 429,937 $ 485,509

Investment Return

Total investment return is comprised of the following:

2018 2017

Interest and dividend income $ 8,752 $ 6,976 Unrealized gains (losses) on trading securities (23,936) 2,752 Gains (losses) on alternative investments (10,932) 9,399 Realized gains (losses) on sales of securities (508) 31,273

$ (26,624) $ 50,400

C-28 24 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Total investment return is reflected in the consolidated statements of operations and changes in net assets as follows:

2018 2017

Net assets without donor restrictions Other nonoperating income$ (26,250) $ 48,941 Net assets with donor restrictions Investment return 680 2,587 Change in unrealized losses on investments (1,054) (1,128)

$ (26,624) $ 50,400

Alternative Investments

The fair value of alternative investments has been estimated using the NAV per share of the investments. Alternative investments held at December 31 consist of the following:

Fair Value Redemption Redemption 2018 2017 Frequency Notice Period

Quarterly and Hedge funds (A) $ 46,159 $ 55,823 Monthly 10–30 days Fund of funds (B) $ 37,219 $ 39,994 Suspendable 45–65 days

(A) This category includes the following types of investments: 1) a hedge fund that is invested in equity securities of non-tobacco companies located in any country other than the United States or Canada; and 2) a hedge fund limited partnership that invests in any debt or equity securities with value to achieve long-term capital appreciation. The funds’ composite portfolio includes investments in corporate bonds and publicly traded partnerships. (B) This category includes the following types of investments: 1) a multi-strategy fund of funds based in the Cayman Islands that seeks to achieve long-term returns commensurate with the long-term returns in the general equity markets. The fund invests in four main sectors: long-short equity, event driven, relative value and global asset allocation; and 2) a multi-strategy fund of funds investing predominately in limited partnerships and similar pooled investment accounts.

C-29 25 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Note 5: Deposits By Residents

Deposits by residents of Parkway Village, Inc. consist of the following and are included under current portion of deposits by residents and other liabilities on the consolidated balance sheets at December 31, 2018 and 2017:

2018 2017

Nonrefundable deposits $ 6,534 $ 6,549 Accumulated amortization (3,497) (3, 374) Net nonrefundable deposits 3,037 3,175 Refundable deposits 13,689 14,419 Deposits from future residents 75 21 16,801 17,615 Less current maturities 1,563 999

$ 15,238 $ 16,616

Note 6: Property and Equipment

Property and equipment are stated at cost and are summarized at December 31 as follows:

2018 2017

Land and land improvements $ 82,311 $ 76,471 Buildings 826,996 711,326 Equipment 483,586 450,369 Construction in progress 36,362 16,440 1,429,255 1,254,606 Less accumulated depreciation 688,115 645,710

$ 741,140 $ 608,896

C-30 26 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Note 7: Investments in Equity Investees

The Corporation invests in various joint ventures accounted for using the equity method of accounting and reported as a component of long-term other assets on the consolidated balance sheets. The equity investment amounts recorded in other long-term assets on the consolidated balance sheets were approximately $43,914,000 and $43,165,000 as of December 31, 2018 and 2017, respectively. The financial position and operating results of these investees are summarized below:

2018 2017

Current assets $ 148,556 $ 154,549 Property and other long-term assets, net 9,764 9,043

Total assets $ 158,320 $ 163,592 Total liabilities $ 71,547 $ 78,046

Equity $ 86,773 $ 85,546 Net revenues $ 270,825 $ 246,091

Net income $ 11,247 $ 10,512 Distributions $ 5,451 $ 3,246

Note 8: Contributions Receivable

Contributions receivable at December 31, 2018 and 2017, were $1,964,000 and $2,314,000, respectively. The current portion is presented in supplies, prepaid expenses and other, and the remaining amounts are recorded in other long-term assets on the consolidated balance sheets. Included in these amounts are amounts due under split-interest agreements of $1,710,000 and $1,825,000 as of December 31, 2018 and 2017, respectively.

C-31 27 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Note 9: Professional and General Liability and Workers’ Compensation Claims

The Corporation is self-insured for the first $1,000,000 per occurrence and $5,000,000 in the aggregate of medical malpractice risks for substantially all hospital operations. The Corporation is responsible for the first $1,000,000 (known as the buffer) of claim expense, including expenses incurred associated with defense of claims, before the $1,000,000 per occurrence and $5,000,000 in the aggregate limits apply. These risks are insured by Diamond Risk. Diamond Risk obtains reinsurance from the commercial insurance industry to fulfill the excess umbrella policy of $75,000,000. Arkansas Health Group (AHG), a wholly owned subsidiary of the Corporation, has obtained a separate professional liability claims-made insurance policy on a fixed premium basis, which is used in conjunction with the excess umbrella policy of the Corporation. AHG’s professional liability policy provides for coverage for the first $1,000,000 per claim and $3,000,000 in the aggregate for each employed physician and AHG with a shared limit of $1,000,000 per claim and $4,000,000 in the aggregate. This policy includes a deductible of $50,000 per claim with an annual limit of $150,000. The Corporation has also elected to self-insure workers’ compensation claims and has purchased insurance coverage to limit its exposure to $750,000 per occurrence and $1,000,000 in the aggregate. The Corporation records a liability and related receivable for any claims exceeding the self-insured retention limit. Professional and general liability and workers’ compensation reserve estimates represent the estimated ultimate cost of all reported and unreported losses incurred through the respective consolidated balance sheet dates. The reserves for unpaid losses and loss expenses are estimated using individual case-basis valuations and actuarial analyses. Those estimates are subject to the effects of trends in loss severity and frequency. The estimates are continually reviewed, and adjustments are recorded as experience develops or new information becomes known. Such adjustments are included in current operations. The time period required to resolve these claims can vary depending upon whether the claim is settled or litigated. The estimation of the timing of payments beyond a year can vary significantly. Although considerable variability is inherent in professional and general liability reserve estimates, management believes the reserves for losses and loss expenses are adequate based on information currently known. It is reasonably possible that this estimate could change materially in the near term. The liabilities recorded on the consolidated balance sheets at December 31, 2018 and 2017, are summarized below:

2018 2017

Current accrued expenses $ 4,905 $ 4,466 Long-term other liabilities 12,602 11,847

$ 17,507 $ 16,313

C-32 28 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Note 10: Line of Credit

The Corporation had a $30,000,000 unsecured revolving line of credit that expired on August 14, 2018. The Corporation borrowed $22,500,000 against this line as of December 31, 2017. Interest was payable quarterly at the BBA LIBOR daily floating rate plus 0.50%, which in total was 1.93% at December 31, 2017. During 2018, the line of credit was repaid with the note payable discussed in (F) below.

Note 11: Long-term Debt

Long-term debt consists of the following:

2018 2017

Revenue bonds (A) $ 149,949 $ 150,375 Revenue bonds (B) 5,191 5,628 Revenue bonds (C) 44,186 52,639 Line of credit (D) 56,412 44,365 Note payable (E) 125,000 - Note payable (F) 30,000 - Other obligations (G) 8,009 9,370 Capital lease obligations (H) 34,683 -

453,430 262,377 Less unamortized debt issuance costs 2,390 2,529 Less current maturities 14,288 9,813

$ 436,752 $ 250,035

(A) 2014 Revenue Bonds (2014 Bonds) of an Obligated Group of the Corporation (defined in the Master Trust Indenture as Baptist Health, an Arkansas nonprofit corporation) in the original amount of $138,910,000 plus net original premium of approximately $12,778,000; unamortized debt premium of $11,039,000 and $11,465,000 and unamortized debt issuance costs of $1,493,000 and $1,551,000 at December 31, 2018 and 2017, respectively; matures serially from 2022 through 2044; issued for the purpose of financing equipment and other personal property and for capital improvements to certain facilities of the Corporation; fixed interest rates ranging from 4.25% to 5.0%; effective interest rate of 4.63% at December 31, 2018 and 2017; subject to optional redemption in whole or in part beginning December 1, 2024, at 100% of the principal amount plus accrued interest; secured by revenues and/or accounts of the Obligated Group; as defined in the Master Trust Indenture.

C-33 29 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

(B) Hospital Revenue Refunding Bonds maturing annually through October 1, 2029; fixed interest rates of 3.05% and 4.50%; unamortized debt issuance costs of $71,000 and $78,000 and an effective interest rate of 3.24% and 3.25% at December 31, 2018 and 2017, respectively; secured by substantially all revenues of certain facilities and guaranteed by the Corporation. (C) 2015 Healthcare Revenue Refunding Bonds (2015 Bonds) in the original amount of $61,730,000 plus net original premium of approximately $7,122,000; unamortized debt premium of $5,661,000 and $6,100,000 and unamortized debt issuance costs of $627,000 and $675,000 at December 31, 2018 and 2017, respectively; matures serially through 2031; issued for the purpose of advanced refunding several then outstanding revenue bond issues; fixed interest rates ranging from 1% to 5%; effective interest rate of 4.06% and 3.96% at December 31, 2018 and 2017, respectively; subject to optional redemption in whole or in part beginning December 1, 2025, at 100% of the principal amount plus accrued interest; secured by revenues and/or accounts of the Obligated Group; as defined in the Master Trust Indenture. Upon issuance and delivery of the 2015 Bonds, the Corporation defeased certain then existing Revenue Bonds (defeased Bonds) in the total principal amount of $70,515,000. Proceeds from the 2015 Bonds in conjunction with bond funds from the defeased revenue bonds and deposits by the Corporation were used to purchase securities that were deposited in trust under an escrow agreement sufficient in amount to pay future principal and interest on the defeased bonds. This advanced refunding transaction resulted in an extinguishment of debt since the Corporation was legally released from its obligations on the defeased Bonds at the time of the defeasance. Accordingly, the defeased Bonds, aggregating $4,405,000 at December 31, 2018, remain outstanding, but are excluded from the Corporation’s consolidated balance sheets. (D) Non-revolving line of credit that provides for borrowing up to $75,000,000 during the availability period, which is through March 2019; semi-annual interest payments at the LIBOR daily floating rate plus 0.75% through the availability period and subsequently at the monthly LIBOR plus 0.75%, which in total was 3.13% and 2.18% at December 31, 2018 and 2017, respectively; annual principal payments beginning on December 1, 2019, based on a percentage of the total principal amount outstanding; matures on September 27, 2026; secured on a parity basis with the 2014 Bonds discussed in (A) above. Subsequent to year-end, the Corporation borrowed an additional $18,588,000 during the availability period. (E) Note payable that provides for borrowing up to $150,000,000 during the availability period, which is through April 2, 2019; monthly interest payments beginning October 31, 2018, at the LIBOR daily floating rate plus 0.50%, which in total was 2.88% at December 31, 2018; matures on October 2, 2020; secured by revenues and/or accounts of the Obligated Group; as defined in the Master Trust Indenture. Subsequent to year- end, the Corporation borrowed an additional $25,000,000 during the availability period.

C-34 30 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

(F) Note payable due September 27, 2026; semi-annual interest payments beginning December 1, 2018, at monthly LIBOR plus 0.75%, which in total was 3.25% at December 31, 2018; annual principal payments beginning on December 1, 2019, based on a percentage of the total principal amount outstanding; secured by revenues and/or accounts of the Obligated Group; as defined in the Master Trust Indenture. (G) Primarily comprised of various notes payable to banks; remaining balances mature at various dates through February 1, 2027; fixed interest rates ranging from 3.05% to 3.5%; secured primarily by real estate and certain equipment. (H) Capital leases include real estate leases that are due through June 30, 2029, at an imputed rate of 4.06% and secured by certain leased property. Property and equipment include the following property under capital leases at December 31, 2018:

Buildings $ 34,964 Less accumulated depreciation 537

$ 34,427

There were no capital leases as of December 31, 2017.

Under the terms of the Master Trust Indenture, the Corporation is required to maintain certain deposits with a trustee. Such deposits are included with assets limited as to use in the consolidated balance sheets. The Master Trust Indenture also places limits on the incurrence of additional borrowings and requires that the Corporation satisfy certain measures of financial performance as long as the bonds are outstanding, including maintaining an annual debt-service coverage ratio of at least 1.10. The financial institution that holds the non-revolving line of credit described in (D) above and the notes payable described in (E) and (F) above requires a calculation of debt-service coverage ratio semiannually on each June 30 and December 31.

C-35 31 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Aggregate annual maturities and sinking fund requirements of long-term debt at December 31, 2018, are:

Long-term Debt (Excluding Capital Lease Capital Lease Obligations) Obligations

2019 $ 11,677 $ 3,742 2020 136,891 3,832 2021 12,070 3,923 2022 8,384 4,013 2023 7,526 4,103 Thereafter 225,499 23,014 402,047 42,627 Plus unamortized bond premium 16,700 Less unamortized bond issuance cost (2,390)

Total $ 416,357

Less amount representing interest 7,944 Present value of future minimum lease payments 34,683 Less current maturities 2,611

Noncurrent portion $ 32,072

Note 12: Hedging Activities and Derivative Financial Instruments

Cash Flow Hedge

As a strategy to maintain acceptable levels of exposure to the risk of changes in future cash flows due to interest rate fluctuations, the Corporation entered into an interest rate swap agreement for a portion of its floating rate debt. The agreement provides for the Corporation to receive interest from the counterparty at LIBOR and to pay interest to the counterparty at a fixed rate of 2.21% on a notional amount of $50,000,000. Under the agreement, the Corporation pays or receives the net interest amount monthly, with the monthly settlements included in interest expense. Management has designated the interest rate swap agreement as a cash flow hedging instrument. For a derivative instrument that is designated and qualifies as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of net assets without donor restrictions and reclassified into excess (deficiency) of revenues over expenses in the same period or periods during which the hedged transaction affects earnings.

C-36 32 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current excess (deficiency) of revenues over expenses. The table below presents certain information regarding the Corporation’s interest rate swap agreement designated as a cash flow hedge.

2018 2017 Balance sheet location of fair value amount Other Assets $ 1,104 $ 218 Gain (loss) recognized in net assets without donor restrictions (effective portion) $ 887 $ (4)

The Corporation did not have any derivative instruments at December 31, 2018 and 2017, that were not designated as hedging instruments.

Note 13: Net Assets with Donor Restrictions

Net assets with donor restrictions at December 31, 2018 and 2017, consisted of promises receivable, endowed investments and trust assets that are available for capital improvements and the general support of the Corporation in future periods. Approximately $943,000 and $6,495,000 of net assets with donor restrictions were released from restriction during the years ended December 31, 2018 and 2017, respectively. Certain net assets with donor restrictions have been restricted by donors to be maintained by the Corporation in perpetuity.

Note 14: Endowment

The Foundation’s governing body is subject to the State of Arkansas’ Prudent Management of Institutional Funds Act (SPMIFA). As a result, the Foundation classifies amounts in its donor- restricted endowment funds as net assets with donor restrictions because those net assets are time restricted until the governing body appropriates such amounts for expenditures. Most of those net assets also are subject to purpose restrictions that must be met before being reclassified as net assets without donor restrictions. Additionally, in accordance with SPMIFA, the Foundation considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: 1. Duration and preservation of the fund 2. Purposes of the Foundation and the fund 3. General economic conditions 4. Possible effect of inflation and deflation

C-37 33 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

5. Expected total return from investment income and appreciation or depreciation of investments 6. Other resources of the Foundation 7. Investment policies of the Foundation The Foundation’s endowment consists of approximately 70 individual funds established for a variety of purposes. The endowment includes both donor-restricted endowment funds and funds designated by the governing body to function as endowments (board-designated endowment funds). As required by accounting principles generally accepted in the United States of America (GAAP), net assets associated with endowment funds, including board-designated endowment funds, are classified and reported based on the existence or absence of donor-imposed restrictions. The composition of net assets by type of endowment funds at December 31, 2018 and 2017, was:

2018 Without Donor With Donor Restrictions Restrictions Total

Board-designated endowment funds $ 11,762 $ - $ 11,762 Donor-restricted endowment funds Original donor-restricted gift amount and amounts required to be maintained in perpetuity by donor - 3,025 3,025 Term endowment - 13,897 13,897

Total endowment funds $ 11,762 $ 16,922 $ 28,684

2017 Without Donor With Donor Restrictions Restrictions Total

Board-designated endowment funds $ 15,097 $ - $ 15,097 Donor-restricted endowment funds Original donor-restricted gift amount and amounts required to be maintained in perpetuity by donor - 2,800 2,800 Term endowment - 13,003 13,003

Total endowment funds $ 15,097 $ 15,803 $ 30,900

C-38 34 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Changes in endowment net assets for the years ended December 31, 2018 and 2017, were:

2018 Without Donor With Donor Restrictions Restrictions Total

Endowment net assets, beginning of year $ 15,097 $ 15,803 $ 30,900

Investment return Investment income 851 675 1,526 Net losses (1,319) (1,054) (2,373)

Total investment return (468) (379) (847)

Contributions 594 2,213 2,807

Appropriation of endowment assets for expenditure (3,461) (715) (4,176)

Endowment net assets, end of year $ 11,762 $ 16,922 $ 28,684

2017 Without Donor With Donor Restrictions Restrictions Total

Endowment net assets, beginning of year $ 23,763 $ 18,250 $ 42,013

Investment return Investment income 4,198 2,587 6,785 Net losses (1,831) (1,129) (2,960)

Total investment return 2,367 1,458 3,825

Contributions 446 2,135 2,581

Appropriation of endowment assets for expenditure (11,479) (6,040) (17,519)

Endowment net assets, end of year $ 15,097 $ 15,803 $ 30,900

C-39 35 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

The Foundation has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs and other items supported by its endowment while seeking to maintain the purchasing power of the endowment. Endowment assets include those assets of donor-restricted endowment funds the Foundation must hold in perpetuity or for donor-specified periods, as well as those of board-designated endowment funds. Under the Foundation’s policies, endowment assets are invested in a manner that is intended to produce results over time of at least 5% over the rate of inflation annually, as measured by the Consumer Price Index (CPI), while assuming a moderate level of investment risk. Actual returns in any given year may vary from this amount. The various asset classes of investments are compared on a quarterly basis to national indexes or other benchmarks as considered appropriate. To satisfy its long-term rate of return objectives, the Foundation relies on a total return strategy in which investment returns are achieved through both current yield (investment income such as dividends and interest) and capital appreciation (both realized and unrealized). The Foundation targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. The Foundation has a policy (the spending policy) of appropriating for expenditure each year an average of 5% of its endowment funds’ average fair value over the prior four quarters through the year-end preceding the year in which expenditure is planned, resulting in a minimum target return of inflation plus 5%. It is recognized the target return is not always realized due to changing market conditions. In establishing this policy, the Foundation considered the long-term expected return on its endowment. Accordingly, over the long term, the Foundation expects the current spending policy to allow its endowment to grow with inflation annually. This is consistent with the Foundation’s objective to maintain the purchasing power of endowment assets held in perpetuity or for a specified term, as well as to provide additional real growth through new gifts and investment return.

C-40 36 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Note 15: Liquidity and Availability

Financial assets available for general expenditure, that is, without donor or other restrictions limiting their use, within one year of December 31, 2018 and 2017, comprise the following:

2018 2017 Total financial assets Cash and cash equivalents $ 58,915 $ 26,332 Short-term investments and other 5,922 10,174 Patient accounts receivable, net 144,945 109,565 Estimated amounts due from third-party payors 22,062 21,238 Assets limited as to use 402,764 454,279 Other assets 78,411 76,763

Total financial assets 713,019 698,351

Less amounts not available to be used within one year Investment in equity investees 43,914 43,165 Donor restricted with liquidity horizons greater than one year 19,918 19,239 Promises receivable, net 1,753 1,958 Interest in net assets of affiliated foundations 3,349 3,342 Other assets 8,144 7,242

Financial assets not available to be used within one year 77,078 74,946

Financial assets available to meet general expenditures within one year $ 635,941 $ 623,405

C-41 37 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Note 16: Functional Expenses

The Corporation provides health care services to residents within its geographic area. Certain costs attributable to more than one function have been allocated among health care services and general and administrative functional expense classifications. The following schedules present the natural classification of expenses by function as follows:

2018 Health Care General and Services Administrative Total

Salaries and wages $ 525,324 $ 58,339 $ 583,663 Employee benefits 107,455 17,057 124,512 Supplies 224,536 1,321 225,857 Professional fees 36,089 105 36,194 Other operating expenses 154,441 38,129 192,570 Depreciation and amortization 56,720 9,244 65,964 Interest 7,039 993 8,032

$ 1,111,604 $ 125,188 $ 1,236,792

2017 Health Care General and Services Administrative Total

Salaries and wages $ 470,232 $ 55,789 $ 526,021 Employee benefits 100,484 15,319 115,803 Supplies 202,203 1,339 203,542 Professional fees 35,497 774 36,271 Other operating expenses 122,135 50,691 172,826 Depreciation and amortization 52,266 7,911 60,177 Interest 3,965 713 4,678

$ 986,782 $ 132,536 $ 1,119,318

C-42 38 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Note 17: Operating Leases

The Corporation has entered into multiple noncancellable operating leases, primarily for clinical office space and equipment. Future minimum lease payments at December 31, 2018, were:

2019 $ 8,551 2020 7,137 2021 5,832 2022 3,685 2023 1,482 Later years 986

Future minimum lease payments $ 27,673

Rental expense for all operating leases was approximately $18,731,000 and $17,965,000 for 2018 and 2017, respectively.

Note 18: Pension Plans

Defined Benefit Plan

The Corporation has a noncontributory defined benefit pension plan covering all employees who meet the eligibility requirements. The Corporation’s funding policy is to make the minimum annual contribution that is required by applicable regulations, plus such amounts as the Corporation may determine to be appropriate from time to time. The plan was frozen to future benefit accruals effective January 1, 2009. The Corporation expects to contribute $10,000,000 to the plan in 2019.

C-43 39 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

The Corporation uses a December 31 measurement date for the plan. Information about the plan’s funded status follows:

2018 2017

Change in benefit obligation Beginning of year$ 366,667 $ 324,284 Interest cost 13,641 13,732 Actuarial loss (gain) (6,539) 38,818 Benefits paid (10,810) (10,167)

End of year 362,959 366,667

Change in fair value of plan assets Beginning of year 315,559 266,885 Actual return on plan assets 8,626 44,841 Employer contribution 10,500 14,000 Benefits paid (10,810) (10,167)

End of year 323,875 315,559

Funded status at end of year$ (39,084) $ (51,108)

Liabilities recognized in the consolidated balance sheets:

2018 2017

Pension liabilities $ 39,084 $ 51,108 Information for pension plans with an accumulated benefit obligation in excess of plan assets:

2018 2017

Projected benefit obligation $ 362,959 $ 366,667

Accumulated benefit obligation $ 362,959 $ 366,667

Fair value of plan assets $ 323,875 $ 315,559

Components of net periodic benefit cost Interest cost $ 13,641 $ 13,732 Expected return on plan assets (15,778) (13,344) Amortization of net loss 8,813 9,349

Net periodic benefit cost $ 6,676 $ 9,737

C-44 40 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Other changes in plan assets and benefit obligations recognized in other changes in net assets are as follows:

2018 2017

Net loss $ 617 $ 7,328 Amortization of net loss (8,813) (9,349)

Total recognized in other changes in net assets $ (8,196) $ (2,021)

Total recognized in net periodic benefit cost and other changes in net assets $ (1,520) $ 7,716

The estimated net loss for the defined benefit pension plan that will be amortized from other changes in net assets into net periodic benefit cost over the next fiscal year is approximately $2,157,000. Amounts recognized in other changes in net assets not yet recognized as components of net periodic benefit cost consist of:

2018 2017

Net loss $ 51,396 $ 59,595

Significant assumptions include:

2018 2017

Weighted-average assumptions used to determine benefit costs Discount rate 3.75% 4.25%

Weighted-average assumptions used to determine benefit obligation Discount rate 4.13% 3.75% Expected return on plan assets 4.25% 5.00%

The Corporation has estimated the long-term rate of return on plan assets based primarily on historical returns on plan assets, adjusted for changes in target portfolio allocations and recent changes in long-term interest rates based on publicly available information.

C-45 41 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

The following benefit payments are expected to be paid as of December 31, 2018:

2019 $ 13,315 2020 14,581 2021 15,831 2022 16,793 2023 17,883 2024–2028 100,599 Plan assets are held by a bank-administered trust fund and are invested by multiple independent fund managers in accordance with the provisions of the plan agreement. The plan agreement permits investment in common stocks, corporate bonds and debentures, U.S. government securities, certain insurance contracts, real estate and other specified investments, based on certain target allocation percentages. Historically, the Corporation’s overall investment strategy was to achieve a rate of return of approximately 6.5% from a mix of investments allocated for long-term growth with a wide diversification of asset types, fund strategies and fund managers. Management revised the investment strategy and target percentages in 2018 to a liability driven investment allocation. This approach focuses on minimizing volatility of equity investment returns and reducing the impact of fluctuating interest rates on the funded status. Management may revise the target percentages as the financial needs of the plan and the outlook for capital markets change. The target asset allocation percentages for 2018 and 2017 are as follows:

2018 2017

Domestic equity securities 9% 35% International equity securities 11% 20% Alternative investments (equities and real estate) 2% 15% Domestic fixed income 78% 30%

100% 100%

Pension Plan Assets

Following is a description of the valuation methodologies used for pension plan assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of pension plan assets pursuant to the valuation hierarchy. Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include equity securities, money market funds and mutual funds. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include mortgage-backed securities, U.S. Treasury obligations and corporate bonds. For Level 2 investments, inputs include maturity, coupon rates and/or closing prices of similar securities from comparable industry financial data. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. C-46 42 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

The fair values of the Corporation’s pension plan assets at December 31, 2018 and 2017, by asset class are as follows:

Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Investments Assets Inputs Inputs Measured Fair Value (Level 1) (Level 2) (Level 3) at NAV (A)

December 31, 2018 Money market accounts $ 3,571 $ 3,571 $ - $ - $ - U.S. Treasury and federal obligations 25,762 - 25,762 - - Corporate obligations 6,427 - 6,427 - - Mutual funds Fixed income 232,310 145,568 86,742 - - Domestic equity 9,688 9,688 - - - International funds 14,723 14,723 - - - Private investment funds 29,524 - - - 29,524

$ 322,005 $ 173,550 $ 118,931 $ 0 $ 29,524

December 31, 2017 Money market accounts $ 23,454 $ 23,454 $ - $ - $ - U.S. Treasury and federal obligations 9,763 - 9,763 - - Corporate obligations 10,684 - 10,684 - - Domestic stocks 27,384 27,384 - - - Foreign stocks 2,395 2,395 - - - Mortgage-backed securities 11,383 - 11,383 - - Limited partnership 336 336 - - - Mutual funds Fixed income 14,289 14,289 - - - Domestic equity 48,991 48,991 - - - International funds 49,595 49,595 - - - Private investment funds 89,464 - - - 89,464 Real estate trust fund 27,653 - - - 27,653

$ 315,391 $ 166,444 $ 31,830 $ 0 $ 117,117

(A) Certain investments that are measured at fair value using the NAV per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts included above are intended to permit reconciliation of the fair value hierarchy to the pension plan assets presented previously in this disclosure. The fair value of plan assets for the Corporation at December 31, 2018 and 2017, includes cash and cash equivalents not included in the disclosure above of approximately $1,870,000 and $168,000, respectively. The Corporation does not consider any of its investments in marketable equity securities, mutual funds or corporate debt obligations to be concentrated in any individual or aggregated industry subgroups.

C-47 43 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Alternative Investments

The fair value of alternative investments that have been estimated using the NAV per share as a practical expedient consist of the following at December 31, 2018 and 2017:

Fair Value Redemption Redemption 2018 2017 Frequency Notice Period

Private investment funds (A) $ 29,524 $ 89,464 Suspendable 10–65 days (B) Real estate trust fund - 27,653 Quarterly 90 days (A) This class includes the following types of investments: 1) a hedge fund that is invested in equity securities of non-tobacco companies located in any country other than the United States or Canada; 2) a fund of funds based in the Cayman Islands that invests in private investment entities that primarily utilize long/short trading strategies; and 3) a multi-strategy fund of funds based in the Cayman Islands investing predominately in limited partnerships and similar pooled investment accounts. (B) This class includes an investment in a real estate trust that invests in privately owned real estate investments.

Defined Contribution Plans

The Corporation has a defined contribution plan that covers substantially all eligible employees. Effective January 1, 2018, substantially all employees of AHG and certain employees of Practice Plus became eligible to participate in the plan. Contributions from the Corporation to the plan were approximately $27,831,000 and $19,808,000 for 2018 and 2017, respectively. During 2017, AHG had a defined contribution plan that covered substantially all of its employees as well as certain employees of Practice Plus. Effective January 1, 2018, AHG’s plan was merged with the Corporation’s plan discussed above. Contributions from AHG and Practice Plus to the plan was approximately $3,169,000 and $538,000, respectively, during 2017.

Deferred Compensation Plan

The Corporation has a deferred compensation agreement with employees meeting certain criteria as defined in Title 1 of the Employee Retirement Income Security Act of 1974 (ERISA). The agreement provides for employer contributions that are in sole and absolute discretion of the Board. There were no employer contributions made during 2018 and 2017. The Corporation also has a retirement plan for other qualified management who meet certain requirements. At December 31, 2018 and 2017, the total liability recorded in other liabilities on the consolidated balance sheets was approximately $6,731,000 and $6,564,000, respectively. The Corporation has designated funds for future payments of this liability of approximately $5,128,000 and $6,032,000 as of December 31, 2018 and 2017, respectively. These funds are in internally designated for other uses in assets limited as to use on the consolidated balance sheets.

C-48 44 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Note 19: Disclosures About Fair Value of Assets and Liabilities

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities

C-49 45 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Recurring Measurements

The following tables present the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2018 and 2017:

2018 Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Investments Assets Inputs Inputs Measured Fair Value (Level 1) (Level 2) (Level 3) at NAV (A) Investments Money market mutual funds $ 28,315 28,315$ -$ -$ -$ Marketable equity securities Consumer 15,438 15,438 - - - Financial industry 12,677 12,677 - - - Health care 8,247 8,247 - - - Industrials 15,821 15,821 - - - Oil and gas 3,777 3,777 - - - Technology 11,415 11,415 - - - Other 4,864 4,864 - - - Mutual funds Fixed income 17,571 17,571 - - - Domestic equity 12,201 12,201 - - - International funds 61,827 61,827 - - - U.S. government and agency obligations 18,636 - 18,636 - - State and municipal obligations 31,798 - 31,798 - - Corporate debt obligations 59,512 - 59,512 - - Mortgage-backed securities 34,346 - 34,346 - - Held under split-interest agreements 2,801 - 2,801 - - Alternative investments Hedge funds 46,159 - - - 46,159 Fund of funds 37,219 - - - 37,219

Total 422,624$ $ 192,153 147,093$ 0$ 83,378$

Other assets Interest rate swap agreement $ 1,104 -$ 1,104$ -$ -$

Total $ 1,104 0$ 1,104$ 0$ 0$

C-50 46 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

2017 Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Investments Assets Inputs Inputs Measured Fair Value (Level 1) (Level 2) (Level 3) at NAV (A) Investments Money market mutual funds 58,131$ 58,131$ $ - -$ -$ Marketable equity securities Consumer 17,692 17,692 - - - Financial industry 15,516 15,516 - - - Health care 8,174 8,174 - - - Industrials 17,632 17,632 - - - Oil and gas 4,279 4,279 - - - Technology 10,033 10,033 - - - Other 5,152 5,152 - - - Mutual funds Fixed income 7,138 7,138 - - - Domestic equity 12,698 12,698 - - - International funds 74,816 74,816 - - - U.S. government and agency obligations 22,368 - 22,368 - - State and municipal obligations 28,899 - 28,899 - - Corporate debt obligations 54,290 - 54,290 - - Mortgage-backed securities 37,345 - 37,345 - - Held under split-interest agreements 3,247 - 3,247 - - Alternative investments - Hedge funds 55,823 - - - 55,823 Fund of funds 39,994 - - - 39,994

Total 473,227$ 231,261$ $ 146,149 0$ 95,817$

Other assets Interest rate swap agreement $ 218 -$ 218$ -$ -$

Total $ 218 0$ 218$ 0$ 0$

(A) Certain investments that are measured at fair value using the NAV per share practical expedient have not been classified in the fair value hierarchy. The fair value amounts included above are intended to permit reconciliation of the fair value hierarchy to the investments in Note 4.

C-51 47 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

The following is a reconciliation of investments carried at fair value and the Corporation’s total investments:

2018 2017

Financial instruments carried at fair value $ 422,624 $ 473,227 Financial instruments not measured at fair value Cash and cash equivalents 5,990 10,998 Interest receivable 1,323 1,284

Total investments (Note 4) $ 429,937 $ 485,509

Following is a description of the valuation methodologies and inputs used for assets and liabilities measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the year ended December 31, 2018.

Investments

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Interest Rate Swap Agreements

The fair value is estimated using forward-looking interest rate curves and discounted cash flows that are observable or can be corroborated by observable market data and, therefore, are classified within Level 2 of the valuation hierarchy.

Split-Interest Agreements

Fair value is estimated at the present value of the future distributions expected to be received over the term of the agreement. Due to the nature of the valuation inputs, the split-interest agreements are classified within Level 2 of the hierarchy.

C-52 48 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Note 20: Significant Estimates and Concentrations

Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Those matters include the following:

Variable Consideration

Estimates of variable consideration included in determining the transaction price for patient service revenue are described in Notes 1 and 2.

Professional and General Liability and Workers’ Compensation Claims

Estimates related to the accrual for professional, general and workers’ compensation claim liabilities are described in Notes 1 and 9.

Agreement with HMO

The Corporation is a participant in a risk-sharing contract with HMO Partners, Inc. (HMO). Pursuant to its contract with the physicians and hospitals, HMO will deposit an amount monthly into a Health Service Fund (the Fund) to be used as payment for all covered health benefits for HMO members. The total of HMO’s payments to the Fund may or may not be sufficient to pay for all of the covered health services consumed by the HMO membership. After the end of each fiscal year, an accounting of the financial disposition of the Fund occurs. Any surplus or deficit in the Fund is allocated one-half to the physician providers and one-half to the hospital providers. The Corporation records an estimate of its share of surplus or deficit in the Fund. It is reasonably possible that recorded estimates will change materially in the near term. HMO Partners, Inc. is a joint venture between Baptist Medical System HMO, Inc. and Blue Cross/Blue Shield of Arkansas.

Accountable Care Organization (ACO)

Beginning January 1, 2018, The Baptist Health – UAMS Accountable Care Alliance (the Alliance) entered into a Participant Agreement (the Agreement) with Centers for Medicare & Medicaid Services (CMS) to participate as an ACO under Track 1+ of the Medicare Shared Savings Program (MSSP). Pursuant to the Agreement, the Alliance may receive shared savings payments from CMS or be required to make shared loss repayments to CMS based on the level of claim expenditures made by Medicare Parts A and B for patients attributed to the ACO (ACO Expenditures) for a Performance Year (2018 Performance Year is January 1, 2018 through December 31, 2018) in comparison to a benchmark defined in the rules and regulations of the Track 1+ MSSP program. Shared savings payments or shared loss repayments are determined by CMS after the end of each Agreement Performance Year. In order for a shared savings payment or loss repayment to accrue for the Alliance, ACO Expenditures must exceed a minimum savings or loss rate threshold.

C-53 49 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

In addition, the Alliance’s maximum shared savings loss repayment amount to CMS is capped at 4% of total ACO Expenditures, and maximum shared savings payment amount from CMS is capped at 10% of ACO Expenditures. The Alliance estimates shared savings or losses throughout the Performance Year and has estimated and recorded no shared savings or losses for the 2018 Performance Year. It is reasonably possible that this estimate may differ materially from the final CMS financial reconciliation calculated amount due to the lack of access to all underlying data utilized by CMS in the calculation. Pursuant to the Agreement, the Alliance has established a Surety Bond with Travelers Casualty and Surety Company of America for $3,952,592 to be paid to CMS in the case of repayments due under the Agreement if not paid by the Alliance.

Self-Insured Employee Health Care Costs

Estimates related to the accrual for employee health care costs are described in Note 1.

Litigation

In the normal course of business, the Corporation is, from time to time, subject to allegations that may or do result in litigation. Some of these allegations are in areas not covered by the Corporation’s self-insurance program (described elsewhere in these notes) or by commercial insurance; for example, allegations regarding employment practices or performance of contracts. The Corporation evaluates such allegations by conducting investigations to determine the validity of each potential claim. Based upon the advice of counsel, management records an estimate of the amount of ultimate expected loss, if any, for each of these matters. Events could occur that would cause the estimate of ultimate loss to differ materially in the near term.

Asset Retirement Obligation

As discussed in Note 21, the Corporation has recorded a liability for its conditional asset retirement obligations related to asbestos contained in buildings that the Corporation owns.

Pension and Other Postretirement Benefit Obligations

The Corporation has a noncontributory-defined benefit pension plan whereby it agrees to provide certain postretirement benefits to eligible employees. The benefit obligation is the actuarial present value of all benefits attributed to service rendered prior to the valuation date based on the projected costs. It is reasonably possible that events could occur that would change the estimated amount of this liability materially in the near term.

C-54 50 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Investments

The Corporation invests in various investment securities. Investment securities are exposed to various risks such as interest rate, deposit, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such change could materially affect the amounts reported in the accompanying consolidated balance sheets.

Agreements with Office of Inspector General

In February 2015, the Corporation entered into a settlement agreement and corporate integrity agreement (CIA) with the United States Office of Inspector General (OIG) regarding specific third- party payor billing issues. Under the terms of the settlement agreement, the Corporation agreed to pay $2,700,000 to settle the claims. The terms of the CIA obligate the Corporation to provide certain training and education, modify certain compliance programs and have certain Medicare and Medicaid claims reviewed by an independent review organization. The CIA is effective for five years. Management believes it is currently in compliance with the various provisions of the CIA.

Note 21: Asset Retirement Obligation

Accounting principles generally accepted in the United States of America require that an asset retirement obligation (ARO) associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred or becomes determinable (as defined by the standard) even when the timing and/or method of settlement may be conditional on a future event. The Corporation’s conditional AROs primarily relate to asbestos contained in buildings that the Corporation owns. Environmental regulations exist in Arkansas, where the Corporation operates, that require the Corporation to handle and dispose of asbestos in a special manner if a building undergoes major renovations or is demolished. A summary of changes in AROs for the years ended December 31, 2018 and 2017, is included in the table below.

2018 2017

Liability, beginning of year $ 16,269 $ 16,179 Liabilities incurred 1,218 - Liabilities settled (453) (976) Accretion expense 1,135 1,066

Liability, end of year $ 18,169 $ 16,269

The liability is included in other long-term liabilities in the consolidated balance sheets at December 31, 2018 and 2017.

C-55 51 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Note 22: Patient Protection and Affordable Care Act

The Patient Protection and Affordable Care Act (PPACA) has and will, unless repealed or modified, continue to substantially reform the United States health care system. The legislation impacts multiple aspects of the health care system including many provisions that change payments from Medicare, Medicaid and insurance companies. One significant component of PPACA is the expansion of the Medicaid program to a wide range of newly eligible individuals. As a result of this expansion, payments under certain existing programs, such as Medicare disproportionate share, have been substantially decreased. Each state’s participation in an expanded Medicaid program is optional. The state of Arkansas has enacted a form of Medicaid expansion that uses the expansion funding to purchase private insurance policies on the health care exchanges for qualifying beneficiaries beginning January 1, 2014. The expansion has been subject to periodic reauthorization. In April 2016, the Arkansas legislature voted to extend the expansion with certain modifications through December 31, 2021, subject to budgetary reappropriation. Future changes to PPACA and the Arkansas Medicaid expansion could materially impact the Corporation’s financial performance.

Note 23: Acquisition

On November 1, 2018, the Corporation purchased substantially all of the assets of Sparks Health System (the Acquiree) from a publicly traded company. The Acquiree provides health care services in west Arkansas and is located in Fort Smith and Van Buren. As part of the purchase, the Acquiree’s employees and all systems necessary for normal, self-sustaining operations were received. As a result of the acquisition, the Corporation has expanded its service area to include several counties adjacent to those it has historically served. The Corporation expects the acquisition to expand its mission to provide faith-based health care that strengthens communities it serves and encourage healthy lifestyle changes. As part of the acquisition, Sparks Health System was organized as two legal entities, Baptist Health Services and Baptist Health Regional Hospitals, which will operate Baptist Health – Fort Smith and Baptist Health – Van Buren as well as affiliated physician clinics in western Arkansas and eastern Oklahoma. The Corporation is the sole member of these entities. The Corporation incurred approximately $1,295,000 of third-party acquisition-related costs in connection with this acquisition during the year ended December 31, 2018. These costs are included in other operating expenses in the Corporation’s consolidated statement of operations and changes in net assets. Subsequent to year-end, the Corporation incurred approximately $159,000 of additional costs related to the acquisition.

C-56 52 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

The following table summarizes the consideration paid for Sparks Health System and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

Fair Value of Consideration Transferred Cash $ 105,286

Recognized Amounts of Assets Acquired and Liabilities Assumed Cash $ 11 Supplies, prepaid expenses and other 12,750 Property, plant and equipment 127,759

Accrued expenses (3,062) Long-term debt (32,172)

Total identifiable net assets $ 105,286

The purchase price is based on estimates that are subject to be settled when the actual amounts are agreed upon by both parties. The Corporation has recorded a receivable of approximately $1,815,000 related to the expected settlement of the net working capital. The Corporation has adjusted the capital lease obligations based on the Corporation’s incremental borrowing rate at the acquisition date. These adjustments were not reflected in the table above, as the adjustments were not part of the consideration transferred. The Acquiree contributed revenues of $46,059,000, deficiency of revenues over expenses of ($3,863,000) and changes in net assets without donor restrictions of ($3,863,000) to the Corporation for the period from November 1, 2018 to December 31, 2018. The acquired organization had no changes to net assets with donor restrictions during this period. The following unaudited pro forma summary presents information of the Corporation as if the business combination had occurred on January 1, 2017:

Pro Forma Pro Forma Year Ended Year Ended December 31, 2018 December 31, 2017 (Unaudited) (Unaudited)

Revenue $ 1,521,495 $ 1,392,470 Excess (deficiency) of revenues over expenses $ (42,544) $ 18,858 Change in Net assets without donor restrictions $ (33,503) $ 29,246 Net assets with donor restrictions $ 222 $ (2,108)

C-57 53 Baptist Health Notes to Consolidated Financial Statements December 31, 2018 and 2017

Note 24: Future Change in Accounting Principle

Accounting for Leases

FASB amended its standard related to the accounting for leases. Under the new standard, lessees will now be required to recognize substantially all leases on the balance sheet as both a right-of-use asset and a liability. The standard has two types of leases for income statement recognition purposes: operating leases and finance leases. Operating leases will result in the recognition of a single lease expense on a straight-line basis over the lease term similar to the treatment for operating leases under existing standards. Finance leases will result in an accelerated expense similar to the accounting for capital leases under existing standards. The determination of lease classification as operating or finance will be done in a manner similar to existing standards. The new standard also contains amended guidance regarding the identification of embedded leases in service contracts and the identification of lease and nonlease components in an arrangement. The new standard will be effective for the Corporation’s fiscal year ending December 31, 2019. The Corporation is evaluating the impact the standard will have on the consolidated financial statements; however, the standard is expected to have a material impact on the consolidated financial statements due to the recognition of additional assets and liabilities for operating leases.

C-58 54 APPENDIX D

Unaudited Consolidated Financial Statements of Baptist Health as of and for the eight-month periods ended August 31, 2018 and August 31, 2019

D - 1 ~ ?..i''II Baptist Health Baptist Health Consolidated Balance Sheets August 31, 2019 and December 31 , 2018 (In thousands)

UNAUDITED AUCIITED 2019 21)18 Assets

Current Assets Cash and cash equ,valents $ 83.083 $ 58.915 Short-term investments 395 504 Assets limited as to use • current 5,940 5.418 Patient accounts receivable 174.655 144.945, Estimated amounts due From th1rd-party payors 17.907 22,062 Supplies 24,631 23,899 Prepaid expenses and other 63.275 55.199

Total current assets 369.886 310.942

Assets Limited As to Use Internally designated Capital Improvements 372,972 337.483 Otner uses 31,619 3 1,287 Under indenture agreements - held by tn.1s1ee 10,974 1g,494 Externally restricted by donors 24.928 19.724 Other arrangements 194 194 440,687 408,182 Less amount required to meet current oblig.illons 5,g40 5.418

434.747 402,764

Property and Equipment, Net 736,960 141,140

Other Assets Operating lease right-of-use assets 20.062 Investments 23,359 21 ,251 Promfses receivable 1,783 1,753 Interest in net assets of affiliated foundations 3.381 3.349 Investment 1n equity investees 47,946 43,914 Other assets 3,368 8 144

99.899 78.411

Total assets $ (641.492_ ===·====S 1.533.257

D - 2 Baptist Health Consolidated Balance Sheets August 31 , 2019 and December 31 , 2018 (In thousands)

UNAUDITED AUDITED 2019 201 8 Liabilities and Net Assets

Current Liabilities Current maturities of operatir,g lease llabllllles $ 7.414 $ Current maturities of long-term debt 15.236 14.288 Accounts payable 68,346 75.324 Accrued expenses 102A69 92,100 Estimated amounts due to third-party payo1s 1.246 Current portion of deposits by residents 1.478 1,563

Total current liabilities 194,943 184.521

Liabilities Under Split-Interest Agreements 886 1,791

Pension Liabilities .58,900 39.084

Operating Lease Liabilities 12,648

Long.term Debt 479.578 436,752

Asset Retirement Obligations 18,705 18,169

Deposits by Residents 15.526 15.238

Other llabliities 21,998 22,305

rotal liab\lllles 803.184 717.860

Net Assets Net assets without donor restrictions Baptist Health 805,807 78i.452 Num::onlrolllny intere~lS 4.603 4,979 Net assets with donor restrictions 21.898 22.968

Tote I net assets 838,308 815,397

Total liabilities and net assets t ,641.492 $ 1,533.257

D - 3 0 ~ Baptist Health

Baptist Health Consolidated Statements of Operations and Changes in Net Assets Periods Ended August 31, 2019 and 2018 and Year Ended December 31 , 2018 (In thousands)

UNAUDITED AUDITED UNAUDITED YTO AUG 2019 FYE 2018 YTO AUG 2016

Revenues, Gains and Other Support Without Donor Restrictions PaMnt service revenue s 947,203 s 1,125,2d4 s 723,\16 Management fees. lease iocome and other 70,172 90,670 56,952

Total revenues. ga111s and other suppori Wolhout dono, restrlcuons 1,017,375 1,215,914 780,068

Expenses and Losses Salaries and wages 464,814 583,663 376,071 Employee benefilS 9'2,248 124,512 80,059 Su?J'lies 199,122 225.857 146,052 Professfonal fees 34.345 36.194 22.298 Other operating e~penses 166,575 192,569 121.187 Depre,:laoon and amonizatlon 47,877 65,965 41,095 Interest 10,479 8 .032 4,645

rotal expenses ana losses 1 015 460 1 236.792 791A08

Operating Income \Lo n) 1,!115 {:IU,87M) 111 ~u,

Other Income (Expense) lnve:s.tment return 40.362 (26.260) 11.11~ EqUlty in eamor\115 0111quhy Investees 5,477 3 ,401 2,728 Ot'1er non-opera ling experise {1,258) jl.362) j60}

'Tolal ntt,ar inr,om~ (expnnse) 44,581 (24,201) 13,780

Excess.(OeflclencyJ of Revenues over Expenses $ 46i496 $ (45,079) s 2,440

D - 4 Baptist Health Consolidated Statements of Operations and Changes in Net Assets (Continued) Periods Ended August 31 , 2019 and 2018 and Year Ended December 31, 2018 (In thousands)

UNAUDITED AUDITED UNAUDITED YTDAUG 2019 FYE2Q18 YTD AUG 2Q18

Net Assets WithOut Donor Restrictions

EKcess (deficiency) of revenues over exPenses $ 46.496 $ (45.079) $ 2.440 Contnbullons for acquisition of property and equipment 99 530 360 Sales tax proceeds for acquisU!on of property and equipment 656 888 359 Other contnbutions 97 (354) Change in fair value of cash flow h

Contrjbullons from noncorylrollin9 Interests

Distributions lo noncootroltlng Interests (967! (1 .106! j727}

lncreese (decrease) In net assets wflhout reshicllons 17,979 (36,038! 3,367

Net Assets With Donor Restrictions

Conlnbutlons reoslved and other 1,938 1,999 1.414 Investment mlurn 549 680 204 Change ITT value of split fr,torasl a.greemeni.s. ·60:l M67) 69 Net assets released from res~lctlon /512) (943) (550) Change tn Interest m net assel5 of affihaled founda!JoJlS 32 7 ( 160) Change tn net unrealized gains end losses on investments 2 322 (1,054! (96)

Increase (decrea,e) In net assets wllh reslncllons 4 932 222 9 11

Change in Net Assets 22,911 (35,816) 4,278

Net Asset,;, Beginning of Period 815,397 851 ,2·13 851.2 13

Net Assets, End of Period 838,308 s 81 5,397 s 855,491

D - 5 Ille~ Baptist Ilcaltb

Baptist Health Consolidated Statements of Cash Flows Periods Ended August 31 , 2019 and 2018 and Year Ended December 31 , 2018 (In thousands)

UNAUDITED AUDITED UNAUDITED YTD AUG 2019 FYE2018 YTOAUG 2018 Operating Activities Change in net assets $ 22,911 $ (35,816) $ 4,278

llems not requiring (providing) operating cash: Depreciation and amortization 47,877 65,965 41 ,095 Amortization of entrance deposits (433) (585) (398) Amortization of bond premiums and issuance costs (484) (726) (464) (Gain) loss on sale of assets (241) (776) (340) Undistributed earnings of equity investees (5,477) (3,401) (2,728) Distributions to noncontrolling interest 967 1,106 727 Net (gain) loss on investments (35,977) 35,376 (6,304) Cootributions for acquisition of property other (99) (1 ,064) (350) Restricted contributions and investment income received (4,809) (1,625) (1,522) Contributions from noncontrolling interest Change in beneficial interest in perpetual trusts (603) 467 (89) Change in interest in net assets of affiliated foundations (32) (7) 150 Change in pension liability 19,816 (1 2,024) (5,393) Change in fair value of interest rate swap agreements 4,172 (887) (1,657) Other 30 (19) Changes in: Patient accounts rec,eivable. net (29,710) (35,380) (1,106) Supplies and prepaid expenses and other (8,838) (10,435) (1,502) Estimated amounts due from and to third-party payera 2,909 (1,643) 3,643 Accounts payable and accrued expenses 6,632 42,550 10,267

Net cash provided by (used in) operating activities 18,581 41 ,125 38,468

Investing Activities Purchase of property and equipment (44,918) (64,404) (36,932) Payment for puchase of Sparks Health System, net of cash (105,275) Net change in trading securities (7,356) (877) 1,664 Change in project fund 8,527 20,556 18,635 Proceeds from sale of property and equipment 2,064 2,329 1,623 Other investing activities 1,920 2.492 692

Net cash provided by (used in) investing activities (39,763) (145,177) (14,316)

Financing Activities Principal payments on long-term debt (2,815) (10,287) (756) Proceeds from issuance of long-term debl 43,588 137,394 4,460 Net borrowings on line of credit 7,500 7.500 Proceeds from entrance deposits 1,962 962 735 Payments on refundable deposits (1,326) (1 ,191) (750) Proceeds from restricted contributions and investment income 4,809 1,945 1.719 Proceeds from contributions for acquisition of property and equipment 99 1,418 350 Contributions from noncontrolling interest Distributions to noncontrolling interest (967) (1,106) (727)

Net cash provided by (used in) financing activities 45,350 136,635 12551

Increase (Decrease) in Cash and Cash Equivalents 24,168 32,583 36,701

Cash and Cash Equivalents, Beginning of Period 58.915 26,332 26.332

Cash and Cash Equivalents, End of Period $ 63,083 $ 58,915 $ 63,033

D - 6 APPENDIX E

Form of Bond Counsel Opinion

Upon delivery of the Series 2019 Bonds in definitive form, Friday, Eldredge & Clark, LLP, Little Rock, Arkansas, Bond Counsel, proposes to deliver its approving opinion in substantially the following form:

______, 2019

Regions Bank Raymond James & Associates, Inc. Little Rock, Arkansas Little Rock, Arkansas

Baptist Health Stephens Inc. Little Rock, Arkansas Little Rock, Arkansas

Crews & Associates, Inc. Little Rock, Arkansas

Re: $______Arkansas Development Finance Authority Healthcare Revenue Bonds (Baptist Health), Tax Exempt Series 2019

Ladies and Gentlemen:

We have acted as bond counsel in connection with the issuance by the Arkansas Development Finance Authority (the "Issuer") of its $______Healthcare Revenue Bonds (Baptist Health), Tax Exempt Series 2019 (the "Bonds"). In such capacity, we have examined the law and such certified proceedings and other documents as we deem necessary to render this opinion.

With respect to (i) the incorporation and existence of the Corporation and BHRH (each identified below), (ii) the power of the Corporation and BHRH to authorize, execute and deliver the Loan Agreement, the Master Indenture, the Supplement, and Obligation No. 9 (each as hereinafter defined) and to assume the obligations represented thereby, (iii) the execution and delivery by the Corporation and BHRH of such documents, (iv) the tax-exempt status of the Corporation and BHRH and (v) the enforceability of such documents against the Corporation and BHRH, reference is made to the opinion as to such matters rendered by Quattlebaum, Grooms & Tull, PLLC, Little Rock, Arkansas, Counsel to the Corporation and BHRH.

The Bonds are being issued for the purpose of providing permanent financing for a portion of the costs of the acquisition of certain healthcare assets and for a portion of the costs of acquiring and installing furnishings and equipment for certain healthcare facilities which are owned and operated by Baptist Health, an Arkansas nonprofit corporation (the "Corporation"), Baptist Health Regional Hospitals, an Arkansas nonprofit corporation ("BHRH"), or an affiliate

E - 1 thereof, and paying certain expenses of issuing the Bonds. The Bonds are all issued under and are all equally and ratably secured and entitled to the protection given by a Trust Indenture dated as of ______, 2019 (the "Indenture"), between the Issuer and Regions Bank, as trustee (the "Trustee"). Various terms for the security of the Bonds and the payment of certain amounts thereunder are contained in a Loan Agreement and Security Agreement dated as of ______, 2019 (the "Loan Agreement"), by and between the Issuer and the Corporation.

The Bonds are issued pursuant to and in full compliance with the Constitution and laws of the State of Arkansas (the "State"), including particularly Arkansas Code of 1987 Annotated, Title 15, Chapter 5, Subchapter 3 and a resolution duly adopted by the Board of Directors of the Issuer (the "Bond Resolution").

The Bonds are obligations of the Issuer only, as hereinafter described. In no event shall the Bonds or the interest thereon constitute an indebtedness of the State or an indebtedness for which the faith and credit of the State or any of its revenues are pledged or an indebtedness secured by a lien on or a security interest in any property of the State. The Bonds and the interest thereon are not secured by a pledge of the full faith and credit of the Issuer, nor the pledge of any of its revenues except as specifically set forth in the Bonds and the Indenture. The Bonds and the interest thereon do not constitute an indebtedness of the Issuer within the meaning of any constitutional or statutory limitation.

The Loan Agreement provides for payments by the Corporation and the Obligated Group (as such term is defined in the Master Indenture, hereinafter defined) in amounts sufficient to provide for the payment of the principal of and premium, if any, and interest on the Bonds as due and payable. Provision has been made in the Loan Agreement for such payments to be paid directly to the Trustee and deposited in a special account designated "Bond Fund" and such payments have been duly assigned to the Trustee for that purpose. In addition, pursuant to the terms of a Master Indenture dated as of December 1, 2014, as amended and supplemented by the Supplemental Indenture for Obligation No. 5 dated as of November 21, 2016, and the First Supplement to Master Trust Indenture dated as of October 2, 2018 (collectively the "Master Indenture") by and between the Corporation and Regions Bank, as Master Trustee (the "Master Trustee"), a Supplemental Indenture for Obligation No. 9 dated as of ______, 2019 (the "Supplement") by and between the Corporation and the Master Trustee, and the Loan Agreement, the Corporation, as Obligated Group Representative (as defined in the Master Indenture), has delivered to the Issuer the Baptist Health Obligated Group Obligation No. 9 (Series 2019 ADFA Bonds) dated ______, 2019 in the principal amount of $______("Obligation No. 9"). All the rights and interest of the Issuer in and to the Loan Agreement (except for certain rights specified in the Indenture) and Obligation No. 9 have been assigned under the Indenture to the Trustee to secure the payment of the principal of and interest on the Bonds.

As provided in the Master Indenture, Obligations (as defined in the Master Indenture), including Obligation No. 9, issued pursuant to the terms thereof are granted, equally and ratably without preference or priority as to lien or source of payment of any one Obligation over any other Obligation, a lien on and security interest in all Gross Revenues and/or Accounts (as such

E - 2 terms are defined in the Master Indenture) of the Obligated Group and otherwise as provided therein. In this regard, after the issuance of Obligation No. 9, there will be outstanding under the Master Indenture, in addition to Obligation No. 9, (i) Baptist Health Obligated Group Obligation No. 1 (Series 2014 Bonds) dated September 15, 2015, issued pursuant to the Master Indenture and the Supplemental Indenture for Obligation No. 1 dated as of September 15, 2015, evidencing and securing the Obligated Group's obligations in connection with the Pulaski County Public Facilities Board Healthcare Revenue Bonds (Baptist Health), Series 2014, (ii) Baptist Health Obligated Group Obligation No. 2 (Series 2015A Bonds) dated September 15, 2015, issued pursuant to the Master Indenture and the Supplemental Indenture for Obligation Nos. 2 and 3 dated as of September 15, 2015, evidencing and securing the Obligated Group’s obligations in connection with the Issuer’s Healthcare Revenue Refunding Bonds (Baptist Health), Series 2015A, (iii) Baptist Health Obligated Group Obligation No. 4 (2016 Bank of America Indebtedness) dated September 27, 2016, issued pursuant to the Master Indenture and the Supplemental Indenture for Obligation No. 4 dated as of September 27, 2016, evidencing and securing the Obligated Group’s obligations in connection with a line of credit from Bank of America, N.A., (iv) Baptist Health Obligated Group Obligation No. 5 (2016 JPMorgan Derivative Agreement) dated November 21, 2016, issued pursuant to the Master Indenture and the Supplemental Indenture for Obligation No. 5 dated as of November 21, 2016, evidencing and securing the Obligated Group’s obligations in connection with the execution of an interest rate swap agreement with JPMorgan Chase Bank, N.A., and (v) Baptist Health Obligated Group Obligation No. 8 (Series 2019 Bonds) dated ______, 2019, issued pursuant to the Master Indenture and the Supplemental Indenture for Obligation No. 8 dated as of ______, 2019, evidencing and securing the Obligated Group’s obligations in connection with the Baptist Health Obligated Group Healthcare Revenue Bonds, Taxable Series 2019, in each case to the extent outstanding. In addition, as provided in the Master Indenture, each Member (as defined in the Master Indenture) of the Obligated Group is jointly and severally liable for all Obligations, including Obligation No. 9, heretofore and hereafter issued pursuant to the terms of the Master Indenture.

Based upon the laws in force on this date, we are of the opinion that:

1. The Bonds have been lawfully authorized and issued under the Constitution and laws of the State, including the Act, the Indenture and the Bond Resolution.

2. The Bonds are valid and binding special obligations of the Issuer and enforceable in accordance with their terms and the terms of the Indenture and are payable and are secured solely as described in the Indenture, the Loan Agreement and the Master Indenture.

3. The Indenture is a valid, binding and legally enforceable agreement under the laws of the State in accordance with its terms and creates a valid lien on the Trust Estate as defined therein.

4. The Loan Agreement is a valid, binding and legally enforceable agreement under the laws of the State in accordance with its terms, and the Loan Agreement is a valid and binding obligation of the Issuer.

E - 3 5. The interest on the Bonds (including any original issue discount properly allocable to the Bonds) is excludable from gross income for federal income tax purposes. Interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum tax. This opinion is subject to the condition that the Issuer, the Corporation and BHRH comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. Failure to comply with certain of such requirements could cause the inclusion of interest on the Bonds in gross income for federal income tax purposes, retroactive to the date of issuance of the Bonds. The Issuer has covenanted to comply with such requirements and has the power to perform its obligations in that regard. We express no opinion regarding other federal tax consequences arising with respect to the Bonds.

6. Interest on the Bonds is exempt from all state, county and municipal taxation in the State.

It is to be understood that the rights of the owners of the Bonds and the enforceability of the Bonds, the Loan Agreement, the Master Indenture, the Supplement, Obligation No. 9, the Indenture and the Bond Resolution may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

Yours very truly,

FRIDAY,ELDREDGE &CLARK, LLP

E - 4