Louisiana Public Facilities Authority Revenue and Refunding Revenue Bonds (Ochsner Clinic Foundation Project) Series 2017

This Preliminary Official Statement and the information contained in it are subject to completion and amendment without notice.. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of any offer to buy, and there shall not be any sale of the Bonds offered hereby in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification. * Dated: May __,2017 New York,Yorkonorabout May22,2017. & SutcliffeLLP.Itisexpected thattheBondsindefinitiveformwillbeavailablefordelivery throughthefacilitiesofDTCin Lewis, aProfessionalLawCorporation, NewOrleans,LouisianaandfortheUnderwriter byitscounsel,Orrick,Herrington passed uponfortheAuthority byitsspecialcounsel,JacobS.Capraro,Esq.,NewOrleans, Louisiana,forOCFbyLiskow& Foley &Judell,L.L.P.,NewOrleans, Louisiana,BondCounsel,andcertainotherconditions. Certainlegalmatterswillbe Appendices attachedhereto,toobtaininformationessential tothemakingofaninformedinvestmentdecision. or termsoftheBonds.Investorsareadvisedtoread entireOfficialStatement,includingtheinsidecoverpageand AS DESCRIBEDINTHISOFFICIALSTATEMENT. AGREEMENT ANDOBLIGATIONNo. 17 ANDANYOTHERAMOUNTSAVAILABLETHEREFOR UNDERTHEINDENTURE REVENUES ANDRECEIPTSDERIVEDORTOBE FROMPAYMENTSMADEPURSUANTTOTHELOAN ARE ALIMITEDANDSPECIALREVENUEOBLIGATION OFTHEAUTHORITYPAYABLESOLELYFROMINCOME, AUTHORITY (WHICHHASNOTAXINGPOWERANDRECEIVES NOFUNDSFROMANYGOVERNMENTALBODY)BUT PREMIUM, IFANY,ORTHEINTERESTONBONDS. THEBONDSARENOTAGENERALOBLIGATIONOF STATE OROFANYPOLITICALSUBDIVISIONTHEREOFISPLEDGEDTOTHEPAYMENTPRINCIPAL OF, STATUTORY PROVISIONS WHATSOEVER AND NEITHER THE FAITH OR CREDIT NOR THE TAXING POWER OF THE (THE “STATE”)ORANYPOLITICALSUBDIVISIONTHEREOFWITHINTHEMEANINGOFCONSTITUTIONAL OR AN OBLIGATION,GENERALORSPECIAL,DEBT,LIABILITYMORALOBLIGATIONOFTHESTATELOUISIANA as mastertrustee. “Master Indenture”), between OCF, as Credit Group Representative, and The Bank of New York Mellon Trust Company, N.A., are evidencedbyObligationNo. 17 issuedundertheMasterIndenture,datedasofSeptember 1, 2007 (assupplemented,the will beloanedbytheAuthoritytoOCFpursuantLoanAgreement.TheobligationsofunderAgreement Agreement, dated as of May 1, 2017, between the Authority and OCF (the “Loan Agreement”). The proceeds of the Bonds New YorkMellonTrustCompany,N.A.,astrustee(insuchcapacity,the“Trustee”),assigneeofAuthorityunder aLoan November 15,2017. of thisOfficialStatement.InterestontheBondswillbepayableMay15andNovembereachyear,commencing DTC throughitsparticipants.See“THEBONDS–Book-EntryOnlySystem”herein. within amaturity.Paymentsofprincipalof,premium,ifany,andinterestontheBondswillbemadetobeneficial owners by Bonds willbemadeinbook-entryformthroughDTCparticipantsdenominationsof$5,000oranyintegralmultiple thereof form throughTheDepositoryTrustCompany,whichwillactassecuritiesdepository.Purchasesofbeneficialinterests inthe Ochsner ClinicFoundation,aStateofLouisiananonprofitcorporation(“OCF”).TheBondswillbeissuedinbook-entry only and RefundingRevenueBonds(OchsnerClinicFoundationProject),Series2017(the“Bonds”)tobeissuedforthebenefitof Dated: DateofDelivery of BondCounselattachedheretoasAPPENDIX E. thereof areexemptfromalltaxationintheStateofLouisiana.See“TAXEXEMPTION”hereinandformopinion minimum tax.BondCounselisfurtheroftheopinionthat,pursuanttoPublicTrustAct,Bondsandincome certain taxesthat may be imposed with respecttocorporations,including,withoutlimitation,the federal alternative on individualsandcorporations.However,interesttheBondsistobetakenintoaccountincomputationof income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed NEW-ISSUE—BOOK-ENTRY ONLY Preliminary; subjecttochange. The Bondsareofferedwhen,asandifissuedreceived bytheUnderwriterandsubjecttoapprovingopinionof This coverpagecontainscertaininformationforquickreference only.Itisnotintendedtobeasummaryofthesecurity THE BONDSARELIMITEDANDSPECIALOBLIGATIONSOFAUTHORITYDONOTCONSTITUTEORCREATE Principal ofandpremium,ifany,interestontheBondswillbepayablefrompaymentstoreceivedbyTheBank of The Bondsaresubjecttoredemptionpriormaturityasdescribedherein. The Bondswillmatureonthedatesandbearinterestpayableatratesperannumshowninsidecover page The LouisianaPublicFacilitiesAuthority(the“Authority”)isofferingthe Public FacilitiesAuthorityRevenue In theopinionofBondCounsel,underexistinglaw,interestonBondsisexcludedfromgrossincomeforfederal

PRELIMINARY OFFICIAL STATEMENT DATED APRIL 25, 2017 L ouisiana Revenue andRefundingBonds (Ochsner ClinicFoundationProject)

P ublic $412,020,000 Series 2017 Citigroup F acilities * A ut h ority Due: AsShownontheInsideCover (See “RATINGS”herein) Ratings: Moody’s:A3 Fitch: A- $412,020,000* Louisiana Public Facilities Authority Revenue and Refunding Revenue Bonds (Ochsner Clinic Foundation Project) Series 2017

MATURITY SCHEDULE

$______Serial Bonds

Principal Interest Price or Due May 15* Amount Rate Yield CUSIP† 2018 $ % % 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

$______% Term Bond Due May 15, 2042*, Priced to Yield ____% CUSIP† ______$______% Term Bond Due May 15, 2047*, Priced to Yield ____% CUSIP† ______

† CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (“CGS”) is managed on behalf of the American Bankers Association by S&P Capital IQ. Copyright© 2017 CUSIP Global Services. All rights reserved. CUSIP data herein is provided by CGS. This data is not intended to create a database and does not serve in any way as a substitute for the CGS data base. The CUSIP numbers listed above are being provided solely for the convenience of bondholders and none of the Authority, OCF or Citigroup Global Markets Inc. (the “Underwriter”) make any representation with respect to such numbers or undertake any responsibility for their accuracy. The CUSIP numbers for one or more maturities are subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in part of the Bonds. * Preliminary, subject to change.

No broker, dealer, salesman or other person has been authorized by the Authority, OCF or the Underwriter to give any information or to make any representations other than those contained in this Official Statement in connection with the offering made hereby and, if given or made, such information or representations must not be relied upon as having been authorized by the Authority, OCF or the Underwriter. Neither the delivery of this Official Statement nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Authority or the Credit Group since the date hereof. 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 Bonds in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale. The Authority neither has nor assumes any responsibility as to the accuracy of the information in this Official Statement (other than that under the headings “INTRODUCTORY STATEMENT – The Authority,” “THE AUTHORITY” and “NO LITIGATION – The Authority”), all of which has been furnished by others.

THE UNDERWRITER HAS PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL STATEMENT. THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, ITS RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITER DOES NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION.

THE BONDS AND OBLIGATION NO. 17 HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER THE BOND INDENTURE NOR THE MASTER INDENTURE HAVE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS.

IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 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.

The registration or qualification of the Bonds in accordance with the applicable provisions of securities laws of the states in which the Bonds have been registered or qualified, if any, and the exemption from registration or qualification in other states cannot be regarded as a recommendation thereof. Neither these states nor any of their agencies have passed upon the merits of the Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT

Certain statements included in this Official Statement constitute “forward-looking statements.” Such statements generally are identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words. Such forward-looking statements include but are not limited to certain statements contained in the information under the caption “BONDHOLDERS’ RISKS” in the forepart of this Official Statement and in APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM.” These statements reflect the current views of OCF with respect to future events and the achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Other than as may be required by applicable law, OCF does not plan to issue or caused to be issued any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based occur.

[THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS Page

INTRODUCTORY STATEMENT ...... 1 General ...... 1 Purpose of the Bonds ...... 2 The Obligated Group and the Master Indenture ...... 2 Interest Rates; Redemption ...... 2 Payment of Debt Service on the Bonds ...... 3 The Authority ...... 3 Ochsner Health System ...... 3 Bondholders’ Risks ...... 3 Continuing Disclosure Undertaking ...... 3 THE AUTHORITY ...... 4 Powers and Purpose ...... 4 Membership of the Authority ...... 5 Approval of Issuance of the Bonds ...... 5 Legality for Investment ...... 5 Other Financings ...... 6 THE BONDS ...... 6 General ...... 6 Redemption ...... 6 Mandatory Purchase in Lieu of Redemption ...... 8 Book-Entry Only System ...... 8 PLAN OF FINANCE ...... 10 Purpose of the Bonds ...... 10 Project ...... 10 Plan of Refunding ...... 10 ESTIMATED SOURCES AND USES OF FUNDS ...... 11

SECURITY FOR THE BONDS ...... 11 Limited and Special Obligations ...... 11 Loan Agreement and Obligation No. 17 ...... 12 The Master Indenture ...... 12 No Debt Service Reserve Fund ...... 16 Amendments to Indenture, Loan Agreement and Master Indenture...... 16 Limitations on Enforceability ...... 16 ANNUAL DEBT SERVICE REQUIREMENTS ...... 20

BONDHOLDERS’ RISKS ...... 21 General ...... 21 Impact of Tropical Storms and Hurricanes on OCF Market Facilities and Operations ...... 22 Nonprofit Healthcare Environment ...... 22 Federal Budget Matters ...... 25 Federal Legislative and Regulatory Initiatives ...... 27 Health Care Reform ...... 28 Patient Service Revenues ...... 32 Increased Enforcement Affecting Clinical Research ...... 42 Negative Rankings Based on Clinical Outcomes, Cost, Quality, Patient Satisfaction and Other Performance Measures ...... 42 Section 340B Drug Pricing Program ...... 43

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TABLE OF CONTENTS (continued) Page

Regulatory Environment ...... 43 Possible Acquisitions and Other Strategic Initiatives ...... 53 Fundraising ...... 53 Research Matters ...... 54 Business Relationships and Other Business Matters ...... 54 Tax-Exempt Status and Other Tax Matters ...... 59 Other Risk Factors ...... 63 NO LITIGATION...... 66 The Authority ...... 66 The Credit Group ...... 66 RATINGS ...... 67

FINANCIAL ADVISOR ...... 67

VERIFICATION ...... 67

UNDERWRITING ...... 67

CONTINUING DISCLOSURE UNDERTAKING ...... 68

TAX EXEMPTION ...... 68 Alternative Minimum Tax Considerations ...... 68 General ...... 69 Tax Treatment of Original Issue Discount ...... 70 Tax Treatment of Original Issue Premium ...... 70 INDEPENDENT AUDITORS ...... 71

LEGAL MATTERS ...... 71

MISCELLANEOUS ...... 71

APPENDIX A INFORMATION CONCERNING OCHSNER HEALTH SYSTEM ...... A-1 APPENDIX B FINANCIAL STATEMENTS OF OCHSNER HEALTH SYSTEM AND SUBSIDIARIES FOR THE FISCAL YEARS ENDED DECEMBER 31, 2016 and 2015 ...... B-1 APPENDIX C SUMMARY OF PRINCIPAL DOCUMENTS ...... C-1 APPENDIX D SUMMARY OF THE MASTER INDENTURE ...... D-1 APPENDIX E PROPOSED FORM OF OPINION OF BOND COUNSEL ...... E-1 APPENDIX F FORM OF CONTINUING DISCLOSURE UNDERTAKING ...... F-1

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OFFICIAL STATEMENT

relating to

$412,020,000* Louisiana Public Facilities Authority Revenue and Revenue and Refunding Revenue Bonds (Ochsner Clinic Foundation Project) Series 2017

INTRODUCTORY STATEMENT

The following introductory statement is subject in all respects to the more complete information set forth in this Official Statement, including the cover page and appendices hereto (the “Official Statement”). All descriptions and summaries of documents referred to herein do not purport to be comprehensive or definitive and are qualified in their entirety by reference to each such document. Reference is made to each such document for the complete details of all terms and provisions thereof. All capitalized terms used in this Official Statement and not otherwise defined herein have the same meaning as in the Loan Agreement, Obligation No. 17, the Master Indenture or the Indenture, as applicable (each defined herein). See APPENDIX C – “SUMMARY OF PRINCIPAL DOCUMENTS – DEFINITIONS OF CERTAIN TERMS” and APPENDIX D – “SUMMARY OF THE MASTER INDENTURE – DEFINITIONS OF CERTAIN TERMS.”

General

The purpose of this Official Statement, including the cover page and appendices hereto, is to furnish certain information in connection with the offering by the Louisiana Public Facilities Authority (the “Authority”) of $412,020,000* aggregate principal amount of Louisiana Public Facilities Authority Revenue and Refunding Revenue Bonds (Ochsner Clinic Foundation Project) Series 2017 (the “Bonds”). The Authority was organized under an Indenture of Trust pursuant to the provisions of the Louisiana Public Trust Act, Sections 2341 through 2347, inclusive, of Chapter 2-A of Title 9 of the Louisiana Revised Statutes of 1950, as amended (the “Public Trust Act”). The Authority is a duly constituted public trust and public corporation of the State of Louisiana (the “State”), created in 1974 for the benefit of the State. See “THE AUTHORITY” herein.

The Bonds will be issued pursuant to (i) the Public Trust Act, (ii) Chapter 14-A of Title 39 of the Louisiana Revised Statutes of 1950, as amended (together with the Public Trust Act, the “Act”) and (iii) a Trust Indenture, dated as of May 1, 2017 (the “Indenture”), between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (in such capacity, the “Trustee”). The proceeds of the Bonds will be loaned by the Authority to Ochsner Clinic Foundation, a State of Louisiana (the “State”) nonprofit corporation (“OCF”), pursuant to a Loan Agreement, dated as of May 1, 2017, between the Authority and OCF (the “Loan Agreement”).

OCF, headquartered in New Orleans, Louisiana, is exempt from federal income taxation as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 (the “Code”). OCF is the sole obligated party under the Loan Agreement and as of the date of issue of the Bonds will be the only Member (defined below) of the Obligated Group (defined below). OCF is part of the Credit Group (defined below) that consists of OCF and various nonprofit and for profit corporations that own and operate health care facilities and provide health care related services in Louisiana. For more information about the Credit Group, see “SECURITY FOR THE BONDS – The Master Indenture” herein and APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM” and APPENDIX B – “FINANCIAL STATEMENTS OF OCHSNER HEALTH SYSTEM AND SUBSIDIARIES FOR THE FISCAL YEARS ENDED DECEMBER 31, 2016 AND 2015.”

* Preliminary; subject to change.

Purpose of the Bonds

The proceeds of the Bonds will be used to (a) finance and/or reimburse the costs of acquisition, construction, equipping, maintaining, installation and/or upgrading of certain improvements and healthcare and related facilities of OCF located in the State (the “Project”), (b) refund all or a portion of the Louisiana Public Facilities Authority Revenue Bonds (Ochsner Clinic Foundation Project), Series 2007A and the Louisiana Public Facilities Authority Revenue Bonds (Ochsner Community Hospitals Project), Series 2007B (collectively, the “Prior Bonds”) and (c) pay certain costs of issuance of the Bonds. See “PLAN OF FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS” herein.

The Obligated Group and the Master Indenture

As of the date of the issuance of the Bonds, OCF will be the only Member (defined below) of the Obligated Group (the “Obligated Group”) established under a Master Indenture, dated as of September 1, 2007, as supplemented (as supplemented, the “Master Indenture”), between OCF and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.), as master trustee (in such capacity, the “Master Trustee”). Other entities may become members of the Obligated Group (each, a “Member”) in accordance with the procedures set forth in the Master Indenture. OCF, as the sole Member of the Obligated Group, is currently the only entity obligated to pay when due the principal of, premium, if any, and interest on each Obligation issued under the Master Indenture, including Obligation No. 17 (as hereinafter defined). Provision is made in the Master Indenture for adding Members to the Obligated Group and for the withdrawal of Members from the Obligated Group under certain circumstances. Each Member of the Obligated Group is jointly and severally obligated to pay when due the principal of, premium, if any, and interest on each Obligation issued under the Master Indenture. For more information, see APPENDIX D – “SUMMARY OF THE MASTER INDENTURE – Membership in Obligated Group” and “– Withdrawal from Obligated Group.” OCF has previously authorized the issuance of Obligations, which are currently Outstanding and which will remain Outstanding upon issuance of the Bonds. See “SECURITY FOR THE BONDS – The Master Indenture – Additional Indebtedness; Outstanding Obligations” herein.

Under the Master Indenture, OCF, as Credit Group Representative, may designate other entities as “Designated Affiliates” from time to time and rescind any such designation at any time. Designated Affiliates are not obligated to make payments with respect to any Obligations issued under the Master Indenture, including Obligation No. 17, and none of the assets or revenues of any Designated Affiliate are pledged to secure payment with respect to any Obligations. However, Designated Affiliates may be required to pay or otherwise transfer to the Credit Group Representative or other Member amounts necessary to enable the Obligated Group to pay when due the principal of and premium, if any, and interest on Outstanding Obligations. For detailed descriptions of “Designated Affiliates” and other provisions of the Master Indenture, see “SECURITY FOR THE BONDS – The Master Indenture” herein and APPENDIX D – “SUMMARY OF THE MASTER INDENTURE.”

As of the date of issuance of the Bonds, the Designated Affiliates under the Master Indenture will be: Brent House Corporation, Ochsner Clinic L.L.C., Ochsner Bayou, L.L.C., East Baton Rouge Medical Center, L.L.C., Ochsner Medical Center – Northshore, L.L.C., Ochsner Home Medical Equipment, L.L.C., Ochsner Baptist Medical Center, L.L.C., Ochsner Medical Center – Kenner, L.L.C., Ochsner Medical Center – Westbank, L.L.C., Chabert Operational Management Company, L.L.C., Ochsner Physician Partners, L.L.C., Southern Strategic Sourcing Partners, L.L.C. and St. Charles Operational Management Company, L.L.C.. OCF and any future Members of the Obligated Group and the Designated Affiliates and any future Designated Affiliates comprise the “Credit Group” under the Master Indenture. See APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – “INTRODUCTION – Description of Credit Group” and “– Organizational Structure.”

Interest Rates; Redemption

The Bonds will bear interest at the rates set forth on the inside cover page hereof with interest payable on each May 15 and November 15, commencing November 15, 2017.

The Bonds are subject to optional, mandatory sinking fund and extraordinary optional redemption prior to their stated maturity, as described herein.

Payment of Debt Service on the Bonds

Payment of principal of, premium, if any, and interest on the Bonds will be payable from payments made by OCF under the Loan Agreement and from certain funds held under the Indenture. OCF will be obligated under the Loan Agreement to make payments to the Trustee in amounts sufficient to pay in full all of the principal of and premium, if any, and interest on the Bonds when due.

Payment of principal of, premium, if any, and interest on the Bonds will be further secured by Obligation No. 17 (“Obligation No. 17”) issued pursuant to the Master Indenture, as supplemented by Supplemental Master Indenture for Obligation No. 17, dated as of May 1, 2017, between OCF, as Credit Group Representative, and the Master Trustee. Pursuant to the Master Indenture, OCF and any future Members of the Obligated Group agree to make payments on Obligation No. 17 in amounts sufficient to pay, when due, the principal of and premium, if any, and interest on the Bonds. Each Member of the Obligated Group is jointly and severally obligated to make payments on all Obligations issued under the Master Indenture, including Obligation No. 17. The Members of the Obligated Group receive a credit on payments due on Obligation No. 17 to the extent of payments made by OCF under the Loan Agreement. OCF receives credit on payments due under the Loan Agreement to the extent of payment made by the Members of the Obligated Group under Obligation No. 17. As of the date of issuance of the Bonds, OCF will be the only Member of the Obligated Group established under the Master Indenture. As security for its obligations under the Master Indenture, OCF has mortgaged certain property (the “Mortgaged Property”) pursuant to a mortgage (the “Mortgage”) and pledged its Gross Revenues to the Master Trustee as described herein in trust for the protection and benefit of the Holders of all Obligations, including the Trustee.

The Authority

The Authority was organized under an Indenture of Trust, dated August 21, 1974 (the “Authority’s Indenture of Trust”), pursuant to the provisions of the Public Trust Act to engage in a variety of activities, including providing financing for healthcare, hospital and related medical facilities and services and refunding bonds issued to finance the same. The Authority is a duly constituted public trust and public corporation of the State, created in 1974 for the benefit of the State. The Bonds will be issued pursuant to the provisions of the Act. See “THE AUTHORITY” herein.

Ochsner Health System

Ochsner Health System (“OHS”), a Louisiana nonprofit corporation, exempt from federal income taxation as an organization described in Section 501(c)(3) of the Code, was formed in July 2006 and became the sole corporate member of OCF in September 2006. OHS owns no material assets and conducts no material independent operations, but serves as the parent organization to OCF. OHS provides support to OCF in the areas of administration, finance, internal audit/compliance, government relations, legal services, information systems, marketing, human resources, purchasing, facilities development and philanthropy. OCF paid OHS approximately $173 million for these services in 2016. OHS is not a Credit Group Member nor does OHS have any obligation to pay the principal of or premium, if any, or interest on the Bonds. See APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM.”

Bondholders’ Risks

There are certain risks involved in the purchase of the Bonds. See “BONDHOLDERS’ RISKS” herein.

Continuing Disclosure Undertaking

OCF, as Credit Group Representative, will enter into an undertaking for the benefit of the Trustee as holder of Obligation No. 17 and, consequently, the holders of the Bonds to provide certain information annually and quarterly, and to provide notice of certain events. See “CONTINUING DISCLOSURE UNDERTAKING” herein and APPENDIX F – “FORM OF CONTINUING DISCLOSURE UNDERTAKING.”

THE AUTHORITY

Powers and Purpose

The Authority was created pursuant to the Authority’s Indenture of Trust for the benefit of the State. The State’s Governor (the “Governor”), on behalf of the State, accepted the beneficial interest in the Authority by Executive Order Number 71 on August 27, 1974. The Authority is a public trust and a public corporation of the State organized pursuant to the laws of the State, including the Public Trust Act, and is governed by seven trustees who are appointed by the Governor. The Authority has no taxing power and receives no appropriations from the State or any governmental body. The Authority is not organized for profit, and no part of its net earnings may inure to the benefit of any private person. The Public Trust Act provides that no trustee of the Authority may be charged personally with any liability whatsoever by reason of any act or omission committed or suffered in the performance of the functions of the Authority or in the operation of the Authority’s property. The Public Trust Act requires that any amendments to the Authority’s Indenture of Trust must be approved by a two-thirds (2/3) vote of both Houses of the Legislature and by the Governor of the State.

The purposes of the Authority are to promote and encourage a wide range of public and industrial activities within the State, including issuing its revenue bonds and the use of the proceeds derived from the sale thereof for the purpose of financing healthcare, hospital and related medical facilities and services for the benefit of the State and to provide funds in furtherance thereof. The Authority also has general powers which include the power to enter into, make and perform contracts of every lawful kind to accomplish its purpose.

The Authority has not prepared or assisted in the preparation of this Official Statement, except the statements under this section with respect to the Authority and the information with respect to the Authority under the headings “INTRODUCTORY STATEMENT – The Authority” and “NO LITIGATION – The Authority,” and except as aforesaid, the Authority is not responsible for any statements made in this Official Statement. Except for the execution and delivery of documents required to effect the offering of the Bonds, the Authority has not otherwise assisting in connection with the offering of the Bonds. Accordingly, except as aforesaid, the Authority disclaims responsibility for the disclosure set forth in this Official Statement or otherwise with respect to the offering of the Bonds.

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Membership of the Authority

The present Board of Trustees of the Authority (the “Board”), and their respective terms of office and occupations or affiliations, are as follows.

Term Principal Name Expires Occupation/Affiliation

Guy Campbell, III, Chairman October 15, 2017 Attorney, Snellings, Breard, Sartor, Inabnett & Trascher, L.L.P. Monroe, Louisiana

Camille A. Cutrone, Vice Chairman January 31, 2016* Attorney, Cutrone, Verlander & Meyer, New Orleans, Louisiana|

Craig A. Cheramie, Secretary-Treasurer August 25, 2020 CPA, PFS, H.D. Vest Financial Services Harahan, Louisiana

Dale Benoit December 20, 2013* Print All, Inc. Belle Chasse, Louisiana Ronald H. Bordelon January 31, 2022 Chief Financial Officer, Recovery School District, New Orleans, Louisiana

Michael C. Darnell March 2, 2022 Attorney, Murray, Darnell & Assoc., L.L.C., New Orleans, Louisiana

Hon “Eric” Liew August 2, 2017 CEO, AOSS Medical Supply, Inc. Monroe, Louisiana ______* Board members continue in office until a successor trustee has been duly appointed and qualified. Board members are eligible for reappointment.

Mr. James W. Parks II serves as President and Chief Executive Officer and as Assistant Secretary for the Authority. The address of the Authority is 2237 South Acadian Thruway, Suite 650, Baton Rouge, Louisiana 70808. The Authority’s telephone number is (225) 923-0020.

Approval of Issuance of the Bonds

The issuance and sale of the Bonds to finance (i) the redemption of all or a portion of the Prior Bonds were authorized and approved by the Authority’s Board of Trustees by resolution adopted on September 6, 2016 and (ii) the Project was authorized by the Authority’s Board of Trustees by resolutions adopted on November 2, 2016, January 10, 2017, and April 11, 2017, with final sale of the bonds expected to be approved by the Authority on or about May 9, 2017.

Legality for Investment

With respect to bonds and notes issued by the Authority, including the Bonds, the Public Trust Act provides in La. R.S. 9:2347(A)(3) as follows:

“Bonds and notes issued hereunder are hereby declared legal investments and are hereby made securities in which all insurance companies and associations and other persons carrying on an insurance business, trust companies, banks, bankers, banking associations, savings banks and savings associations, including savings and loan associations, credit unions, building and loan associations, investment companies, executors, administrators, trustees and other fiduciaries, pension, profit-sharing, retirement funds and other persons carrying on a banking business, and all other persons who are authorized to invest in revenue bonds may properly and legally invest funds,

including capital in their control or belonging to them. Such bonds and notes are hereby made securities which may properly and legally be deposited with and received by any state or municipal or public officer or any agency or political subdivision of the state for any purpose for which the deposit of revenue bonds is authorized by law. Nothing contained herein shall authorize the investment of public pension or retirement funds in public trust bonds or other obligations.”

Other Financings

The Authority has issued, and may continue to issue, other series of bonds or notes for the purpose of financing other projects and programs. Each such series of bonds or notes is or will be secured by instruments separate and apart from the Indenture securing the Bonds and is or will be payable from different sources of revenue.

THE BONDS

The following is a summary of certain provisions of the Bonds. Reference is made to the Bonds and to the Indenture for a more detailed description of such provisions. The discussion herein is qualified by such reference. See APPENDIX C – “SUMMARY OF PRINCIPAL DOCUMENTS.”

General

Authorized Denominations; Book-Entry. The Bonds will be issued in the aggregate principal amount set forth on the cover of this Official Statement. Purchases of beneficial interests in the Bonds will be made in book- entry only form in denominations of $5,000 or any integral multiple thereof within a maturity (the “Authorized Denominations”). The Bonds will be initially issued in book-entry only form through the facilities of The Depository Trust Company, New York, New York (“DTC”). See “THE BONDS – Book-Entry Only System” herein.

Maturity of and Interest on the Bonds. The Bonds will mature in the amounts and on the dates and bear interest payable at the rates per annum shown on the inside cover page of this Official Statement. Interest on the Bonds will accrue from the date of delivery of the Bonds and will be payable on May 15 and November 15 of each year, commencing November 15, 2017, until paid at maturity or upon redemption. Interest on the Bonds will be computed on the basis of a 360-day year containing twelve 30-day months.

Redemption

Optional Redemption. The Bonds maturing on or after May 15, 20__ are subject to redemption prior to their respective stated maturities at the option of the Authority (which option shall be exercised upon request of OCF), from any source of available funds, in whole or in part on any date on or after May 15, 20__ (in such maturities as are designated by OCF or, if OCF fails to designate such maturities, in inverse order of maturity, and by lot within a maturity), at a redemption price of par plus accrued interest to the redemption date.

Extraordinary Redemption. The Bonds are subject to redemption in whole or in part at any time at a redemption price equal to the principal amount of the Bonds to be redeemed plus accrued interest to the redemption date, without premium, if as a result of any changes in the State Constitution or the Constitution of the United States of America or legislative, judicial or administrative action of the United States of America or the State or any agency, department or subdivision thereof, (i) the Indenture or the Loan Agreement shall have become void or unenforceable or impossible of performance in accordance with the intention of the parties as expressed therein, or (ii) the interest on the Bonds shall no longer be excluded from the gross income of the owners thereof for federal income tax purposes.

The Bonds are also subject to redemption in whole or in part at any time at a redemption price equal to the principal amount of the Bonds to be redeemed plus accrued interest to the redemption date, without premium, in the event of damage, destruction, or condemnation of all or a portion of the Project or the Refunded Projects (as defined in APPENDIX C – “SUMMARY OF PRINCIPAL DOCUMENTS”) and a determination by resolution of the Board

of Directors of OCF to apply all or a portion of any casualty loss or condemnation awards relating to the Project or the Refunded Projects to the redemption of the Bonds.

Mandatory Sinking Fund Redemption. The Bonds of the following maturities (collectively, the “Term Bonds”) are subject to mandatory sinking fund redemption prior to maturity in part by lot in such manner as may be designated by the Trustee, at a redemption price equal to the principal amount of such Bonds to be redeemed, plus accrued interest thereon to the date of redemption on May 15 of each of the following years and in the following amounts.

Bonds due May 15, 2042*

Year* Principal Amount 2038 $ 2039 2040 2041 2042†

† Stated Maturity

Bonds due May 15, 2047*

Year* Principal Amount 2043 $ 2044 2045 2046 2047†

† Stated Maturity

In lieu of the scheduled sinking fund redemption of Term Bonds, OCF may cause the purchase by the Trustee during the 12-month period immediately preceding the related scheduled sinking fund redemption of Term Bonds subject to such scheduled sinking fund redemption at a price not to exceed the principal thereof plus accrued interest to the date of purchase from moneys in the Debt Service Fund or other moneys made available by OCF. OCF may also submit to the Trustee for cancellation any of the Term Bonds subject to redemption on the succeeding May 15. Provided, however, the Trustee shall not purchase Term Bonds scheduled for sinking fund redemption in the 30-day period preceding May 15 (to allow for the notice of such redemption in accordance with the Indenture) and the Trustee is under no obligation to accept any such Term Bonds purchased by OCF and presented to the Trustee for cancellation during such period. The purchase of Term Bonds by the Trustee or OCF as described in this paragraph shall reduce the amount of such Term Bonds to be called by the Trustee in connection with the related scheduled sinking fund redemption. In the event of the redemption of Term Bonds in part, the principal amount of the Term Bond redeemed shall be credited against the related sinking fund installments as designated by OCF or, in the event OCF fails to make such designation, in inverse order of such sinking fund installments.

Notice and Effect of Redemption. At least 20 days before the redemption date of any Bonds, the Trustee shall cause a notice of any such redemption to be mailed to all Bondholders of record owning Bonds to be redeemed in whole or in part, at their addresses as they appear on the Bond Register, but any defect in such mailing of any such notice shall not affect the validity of the proceedings for such redemption. Each such notice shall set forth the date fixed for redemption, the redemption price to be paid and, if less than all of the Bonds then outstanding shall be called for redemption, the numbers of such Bonds to be redeemed and, in the case of Bonds to be redeemed in part

* Preliminary; subject to change.

only, the portion of the principal amount thereof to be redeemed. Any notice of optional redemption given pursuant to this paragraph may be rescinded by written notice given to the Trustee by OCF no later than five Business Days prior to the date specified for redemption. The Trustee shall give notice of such rescission within one Business Day of its receipt in the same manner, and to the same persons, as notice of such redemption was given.

With respect to any notice of optional redemption of Bonds, unless upon the giving of such notice such Bonds or portions thereof shall be deemed to have been paid within the meaning of the Indenture, such notice shall state that such redemption shall be conditioned upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds or portions thereof to be redeemed, and that if such moneys shall not have been received said notice shall be of no force and effect and the Authority shall not be required to redeem such Bonds or portions thereof. In the event that such notice contains such a condition and such moneys are not so received, the redemption shall not be made and the Trustee shall within five days thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received.

On the date so designated for redemption, notice having been given in the manner and under the conditions provided in the Indenture and money for payment of the redemption price being held in the Debt Service Fund in trust for the owners or the Bonds or portions thereof to be redeemed, the Bonds or portions of Bonds so called for redemption shall become and be due and payable at the redemption price provided for redemption of such Bonds or portions of Bonds on such date, interest on the Bonds or portions of Bonds so called for redemption shall cease to accrue, such Bonds or portions of Bonds shall cease to be entitled to any benefit or security under the Indenture, and the owners of such Bonds or portions of Bonds shall not have rights in respect thereof except to receive the payment of the redemption price thereof.

Mandatory Purchase in Lieu of Redemption

Each Holder, by purchase and acceptance of any Bond, irrevocably grants to OCF the option to purchase such Bond at any time such Bond is subject to optional redemption pursuant to the Indenture as described above under “Redemption – Optional Redemption.” Such Bond is to be purchased at a purchase price equal to the then applicable redemption price of such Bond plus accrued interest. OCF may only exercise such option after OCF shall have delivered an opinion of bond counsel to the Trustee to the effect that such purchase is permitted by the Indenture and will not adversely affect the excludability from gross income for federal income tax purposes of interest on the Bonds, and shall have directed the Trustee to provide notice of mandatory purchase (such notice to be provided, as and to the extent applicable, in accordance with the notice of redemption provisions of the Indenture). Bonds to be so purchased shall be selected by the Trustee in the same manner as Bonds called for redemption as described herein. On the date fixed for purchase of any Bond in lieu of redemption as described in this paragraph, OCF shall pay the purchase price of such Bond to the Trustee in immediately available funds, and the Trustee shall pay the same to the Holders of the Bonds being purchased against delivery thereof. No purchase of any Bond in lieu of redemption as described in this paragraph shall operate to extinguish the indebtedness of the Authority evidenced by such Bond. No Holder may elect to retain a Bond subject to mandatory purchase in lieu of redemption.

Book-Entry Only System

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully- registered bond certificate will be issued for each maturity of the Bonds bearing interest at a particular interest rate, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC 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 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) 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 between 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 of DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing 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”). DTC has a Standard & Poor’s rating of AA+. The DTC rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each 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. Beneficial Owners are, however, 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 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 beneficial ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all 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 the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 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. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the bond documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Trustee and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity of the Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts such Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal, redemption price payments and interest on the 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 Authority or the Trustee, on the payment 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 nor its nominee, the Authority or the Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bond certificates are required to be printed and delivered to DTC or Beneficial Owners, as applicable.

The preceding information in this section “Book-Entry Only System” has been provided by DTC. No representation is made by the Authority, OCF, the Underwriter or the Trustee as to the accuracy or adequacy of such information provided by DTC or as to the absence of material adverse changes in such information subsequent to the date of this Official Statement.

PLAN OF FINANCE

Purpose of the Bonds

The proceeds of the Bonds will be loaned to OCF and used to (a) finance the Project, (b) refund all or a portion of the Prior Bonds and (c) to pay certain costs of issuance of the Bonds.

Project

The acquisition, construction, equipping, maintaining, installation and/or upgrading of certain improvements and healthcare and related facilities of OCF located in the State. Such facilities are described in Exhibit B to the Loan Agreement, as it may be amended and supplemented in accordance with the Loan Agreement. See APPENDIX A – “CAPITAL PROJECTS” and APPENDIX C – “SUMMARY OF PRINCIPAL DOCUMENTS – SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT – Construction of the Project.

Plan of Refunding

The portion of the proceeds of the Bonds that will be used to refund all or a portion of the Prior Bonds (such portion so refunded, the “Refunded Bonds”) and other available funds transferred from the trustee for the Prior Bonds will be deposited with The Bank of New York Mellon Trust Company, N.A., as escrow agent for the Refunded Bonds (the “Escrow Trustee”), pursuant to an escrow deposit agreement for the Refunded Bonds (the “Escrow Agreement”), among the Authority, the Escrow Trustee and OCF.

The funds deposited under the Escrow Agreement will be held as cash or invested in Government Obligations in a separate irrevocable escrow account for each Series of the Refunded Bonds (collectively, the “Escrow Funds”) each established pursuant to the Escrow Agreement, the principal of and interest on which have been calculated to be sufficient to pay the principal of and interest on the related series of Refunded Bonds to and including the redemption date (expected to be May 26, 2017), and to redeem the Refunded Bonds on the redemption date at a redemption price equal to the principal amount thereof. The adequacy of the funds deposited under the Escrow Agreement to pay principal of and interest on the Refunded Bonds to the redemption date and to redeem the Refunded Bonds on such date will be verified by the Verification Agent. See “VERIFICATION” herein. The amounts held by the Escrow Trustee in the Escrow Funds are pledged solely to the payment and redemption of the Refunded Bonds secured by the Escrow Funds and are not available for the payment of the principal of or interest on the Bonds.

“Government Obligations” means (i) United States Treasury Obligations – State and Local Government Series (“SLGS”) or other direct obligations the principal of and the interest on which are unconditionally guaranteed by, the United States of America or any instrumentality or agency of the United States of America, including without limitation the interest component of securities issued by Resolution Funding Corporation which have been stripped to the Federal Reserve Bank of New York in book-entry form, (ii) evidences of a direct ownership interest in future interest or principal payments on obligations issued or guaranteed by the United States of America or any instrumentality or agency of the United States of America, which obligations are held in a custody account by a custodian satisfactory, in the case of the Bonds, to the Trustee or, if such Government Obligations are deposited to effect the refunding of the Bonds or any portion thereof, to any bond trustee, pursuant to the terms of a custody agreement, and (iii) obligations issued by any state of the United States of America or any political subdivision, public instrumentality or public authority of any state of the United States of America, which obligations are fully secured by and payable solely from direct obligations of, or obligations the principal of and interest on which are fully guaranteed by, the United States of America or any agency or instrumentality of the United States of America.

The refunding of the Refunded Bonds is predicated on the ability of the Obligated Group to reduce debt service costs of the Credit Group. Consequently, the decision as to whether proceeds of the Bonds will be used to refund any or all of the Refunded Bonds will be made by OCF, at and subject to its sole discretion, at the time of pricing. No assurances can be given that refunding of any or all of the Refunded Bonds will occur.

ESTIMATED SOURCES AND USES OF FUNDS

The proceeds to be received from the sale of the Bonds are expected to be applied as follows:

Sources of Funds Total

Par Amount of Bonds $ Plus Original Issue Premium Release of Funds Held under Trust Indentures for the Refunded Bonds Total Sources of Funds $

Use of Funds Refunding of Refunded Bonds $ Deposit to Construction Fund Costs of Issuance(1) Total Uses of Funds $ (1) Includes certain costs of issuance such as underwriting discount, rating agency, legal, accounting, consulting, financial advisory, trustee, printing fees and expenses and other fees and expenses of issuing the Bonds.

SECURITY FOR THE BONDS

Limited and Special Obligations

THE BONDS ARE LIMITED AND SPECIAL OBLIGATIONS OF THE AUTHORITY AND DO NOT CONSTITUTE OR CREATE AN OBLIGATION, GENERAL OR SPECIAL, DEBT, LIABILITY OR MORAL OBLIGATION OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISIONS WHATSOEVER AND NEITHER THE FAITH OR CREDIT NOR THE TAXING POWER OF THE STATE OR OF ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR THE INTEREST ON THE BONDS. THE BONDS ARE NOT A GENERAL OBLIGATION OF THE AUTHORITY (WHICH HAS NO TAXING POWER AND RECEIVES NO FUNDS FROM ANY GOVERNMENTAL BODY) BUT ARE A LIMITED AND SPECIAL REVENUE OBLIGATION OF THE AUTHORITY PAYABLE SOLELY FROM THE INCOME, REVENUES AND RECEIPTS DERIVED OR TO BE DERIVED FROM PAYMENTS MADE

PURSUANT TO THE LOAN AGREEMENT AND OBLIGATION No. 17 AND ANY OTHER AMOUNTS AVAILABLE THEREFOR UNDER THE INDENTURE AS DESCRIBED IN THIS OFFICIAL STATEMENT.

The Bonds are being issued by the Authority under and pursuant to the Indenture. Pursuant to the Indenture, the Authority will assign and pledge to the Trustee as security for the Bonds all of its right, title and interest in and to the Loan Agreement and Obligation No. 17 and the payments due thereunder, excluding certain rights to payment of expenses and indemnification.

Loan Agreement and Obligation No. 17

The Bonds are limited and special obligations of the Authority, payable from payments made by OCF pursuant to the Loan Agreement or by the Obligated Group pursuant to Obligation No. 17. In the Loan Agreement, OCF agrees to make loan payments to the Trustee for the account of the Authority, which payments, in the aggregate, will be in amounts sufficient for the payment in full of all amounts payable with respect to the principal of, premium, if any, and interest on the Bonds to the date of maturity of the Bonds or earlier redemption when due, less any amounts available for such payment as provided in the Indenture. The obligation of OCF to make such loan payments is absolute and unconditional. The Bonds are also payable from payments made on Obligation No. 17, proceeds of the Bonds (to the extent available), investment earnings on proceeds of the Bonds, certain amounts on deposit under the Indenture and proceeds of insurance or condemnation awards, each in the manner and to the extent set forth in the Indenture.

To secure its obligation to make Payments under the Loan Agreement, including repayment of the loan of the proceeds of the Bonds made by the Authority to OCF under the Loan Agreement, and to further secure payment of the principal of and premium, if any, and interest on the Bonds, OCF, concurrently with the issuance of the Bonds, will execute and deliver Obligation No. 17 to the Trustee, as assignee of the Authority. Obligation No. 17 will be issued and secured under and pursuant to the Master Indenture between OCF, as Credit Group Representative, and The Bank of New York Mellon Trust Company, N.A., a national banking association, as Master Trustee (in such capacity, the “Master Trustee”) and a Supplemental Master Indenture for Obligation No. 17, dated as of May 1, 2017. Pursuant to Obligation No. 17, OCF and any future Members of the Obligated Group agree to make Payments under the Loan Agreement including payments to the Trustee in amounts sufficient to pay, when due, the principal of and premium, if any, and interest on the Bonds. Each Member of the Obligated Group is jointly and severally obligated to make payments on all Obligations issued under the Master Indenture, including Obligation No. 17. OCF is currently the only Member of the Obligated Group established under the Master Indenture and, consequently, will be the only entity liable for payment of Obligations issued under the Master Indenture, including Obligation No. 17, as of the date of issuance of the Bonds. See “SECURITY FOR THE BONDS – The Master Indenture” below.

OCF receives credit on payments due under the Loan Agreement to the extent of payment made by the Members of the Obligated Group under Obligation No. 17. The Members of the Obligated Group receive a credit on payments due on Obligation No. 17 to the extent of payments made by OCF under the Loan Agreement. Obligation No. 17 will be secured by the Mortgage and pledge of Gross Revenues of the Obligated Group to the Master Trustee as described herein.

The legal right and practical ability of the Trustee to enforce its rights and remedies against OCF under the Loan Agreement and Obligation No. 17 and related documents could be limited by laws relating to bankruptcy, insolvency, reorganization, fraudulent conveyance or moratorium and by other similar laws affecting creditors’ rights. See “SECURITY FOR THE BONDS – Limitations on Enforceability” below and see “BONDHOLDERS’ RISKS – Other Risk Factors – Bankruptcy and Insolvency” herein.

The Master Indenture

General. Under the Master Indenture, the Members of the Obligated Group, as it may exist from time to time, jointly and severally guarantee the payment of all obligations secured under the Master Indenture (the “Obligations”), including Obligation No. 17 and any other Obligations Outstanding from time to time. Accordingly, OCF and any future Members of the Obligated Group jointly and severally are required to make payments on Obligation No. 17 sufficient to provide for the full payment of principal of, premium, if any, and interest on the

Bonds when due. As security for its obligations under the Master Indenture, OCF mortgaged certain of its property (the “Mortgaged Property”) pursuant to a mortgage (the “Mortgage”) and pledged its Gross Revenues to the Master Trustee as described herein in trust for the protection and benefit of the Holders of all Obligations, including the Trustee as Holder of Obligation No. 17.

Membership in Obligated Group The Master Indenture permits others to become Members of the Obligated Group under certain circumstances and permits Members of the Obligated Group to be released from their respective obligations under the Master Indenture under certain circumstances; however, the Master Indenture provides that in the case of the addition of (1) OHS or (2) the Medical Center LLCs (as defined in the Master Indenture) and, in either case and at the option of the Credit Group Representative, any entity controlled by OCF, such nonprofit corporation or entity is not required to provide an Officer’s Certificate to the effect that the Credit Group would have been permitted to incur at least $1.00 of additional Long-Term Indebtedness pursuant to the provisions of the Master Indenture related to the limitation on Long-Term Indebtedness immediately after the addition of the proposed new Obligated Group Member. For a description of the provisions of the Master Indenture providing for entry into or withdrawal from the Obligated Group, see APPENDIX D – “SUMMARY OF THE MASTER INDENTURE – Membership in Obligated Group” and “– Withdrawal from Obligated Group.”

Joint and Several Obligations. Under the Master Indenture, OCF, acting as Credit Group Representative, may incur, for itself and on behalf of any future Members of the Obligated Group, Indebtedness and other liabilities that may be evidenced and secured by Obligations issued under the Master Indenture. OCF and any future Members of the Obligated Group are jointly and severally liable with respect to all payments required to be made under the Master Indenture, any indenture supplemental to, and authorized and executed pursuant to the terms of, the Master Indenture and each Obligation issued under the Master Indenture. Obligation No. 17 is being issued by OCF under and pursuant to the Master Indenture on a parity with all other Obligations issued or to be issued on behalf of OCF and any future Members of the Obligated Group thereunder.

Designated Affiliates; Credit Group and Controlling Members. Under the Master Indenture, OCF, as the Credit Group Representative, may by resolution designate entities other than Members of the Obligated Group as “Designated Affiliates” from time to time, and may rescind such designation at any time. Accordingly, there can be no assurance that an entity designated as a Designated Affiliate will continue to be a Designated Affiliate for the full term of Obligation No. 17. As of the date of issuance of the Bonds, the Designated Affiliates under the Master Indenture will be: Brent House Corporation, Ochsner Clinic L.L.C., Ochsner Bayou, L.L.C., East Baton Rouge Medical Center, L.L.C., Ochsner Medical Center – Northshore, L.L.C., Ochsner Home Medical Equipment, L.L.C., Ochsner Baptist Medical Center, L.L.C., Ochsner Medical Center – Westbank, L.L.C., Ochsner Medical Center – Kenner, L.L.C., Chabert Operational Management Company, L.L.C., Ochsner Physician Partners, L.L.C., Southern Strategic Sourcing Partners, L.L.C. and St. Charles Operational Management Company, L.L.C.. OCF does not intend to designate any additional entities as Designated Affiliates prior to the date of issue of the Bonds. OCF and any future Members of the Obligated Group and the Designated Affiliates and any future Designated Affiliates comprise the “Credit Group” under the Master Indenture. See APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – “INTRODUCTION – Description of Credit Group” and “–Organizational Structure.”

The Master Indenture provides that calculations of various financial ratios, debt incurrence tests, reporting requirements and other matters are to be determined based upon the financial results of operations, assets and liabilities, and other indicia of financial condition of the Credit Group as a whole rather than the Obligated Group alone; however, only those entities that are Obligated Group Members are jointly and severally liable to the Master Trustee for payment and performance of all obligations under the Master Indenture, including payments with respect to Obligation No. 17, and only the Obligated Group Members have granted security interest in the Gross Revenues (as defined in the Master Indenture). The Master Indenture requires that OCF, as Credit Group Representative, must, by resolution, designate a Controlling Member (who must be a Member of the Obligated Group) for each Designated Affiliate. Each such Controlling Member is required under the Master Indenture to cause each of its Designated Affiliates to pay or otherwise transfer to the Credit Group Representative or other Member amounts necessary to enable the Members to pay when due the principal of, premium, if any, and interest on the Outstanding Obligations. However, the Designated Affiliates, if any, are not obligated under Obligation No. 17 or any other Obligations Outstanding from time to time, nor may the Trustee or any Holder seek to enforce compliance with the Master Indenture against any Designated Affiliate. Compliance with the Master

Indenture by a Designated Affiliate may only be enforced by its Controlling Member or the Credit Group Representative and the ability of such Controlling Member or the Credit Group Representative to enforce compliance with the Master Indenture will vary and the available remedies may be limited depending on the nature of the relationship between the Designated Affiliate and the Controlling Member. See APPENDIX D - “SUMMARY OF THE MASTER INDENTURE – Transfers from Designated Affiliates” and “–Designation of Designated Affiliates.” As of the date of issuance of the Bonds, the Controlling Member for each Designated Affiliate will be OCF.

Under the Master Indenture the Controlling Member for a Designated Affiliate must either: (i) maintain, directly or indirectly, control of the Designated Affiliate, including the power to direct the management, policies, disposition of assets and actions of such Designated Affiliate to the extent required to cause the Designated Affiliate to comply with the Master Indenture, or (ii) have in effect such contracts or other agreements, which in the judgment of the Governing Bodies of the Credit Group Representative and the Controlling Member, are sufficient to allow such Controlling Member to enforce compliance by the Designated Affiliate with the terms of the Master Indenture.

If the Controlling Member maintains organizational control of the Designated Affiliate, compliance with the Master Indenture generally may be enforced by the Controlling Member exercising its reserved powers to direct actions of the Designated Affiliate, including replacing the members of the governing body of such Designated Affiliate, if necessary. The level of organizational control and the procedures for exercising such control may vary among Designated Affiliates and there is no assurance that a Controlling Member would be able to enforce compliance by its Designated Affiliate in a timely manner.

With respect to those Designated Affiliates which are not subject to organizational control but have only a contractual relationship with a Controlling Member, the ability of the Controlling Member to enforce compliance with the Master Indenture will be based solely on the applicable contract. Should any such non-controlled Designated Affiliate refuse to comply with the covenants and requirements of the Master Indenture, the Controlling Member’s remedies would be limited to litigation to specifically enforce the provisions of the applicable written contract. In particular, the execution of a written contract may not give the Obligated Group the power or authority to replace the governing body or management of a Designated Affiliate. Moreover, the Designated Affiliate may have certain defenses to such litigation, and there is no assurance that the Controlling Member would prevail in such an action.

Security for Obligations. All Obligations Outstanding from time to time under the Master Indenture, including Obligation No. 17, are secured by security interests in the Gross Revenues of OCF and each of the future Members of the Obligated Group (collectively, the “Security Interests”). All such Obligations also will be secured by and entitled to the benefit of the Mortgage and any future liens on certain real property of such Members.

Security Interests in Gross Revenues. Pursuant to the Master Indenture, OCF and each of the other future Members of the Obligated Group will create Security Interests in favor of the Master Trustee in each Member’s Gross Revenues under Article 9 of the Uniform Commercial Code as in effect in the State (the “UCC”). The Security Interests in Gross Revenues will be perfected to the extent, and only to the extent, that the same may be perfected by filing under the UCC; i.e., the Security Interests will be perfected only in those items and types of Gross Revenues consisting of “accounts” and “general intangibles” (as defined in the UCC). The UCC does not permit perfection by filing with respect to certain items included in Gross Revenues, such as the proceeds of accounts, cash or bank deposits, which generally permits perfection only by possession by the Master Trustee or a depository bank under a control agreement. The Master Indenture does not create a gross revenue fund or account in the possession of the Master Trustee or under its control by means of account control agreements. Creation and enforcement of any right to receive payments under the Medicare and Medicaid programs may be subject to limitations under federal and state laws and regulations. Under certain circumstances, the Security Interests in Gross Revenues may be subordinated to the interests of creditors other than the Holders of Obligations. Some instances of subordination of prior interests and claims are (i) statutory liens, (ii) rights arising in favor of the United States of America or any agency thereof, (iii) present or future prohibitions against assignment in any federal statutes or regulations, (iv) constructive trusts, equitable liens or other rights impressed or conferred by any state or federal court in the exercise of its equitable jurisdiction, (v) federal or state bankruptcy or insolvency laws that may affect the enforceability of the Master Indenture or the grant of any Security Interest, and (vi) rights of third parties in Gross Revenues converted to cash and not in the possession of the Master Trustee.

The Mortgage. In addition to the Security Interests, liens on certain real property of OCF were granted for the benefit of the Master Trustee and the holders of all Obligations pursuant to the Mortgage. The Mortgaged Property consists of a portion of the principal hospital facilities, medical offices, and parking structures comprising OCF’s main campus in Jefferson Parish, Louisiana, and fixtures on the main campus. For a discussion of risks that relate to mortgage security generally and the Mortgaged Property in particular, see “SECURITY FOR THE BONDS – Limitations on Enforceability – Risks Related to the Mortgage and the Mortgaged Property” herein. The Mortgaged Property may be released, subordinated, disposed of or subjected to Permitted Liens, all as more fully discussed in APPENDIX D – “SUMMARY OF THE MASTER INDENTURE – Against Encumbrances; Pledge of Gross Revenues.”

Permitted Liens. Pursuant to the Master Indenture, each Member of the Obligated Group agrees that it will not, and each Controlling Member covenants that it will not permit any of its Designated Affiliates to, create, assume or suffer to be created or permit the existence of any Lien upon the Property of the Credit Group, except for Permitted Liens. Permitted Liens include, but are not limited to, Liens which may be granted to secure additional Obligations and other Indebtedness and Liens not otherwise identified as a Permitted Lien where the Value of the Property that is encumbered by all such other Liens is not more than 20% of the Value of all Property. The Obligated Group may incur substantial liabilities secured by Permitted Liens. See the definition of “Permitted Liens” in APPENDIX D – “SUMMARY OF THE MASTER INDENTURE – DEFINITIONS OF CERTAIN TERMS.”

Additional Indebtedness; Outstanding Obligations. In addition to the Bonds, OCF and each of the other future Members of the Obligated Group, if any, are permitted under the Master Indenture to incur additional Indebtedness, either unsecured or secured by Permitted Liens, subject to the financial tests and limitations contained in the Master Indenture. Additional Indebtedness need not be evidenced by Obligations issued under the Master Indenture. However, only Indebtedness represented by Obligations will be secured by the Security Interests and the Mortgage on a parity with other Obligations. For a description of the financial tests and limits on additional indebtedness in the Master Indenture, see APPENDIX D – “SUMMARY OF THE MASTER INDENTURE – Limitation on Indebtedness.” See also “ANNUAL DEBT SERVICE REQUIREMENTS” herein.

The following Obligations are currently Outstanding:

Obligation No. 1 (“Obligation No. 1”), issued to secure the Louisiana Public Facilities Authority Revenue Bonds (Ochsner Clinic Foundation Project), Series 2007A, outstanding in the aggregate principal amount of $250,805,000 as of April 24, 2017, on May 15, 2017, prior to the expected issuance of the Bonds, there is a scheduled principal payment on the related bonds of $4,240,000;

Obligation No. 2 (“Obligation No. 2”), issued to secure OCF’s obligations under a Guaranty Agreement, dated as of September 1, 2007 (the “OCF Guarantee Agreement”), between the Authority and OCF, pursuant to which OCF guarantees loan payments to be made by Ochsner Community Hospitals, a Louisiana nonprofit corporation1 (“OCH”), under a loan agreement executed and delivered in connection with the Louisiana Public Facilities Authority Revenue Bonds (Ochsner Community Hospitals Project), Series 2007B, outstanding in the aggregate principal amount of $53,445,000 as of April 24, 2017, on May 15, 2017, prior to the expected issuance of the Bonds, there is a scheduled principal payment on the related bonds of $750,000;

Obligation No. 11 (“Obligation No. 11”), issued to secure a term loan with Capital One, N.A., outstanding in the aggregate principal amount of $14,006,250 as of April 24, 2017, on May 1, 2017, prior to the expected issuance of the Bonds, there is a scheduled principal payment on the related loan of $172,917;

Obligation No. 12 (“Obligation No. 12”), issued to secure a loan from JPMorgan Chase Bank, N.A., outstanding in the aggregate principal amount of $18,700,000 as of April 24, 2017, on May 1, 2017, prior to the expected issuance of the Bonds, there is a scheduled principal payment on the related loan of $366,667;

1 Effective on December 31, 2016, Ochsner Community Hospitals was merged into OCF and OCF assumed all indebtedness of OCH, including these Series 2007B Bonds.

Obligation No. 13 (“Obligation No. 13”), issued to secure taxable bonds issued by OCF on June 24, 2015, outstanding in the aggregate principal amount of $252,820,000 as of April 24, 2017;

Obligation No. 14 (“Obligation No. 14”), issued to secure the Louisiana Public Facilities Authority Refunding Revenue Bonds (Ochsner Clinic Foundation Project), Series 2015, outstanding in the aggregate principal amount of $112,815,000 as of April 24, 2017 on May 15, 2017, prior to the expected issuance of the Bonds, there is a scheduled principal payment on the related bonds of $2,040,000;

Obligation No. 15 (“Obligation No. 15”), issued to secure a term loan with Capital One, N.A., outstanding in the aggregate principal amount of $26,250,000 as of April 24, 2017; and

Obligation No. 16 (“Obligation No. 16”), issued to secure the Louisiana Public Facilities Authority Refunding Revenue Bonds (Ochsner Clinic Foundation Project), Series 2016, outstanding in the aggregate principal amount of $155,660,000 as of April 24, 2017.

These Obligations are on parity with Obligation No. 17 and any future Obligations. See “ANNUAL DEBT SERVICE REQUIREMENTS” herein and APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – HISTORICAL FINANCIAL INFORMATION – Capital Structure.”

It is anticipated that all or a portion of the outstanding Series 2007A Bonds and Series 2007B Bonds (defined above as the Prior Bonds) will be refunded using proceeds of the Bonds.

Other Master Indenture Covenants. In addition to the security and other provisions described above, the Master Indenture contains provisions, covenants and restrictions related to debt coverage, rates and charges, mergers and other corporate combinations and divestitures, sales, leases or other dispositions of assets and other matters. See APPENDIX D – “SUMMARY OF THE MASTER INDENTURE.”

No Debt Service Reserve Fund

No debt service reserve fund will be established or funded in connection with the issuance of the Bonds.

Amendments to Indenture, Loan Agreement and Master Indenture

Certain amendments may be made to the Indenture and the Loan Agreement without obtaining the consent of any Holders of the Outstanding Bonds and certain other amendments to the Indenture and the Loan Agreement require, subject to the nature of the amendment(s), either the consent of the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding or the consent of all Holders of Bonds. Such amendments that are subject to consent of Holders may adversely affect the security for the Bonds. See APPENDIX C – “SUMMARY OF PRINCIPAL DOCUMENTS – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE – Supplements to Indenture” and “SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT – Amendments to the Loan Agreement.” Certain amendments may be made to the Master Indenture without obtaining consent of any Holders of Obligations and certain other amendments to the Master Indenture require, subject to the nature of the amendment(s), one of the following, the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Obligations, the consent of the Holder of the Obligation affected by such amendment(s) or the consent of all Holders of Obligations. See APPENDIX D – SUMMARY OF THE MASTER INDENTURE – Supplements Not Requiring Consent of Holders,” “– Supplements Requiring Consent of Holders” and “– Amendment of Related Supplements.” With respect to amendments to the Master Indenture, the Holders of the requisite percentage of Outstanding Obligations may be composed wholly or partially of the Holders of Obligations other than Obligation No. 17.

Limitations on Enforceability

Risks Related to Master Indenture Financings. There are circumstances under which it is possible that the Master Indenture would not be enforced by courts, especially as to future Members of the Obligated Group. Additionally, there are a number of circumstances under which the Security Interests, especially the Security Interest

in Gross Revenues and the lien of the Mortgage, may not be enforced or may be subordinated to the claims of others.

Fraudulent Transfer or Conveyance Statutes. The state of insolvency, fraudulent transfer or conveyance and bankruptcy laws relating to the enforceability of guaranties or obligations of one corporation in favor of the creditors of another, or the obligation of one Member of the Obligated Group to make debt service payments on behalf of another Member or the ability of a corporate parent to compel its affiliates or subsidiaries to make such payments is unsettled. The ability of the Obligated Group to compel one Member of the Obligated Group to make payment on behalf of another Member could be subject to challenge if such Member would, by making such payment, be rendered insolvent. In particular, such efforts by the Obligated Group may not be enforced under the Federal Bankruptcy Code or applicable state fraudulent transfer or conveyance statutes if the obligation to pay is incurred without “fair consideration” or “reasonably equivalent value” to the obligor-Member and if the incurrence of the obligation renders the Member insolvent. The standards for determining the 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 other statutes that may be applicable.

In addition a court could determine, in the event of a bankruptcy of a Member, that payments made on Obligation No. 17 by a bankrupt Member could constitute payments to or for the benefit of an insider, within the meaning of Section 547(b) of the Bankruptcy Code, which payments, if made within one year of the filing of the bankruptcy petition, might be recoverable by the bankruptcy court from the owners of the Bonds.

If a court were to find that a Member did not receive fair consideration or reasonably equivalent value for the incurrence of the indebtedness evidenced by Obligation No. 17 and such Member: (i) was insolvent; (ii) was rendered insolvent by such incurrence; (iii) was engaged in a business activity for which its remaining assets were unreasonably small; or (iv) intended (or believed) to incur, assume or issue, debt beyond its ability to pay, a court could determine to invalidate, the indebtedness represented by Obligation No. 17.

Enforceability of Obligation No. 17 and the Loan Agreement. The joint and several obligation described herein of each Member of the Obligated Group to pay amounts due under Obligation No. 17 may not be enforceable under any of the following circumstances:

(a) to the extent payments on Obligation No. 17 are requested to be made from any monies or assets of a Member which are donor-restricted or which are subject to a direct, express or charitable trust that does not permit the use of such monies or assets for such payments; (b) if the purpose of the debt created and evidenced by Obligation No. 17 is not consistent with the charitable purposes of the Member from which such payment is requested or required, or if the debt was incurred or issued for the benefit of an entity other than a nonprofit corporation that is exempt from federal income taxes under sections 501(a) and 501(c)(3) of the Code and is not a “private foundation” as defined in section 509(a) of the Code; (c) to the extent payments on Obligation No. 17 would result in the cessation or discontinuation of any material portion of the health care or related services previously provided by such Member; or (d) if and to the extent payments are requested to be made pursuant to any loan violating applicable usury laws.

These limitations on the enforceability of the joint and several obligations of the Members of the Obligated Group on Obligation No. 17 also apply to their obligations on all Obligations. If the obligation of a particular Member of the Obligated Group to make payment on an Obligation is not enforceable and payment is not made on such Obligation when due in full, then Events of Default will arise under the Master Indenture.

In addition, common law authority and authority under state statutes exists for the ability of courts in such states to terminate the existence of a nonprofit corporation or undertake supervision of its affairs on various grounds, including a finding that such corporation has insufficient assets to carry out its stated charitable purposes. Such court action may arise on the court’s own motion or pursuant to a petition of the attorney general of such states or

such other persons who have interests different from those of the general public, pursuant to the common law and statutory power to enforce charitable trusts and to see to the application of their funds to their intended charitable uses.

The legal right and practical ability of the Trustee to enforce its rights and remedies against OCF under the Loan Agreement and related documents and of the Master Trustee to enforce its rights and remedies against Obligated Group Members under Obligation No. 17 may be limited by laws relating to bankruptcy, insolvency, reorganization, fraudulent conveyance or moratorium and by other similar laws affecting creditors’ rights. In addition, the Trustee’s and the Master Trustee’s ability to enforce such terms will depend upon the exercise of various remedies specified by such documents which may in many instances require judicial actions that are often subject to discretion and delay or that otherwise may not be readily available or may be limited.

The various legal opinions delivered concurrently with the issuance of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by state and federal laws, rulings, policy and decisions affecting available remedies and by bankruptcy, reorganization or other laws of general application affecting the enforcement of creditors’ rights, including fraudulent conveyance considerations, or the enforceability of certain remedies or document provisions.

For a further description of the provisions of the Indenture, the Loan Agreement and the Master Indenture, including covenants that secure the Bonds, events of default, acceleration and remedies, see APPENDIX C – “SUMMARY OF PRINCIPAL DOCUMENTS” and APPENDIX D – “SUMMARY OF THE MASTER INDENTURE.”

Transfers From Designated Affiliates. The Master Indenture obligates the Controlling Members to exercise control over Designated Affiliates to obtain funds for payment pursuant to Obligations. There can be no assurance, however, of the extent or adequacy of such control or the ability of a Controlling Member to exercise this control. See “SECURITY FOR THE BONDS – The Master Indenture – Designated Affiliates; Credit Group and Controlling Members” herein. For example, a Controlling Member may not be able to enforce the transfer of funds from a member of the Credit Group that is a not for-profit corporation to pay debt service to the extent such funds (i) are requested to make payments on any Obligation which is issued for a purpose not consistent with the charitable purposes of the Credit Group member from which such transfer is requested or which is issued for the benefit of any entity other than a tax-exempt organization; (ii) are requested to be made from any property which is donor restricted or which is subject to a direct or express trust which does not permit the use of such property for such payments; or (iii) would result in the cessation or discontinuation of any material portion of the healthcare or related charitable services previously provided by the Credit Group member from which such payment is requested. Since neither the identity of particular Credit Group members from whom funds will be requested, the amount of such requested funds, the charitable purposes of such Credit Group members, if applicable, nor their financial conditions and available funds when a Controlling Member makes the request for a transfer of funds can presently be determined, the extent to which the property of any Credit Group member may fall within any of the categories referred to above cannot be determined and could be substantial.

There is no clear precedent in the law as to whether transfers from a member of the Credit Group in order to pay debt service on the Obligations issued for the benefit of another member of the Credit Group may be voided by a trustee in bankruptcy in the event of a bankruptcy of the transferring member of the Credit Group or by creditors of the transferring member of the Credit Group in an action brought pursuant to fraudulent conveyances or similar state statutes. Under the United States Bankruptcy Code, a trustee in bankruptcy and, under fraudulent conveyances statutes, a creditor of a guarantor, may avoid any obligation incurred by a guarantor, if, among other bases therefor, (i) the guarantor has not received fair consideration or reasonably equivalent value in exchange for the guaranty and (ii) the guaranty renders the guarantor insolvent, as defined in the United States Bankruptcy Code or fraudulent conveyances statutes, or the guarantor is undercapitalized.

Application by courts of tests of “insolvency,” “reasonably equivalent value” and “fair consideration” has resulted in a conflicting body of case law. It is possible that, in an action to force a member of the Credit Group to transfer funds to the Obligated Group to permit OCF to pay debt service on Obligations issued for the benefit of another member of the Credit Group, a court might not permit such a transfer in the event it is determined that the member of the Credit Group is analogous to a guarantor, that fair consideration or reasonably equivalent value for

such guaranty was not received and that the transfer will render the member of the Credit Group insolvent or such member is or will thereby become undercapitalized.

There exists common law authority and authority under certain statutes for the ability of the courts to terminate the existence of a nonprofit corporation or undertake supervision of its affairs on various grounds, including a finding that such corporation has insufficient assets to carry out its stated charitable purposes. Such court action may arise on the court’s own motion or pursuant to a petition of the state Attorney General or such other persons who have interests different from those of the general public, pursuant to the common law and statutory power to enforce charitable trusts and to see to the application of their funds to their intended charitable uses.

Risks Related to the Mortgage and the Mortgaged Property. Under the Master Indenture, OCF and any future Members of the Obligated Group may encumber or permit encumbrance of the Mortgaged Property by Permitted Liens. Permitted Liens on the Mortgaged Property having priority over the lien created by the Mortgage may reduce the amount that can be realized by the Master Trustee in the event of a foreclosure of the Mortgage. OCF has obtained a title policy issued to the Master Trustee providing confirmation of the creation of the liens of the Mortgage on the Mortgaged Property. No appraisal of the Mortgaged Property was completed in connection with the title policy issued to the Master Trustee. The title insurance does not provide coverage equal to the principal amount of Outstanding Obligations and purchasers of the Bonds should not rely on title insurance as a source of recovery if the Master Trustee is unable for any reason related to the condition of title to realize value from the Mortgaged Property when exercising remedies for an Event of Default. The Mortgaged Property is not comprised of general purpose buildings and would not generally be suitable for industrial or commercial use. Consequently, it would be difficult to find a buyer or lessee for the Mortgaged Property if it were necessary to foreclose on the Mortgaged Property. Thus, upon any default, it may not be possible to realize the outstanding interest on and principal of the Bonds from a sale or a lease of the Mortgaged Property. In order to operate the Mortgaged Property as health care facilities under present law, a purchaser of the Mortgaged Property at foreclosure sale would have to obtain approval of the State’s Department of Health and the State Attorney General and licenses for the facilities. OCF and any future Members of the Obligated Group are not granting a lien on equipment or furnishings at the Mortgaged Property. Therefore, the ability to operate Mortgaged Property as health care facilities might be adversely affected. Under applicable federal and state environmental statutes, in the event of part or future releases of pollutants or contaminants on or near the Mortgaged Property, a lien superior to the Mortgage could attach to the Mortgaged Property affected to secure the costs of removing or otherwise treating pollutants or contaminants. Such a lien would adversely affect the Master Trustee’s ability to realize sufficient amounts to pay the Bonds in full. Furthermore, in determining whether to exercise any foreclosure rights with respect to the Mortgaged Property, the Master Trustee may be required to take into account the potential liability of any owner of the Mortgaged Property, including an owner by foreclosure, for clean-up costs with respect to such pollutants and contaminants. No environmental assessment of the Mortgaged Property has been made prior to the issuance of the Bonds.

Bankruptcy. In the event of bankruptcy of a Member of the Obligated Group, the rights and remedies of the Holders of Obligations, including Obligation No. 17, are subject to various provisions of the Federal Bankruptcy Code, which could adversely affect the Owners or beneficial owners of the Bonds. See “BONDHOLDERS’ RISKS – Other Risk Factors – Bankruptcy and Insolvency” herein.

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ANNUAL DEBT SERVICE REQUIREMENTS The following table sets forth, for each year ending on December 31, the amounts required to be paid by OCF with respect to principal, whether by payment at maturity or upon mandatory sinking account redemption, and interest on the Bonds and other long-term debt indebtedness of the Obligated Group. After the issuance of the Bonds and the application of the proceeds thereof, the aggregate principal amount of Obligations outstanding is expected to be approximately $______. See “PLAN OF FINANCE” herein and APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – HISTORICAL FINANCIAL INFORMATION – Capital Structure.”

The Bonds Year Ending Total Other Aggregate December 31 Principal Interest Debt Service Debt Service1 Debt Service

2017 $ % $ $ $ 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 Total: ______1 Interest on fixed and variable rate debt is based on the actual or synthetic fixed rate, as applicable.

BONDHOLDERS’ RISKS

The purchase and ownership of the Bonds involves investment risks that are discussed throughout this Official Statement. Each prospective purchaser of the Bonds should make an independent evaluation of all of the information presented in this Official Statement to make an informed investment decision. This section on Bondholders’ risks focuses primarily on the general risks associated with hospital or health system operations; whereas APPENDIX A describes OCF and the Credit Group specifically. These should be read together.

Set forth in Bondholders’ Risks is a limited discussion of certain of the risks affecting the Credit Group and the ability of the Members of the Obligated Group to provide for payment of the Bonds. Investors should recognize that the discussion in Bondholders’ Risks does not cover all such risks, that payment provisions and regulations and restrictions change frequently and that additional material payment limitations and regulations and restrictions may be created, implemented or expanded while the Bonds are outstanding. The following discussion is not meant to be an exhaustive list of the risks associated with the purchase of any Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors are advised to consider the following special factors along with all other information described elsewhere or incorporated by reference in this Official Statement, including the Appendices hereto, in evaluating the Bonds. The operations and financial condition of the Credit Group may be affected by factors other than those described in this section on Bondholders’ risks and elsewhere in this Official Statement. No assurance can be given as to the nature of such factors or the potential effects thereof on the Credit Group.

General

As set forth under “SECURITY FOR THE BONDS” herein, OCF is obligated to pay when due loan payments that are required to be at least equal to the principal of, premium (if any), and interest, on the Bonds pursuant to the Loan Agreement. OCF’s obligation to make Payments with respect to the Bonds will be further evidenced and secured by Obligation No. 17 issued under the Master Indenture. All Obligations issued and Outstanding under the Master Indenture are secured by the lien on Gross Revenues and the Mortgage. No representation or assurance can be made that revenues will be realized by, or available to, OCF in amounts sufficient to make the loan payments pursuant to the Loan Agreement or by OCF and any future Members of the Obligated Group to make payments pursuant to Obligation No. 17 and, consequently, payment of debt service on the Bonds. For a description of certain limitations on enforceability of the Master Indenture, the Loan Agreement, the lien on Gross Revenues, the Mortgage and other similar matters, see “SECURITY FOR THE BONDS—Limitations on Enforceability” herein.

Under the Master Indenture, OCF, as Credit Group Representative, has designated certain entities as “Designated Affiliates” and OCF, as Credit Group Representative, may rescind such designation at any time. Designated Affiliates are not obligated to make payments with respect to any Obligations issued under the Master Indenture, including Obligation No. 17, and none of the assets or revenues of any Designated Affiliate are pledged to secure payment with respect to any Obligations. However, Designated Affiliates may be required by their Controlling Member to pay or otherwise transfer to the Credit Group Representative or other Member amounts necessary to enable the Obligated Group to pay when due the principal of and premium, if any, and interest on Outstanding Obligations. For detailed descriptions of “Designated Affiliates” and “Controlling Members” and other provisions of the Master Indenture, see “SECURITY FOR THE BONDS – The Master Indenture” herein and APPENDIX D – “SUMMARY OF THE MASTER INDENTURE.” OCF and any future Members of the Obligated Group and the Designated Affiliates and any future Designated Affiliates comprise the “Credit Group” under the Master Indenture.

The Credit Group is subject to a wide variety of federal and state regulatory actions and legislative and policy changes by those governmental and private agencies that administer Medicare, Medicaid and other payors and is subject to actions by, among others, the National Labor Relations Board, The Joint Commission, the Centers for Medicare & Medicaid Services (“CMS”) of the U.S. Department of Health and Human Services (“DHHS”), the State Attorney General and other federal, state and local government and private-sector agencies. The future financial condition of the Credit Group could be adversely affected by, among other things, changes in the method, timing and amount of payments to the Credit Group by governmental and nongovernmental payors, the financial viability of these payors, increased competition from other health care entities, the costs associated with responding

to governmental audits, inquiries and investigations, demand for health care, other forms of care or treatment, changes in the methods by which employers purchase health care for employees, capability of management, changes in the structure of how health care is delivered and paid for (e.g., accountable care organizations, value based purchasing, bundled payments and other health reform payment mechanisms, including a “single-payor” system), future changes in the economy, demographic changes, availability of physicians, nurses and other health care professionals, malpractice claims and other litigation. These factors and others may adversely affect both payment by OCF under the Loan Agreement and payment by OCF and any future Members of the Obligated Group under Obligation No. 17 and, consequently, payment of debt service on the Bonds. In addition, the tax-exempt status of OCF could be adversely affected by, among other things, an adverse determination by a governmental entity, noncompliance with governmental regulations or legislative changes, including changes resulting from current health reform legislation or initiatives. Loss of tax-exempt status by OCF could adversely affect the tax-exempt treatment of interest on the Bonds.

The following discussion of risk factors is not, and is not intended to be, exhaustive.

Impact of Tropical Storms and Hurricanes on OCF Market Facilities and Operations

The Credit Group’s operations were adversely affected by several tropical storms and hurricanes during the 2005 hurricane season, including by Hurricane Katrina, which made direct landfall over OCF’s service area in August 2005, and caused catastrophic damage and flooding when levees failed, particularly to Orleans Parish and a portion of the surrounding suburban areas. In 2012, Hurricane Isaac also adversely affected the Credit Group’s operations. There can be no assurance that future tropical storms and hurricanes, some resulting in future catastrophic damage and flooding when levees fail, will not occur, which could adversely affect the finances or operations of the Credit Group.

Nonprofit Healthcare Environment

Certain members of the Credit Group are nonprofit corporations, exempt from federal income taxation as organizations described in Section 501(c)(3) of the Code. The tax-exempt status of hospitals and health care organizations is the subject of increasing regulatory and legislative threats. As nonprofit, tax-exempt organizations, such Credit Group Members are subject to federal, state and local laws, regulations, rulings and court decisions relating to their organization and operation, including their operation for charitable purposes. At the same time, the Credit Group conducts large-scale complex business transactions and Members of the Credit Group are often a major employer in their respective geographic areas. There can often be a tension between the rules designed to regulate a wide range of charitable organizations and the day-to-day operations of a complex, multi-facility health care organization. Hospitals or other health care providers may be forced to forego otherwise favorable opportunities for certain joint ventures, recruitment and other arrangements in order to maintain their tax-exempt status.

The operations and practices of nonprofit, tax-exempt hospitals and health care organizations are routinely challenged or criticized for inconsistency or inadequate compliance with the regulatory requirements for, and societal expectations of, nonprofit tax-exempt organizations. These challenges, in some cases, are broader than concerns about compliance with federal and state statutes and regulations, such as Medicare and Medicaid compliance, and instead in many cases are examinations of core business practices of the health care organizations. A common theme is that nonprofit hospitals may not confer community benefits that justify the benefits received from their tax-exempt status. Areas that have come under examination have included pricing practices, billing and collection practices, charitable care, methods of providing and reporting community benefit, executive compensation, exemption of property from real property taxation and private use of facilities financed with tax- exempt obligations. These challenges and criticisms have come from a variety of sources, including state attorneys general, the Internal Revenue Service (“IRS”), state and local tax authorities, labor unions, Congress, state legislatures, taxpayer groups, the press, patient advocates and patients, and in a variety of forums, including hearings, audits and litigation. These challenges and examinations, and any resulting legislation, regulations, judgments, or penalties, could have a material adverse effect on the Credit Group. Significant changes in the obligations of nonprofit, tax-exempt health care systems and challenges to or loss of the tax-exempt status of nonprofit hospitals generally or the affected Credit Group Members in particular could have a material adverse effect on the Credit Group. These challenges or examinations include the following, among others:

Congressional Action. A number of Senate and House committees, including the House Committee on Energy and Commerce, the House Committee on Ways and Means and the Senate Finance Committee, have conducted hearings and/or investigations into issues related to nonprofit tax-exempt health care organizations. These hearings and investigations have included a nationwide investigation of hospital billing and collection practices, charity care and community benefit, and prices charged to uninsured patients and have considered reforms to the nonprofit sector, including proposed reform in the area of tax-exempt health care organizations, as part of health care reform generally. See “BONDHOLDERS’ RISKS – IRS Examination of Compensation Practices and Community Benefit” below. It is uncertain whether any of these committees will pursue further investigations or whether Congress will adopt legislative changes negatively impacting tax-exempt organizations generally or tax- exempt hospitals in particular. See “BONDHOLDERS’ RISKS – Tax-Exempt Status and Other Tax Matters – Maintenance of the Tax-Exempt Status of the Credit Group” below.

IRS Tax-Exempt Bond Examinations. The IRS audits tax-exempt bonds in the charitable organization sector. A schedule to the Form 990 return (Schedule K) was reissued in 2009 to address what the IRS believed were significant noncompliance issues with recordkeeping and record retention requirements for tax-exempt bonds. Schedule K also requires tax-exempt organizations to report on the investment and use of bond proceeds to address IRS concerns regarding compliance with arbitrage rebate requirements and the private use of bond-financed facilities. See “BONDHOLDERS’ RISKS – Tax-Exempt Status and Other Tax Matters” below.

IRS Examinations of Compensation Practices and Community Benefit. In February 2009, the IRS issued its Hospital Compliance Project Final Report (the “IRS Final Report”) that examined tax-exempt organizations’ practices and procedures with regard to compensation and benefits paid to their officers and other defined “insiders.” The IRS Final Report indicated that the IRS (1) will continue to heavily scrutinize executive compensation arrangements, practices and procedures of tax-exempt hospitals and other tax-exempt organizations, and (2) in certain circumstances, may conduct further investigations or impose fines on tax-exempt organizations.

The IRS has also undertaken a community benefit initiative directed at hospitals. The IRS Final Report determined that the reporting of community benefit by nonprofit hospitals varied widely, both as to types of programs and expenditures classified as community benefit and the measurement of community benefits. As a result, the IRS issued the revised Form 990 that includes Schedule H which is designed to provide uniformity regarding types of programs and expenditures reported as community benefit by nonprofit hospitals. As the IRS collects and reviews information from hospitals about the level and types of community benefit provided, the IRS may issue a more stringent interpretation of community benefit. Proposals have also been made within Congressional committees to codify the requirements for hospitals’ tax-exempt status, including requirements to provide minimum levels of charity care. Tax-exempt organizations must also complete Schedule J, to Form 990 which requires reporting of compensation information for the organizations’ officers, directors, trustees, key employees, and other highly compensated employees. Additionally, the ACA (as defined herein) contains new requirements for nonprofit hospitals in order to maintain their tax-exempt status. See “BONDHOLDERS’ RISKS – Tax-Exempt Status and Other Tax Matters – Maintenance of the Tax-Exempt Status of the Credit Group” below.

IRS Scrutiny of Employee Classification. The IRS is aggressively pursuing businesses, including nonprofit tax-exempt organizations, which misclassify their employees as independent contractors. A number of employers incorrectly treat their workers (or a class or group of workers) as independent contractors or other nonemployees to reduce their employment tax withholding burden. An IRS audit of employee classification can result in employment tax liability for the employers, as well as interest and penalties on the amounts owed. Whether a worker is performing services as an employee or as an independent contractor depends on facts and circumstances and generally is determined under various common law tests, like whether the service recipient has the right to direct and control the worker regarding how he or she performs the services. The IRS is offering a Voluntary Classification Settlement program that provides partial relief from federal employment taxes owed for employers that agree to prospectively treat workers as employees and not independent contractors.

Class Actions and Litigation. Hospitals and health systems have long been subject to a wide variety of litigation risks, including liability for care outcomes, employer liability, property and premises liability, and peer review litigation with physicians, among others. In recent years, consumer class action litigation has emerged as a potentially significant source of litigation liability for nonprofit hospitals and health systems. These class action suits have most recently focused on hospital billing and collections practices and breaches of privacy, and they may

be used for a variety of currently unanticipated causes of action. Since the subject matter of class action suits may involve uninsured risks, and since such actions often involve alleged large classes of plaintiffs, they may have material adverse consequences on hospitals and health systems in the future.

Federal law and many states, including Louisiana, impose standards related to worker classification, eligibility and payment for overtime, liability for providing rest periods and similar requirements. Large employers with complex workforces, such as hospitals and health care systems, are susceptible to actual and alleged violations of these standards. In recent years there has been a proliferation of lawsuits over these “wage and hour” issues, often in the form of large, sometimes multi-state, class actions. For large employers such as hospitals and health systems, such class actions can involve multi-million dollar claims, judgments and settlements. A major class action decided or settled adversely to OCF or the Credit Group could have a material adverse impact on their financial conditions and results of operations.

Lawsuits have been filed in both federal and state courts alleging, among other things, that hospitals have failed to fulfill their obligations to provide charity care to uninsured patients and have overcharged uninsured patients. Other cases have alleged that charging patients more for services furnished in a hospital based setting is a wrongful or deceptive practice. Many of these cases have since been dismissed by the courts. Some hospitals and health systems have entered into substantial settlements.

Indigent Care. Tax-exempt hospitals and other tax-exempt health care providers often treat large numbers of indigent patients who are unable to pay in full for their medical care. Typically, urban, inner-city hospitals and other health care providers may treat significant numbers of indigents. These hospitals and health care providers may be susceptible to economic and political changes that could increase the number of indigents or their responsibility for caring for this population. General economic conditions affect the number of employed individuals who have health coverage and the ability of patients to pay for their care. Similarly, changes in governmental policy, which may result in coverage exclusions under local, county, state and federal health care programs (including Medicare and Medicaid) may increase the frequency and severity of indigent treatment by such hospitals and other providers. It is also possible that future legislation could require that tax-exempt hospitals and other providers maintain minimum levels of indigent care as a condition to federal income tax exemption or exemption from certain state or local taxes.

State Oversight. The State Attorney General has review and approval jurisdiction over acquisitions of nonprofit organizations operating hospitals, including OCF and certain of the other Credit Group Members, to assure that the charitable assets of such hospitals are managed prudently, and certain aspects of nonprofit fundraising activities are subject to oversight and examination by the State Attorney General and the Louisiana Department of Revenue.

Challenges to Real Property Tax Exemptions. The real property tax exemptions afforded to certain nonprofit health care providers by state and local taxing authorities have been challenged on the grounds that the health care providers were not engaged in sufficient charitable activities. These challenges have been based on a variety of grounds, including allegations of aggressive billing and collection practices, excessive financial margins and operations that too closely resemble for-profit businesses. Several of these disputes have been determined in favor of the taxing authorities or have resulted in settlements. Management of OCF closely monitors any of these disputes, challenges and matters related to the tax exemption afforded to any material real property of the Credit Group. There can be no assurance that these types of challenges will not occur in the future. Neither the real property tax exemptions of OCF or of any other Credit Group Member are currently under review by state or local authorities.

Action by Purchasers of Hospital Services and Consumers. Major purchasers of hospital services and the services of other health care providers could take action to restrain charges or charge increases. As a result of increased public scrutiny, it is also possible that the pricing strategies of hospitals and other providers of health care services may be perceived negatively by consumers, and such providers may be forced to reduce fees for their services. Decreased utilization could result, and hospitals’ revenues and the revenues of other health care providers, may be negatively impacted. In addition, consumers and groups on behalf of consumers are increasing pressure for hospitals and other health care providers to be transparent and provide information about cost and quality of services

that may affect future consumer choices about where to receive health care services, which may lead to a loss of business as consumers and others make choices based upon any cost and quality data provided.

Future Nonprofit Legislation. Legislative proposals which could have an adverse effect on the Credit Group include: (i) any changes in the taxation of nonprofit corporations or in the scope of their exemption from income or property taxes; (ii) limitations on the amount or availability of tax-exempt financing for corporations recognized as tax-exempt under Section 501(c)(3) the Code; (iii) regulatory limitations affecting the Credit Group’s ability to undertake capital projects or develop new services; (iv) a requirement that nonprofit health care institutions pay real estate property tax and sales tax on the same basis as for-profit entities; (v) mandating certain levels of free or substantially reduced care that must be provided to low income uninsured and underinsured populations; and (vi) placing ceilings on executive compensation of nonprofit corporations.

Legislative bodies have considered proposed legislation on the charity care standards that nonprofit, charitable hospitals must meet to maintain their federal income tax-exempt status under the Code and legislation mandating nonprofit, charitable hospitals to have an open-door policy toward Medicare and Medicaid patients as well as to offer, in a non-discriminatory manner, qualified charity care and community benefits. Excise tax penalties on nonprofit, charitable hospitals that violate these charity care and community benefit requirements could be imposed or their tax-exempt status under the Code could be revoked. Due to the complexity of health reform generally, additional legislation is likely to be considered and enacted over time. The scope and effect of legislation, if any, which may be adopted at the federal or state level with respect to charity care of nonprofit hospitals cannot be predicted. The effect on the nonprofit health care sector or the Credit Group of any such legislation, if enacted, cannot be determined at this time.

The foregoing are some examples of the challenges and examinations facing nonprofit health care organizations. They are indicative of a greater scrutiny of the billing, collection and other business practices of these organizations and may indicate an increasingly difficult operating environment for health care organizations, including members of the Credit Group. The challenges and examinations, and any resulting legislation, regulations, judgments, or penalties, could have a material adverse effect on hospitals and health care providers, including members of the Credit Group, and, in turn, the ability of OCF to make payments under the Loan Agreement and of the Members of the Obligated Group to make payments under Obligation No. 17, and consequently, payment of debt service on the Bonds.

Federal Budget Matters

American Recovery and Reinvestment Act of 2009. In February 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”). See “BONDHOLDERS’ RISKS – Health Care Reform” below. ARRA includes several provisions that are intended to provide financial relief to the health care sector, including a requirement that states promptly reimburse health care providers, and a subsidy to the recently unemployed for health insurance premium costs. ARRA also established a framework for the implementation of a nationally-based health information technology program, including incentive payments that commenced in 2011 to eligible health care providers to encourage implementation of health information technology and electronic health records. For more information on this program, see “BONDHOLDERS’ RISKS –Regulatory Environment – The HITECH Act” below.

Federal Budget Cuts. The Budget Control Act of 2011 (the “BCA”) mandated significant reductions and spending caps on the federal budget for fiscal years 2013-2021. The BCA also created a Joint Select Committee on Deficit Reduction (the “Super Committee”) to develop a plan to further reduce the federal deficit by $1.5 trillion on or before November 23, 2011. The Super Committee failed to act within the time specified in the BCA and, as a result, the BCA mandated that a 2% reduction in Medicare spending, among other reductions, would be triggered to take effect on January 2, 2013.

The American Taxpayer Relief Act of 2012 (“ATRA”) postponed this scheduled reduction until March 1, 2013. CMS implemented the 2% reductions for all Medicare Parts A and B claims with dates-of-service or dates-of- discharge on or after April 1, 2013, and for all payments made to Medicare Advantage Organizations (“MAOs”), Part D plans and other programs (including Managed Care Organizations) with enrollment periods beginning on or after April 1, 2013. Additionally, ATRA affects hospital Medicare reimbursement in that it requires the Medicare

program to recoup funds from hospitals based on changes in documentation and coding that have increased Medicare inpatient prospective payment system (“IPPS”) payments but that do not represent real increases in the intensity of services provided to patients. In the final IPPS regulations for federal fiscal year 2014, CMS stated that it will phase in this recoupment over time, and implemented a 0.8% reduction in the Medicare standardized amount for 2014. The fiscal year 2015 IPPS final rule reduced standardized amounts by a second 0.8% installment, for a cumulative reduction of 1.6% for fiscal year 2015. The fiscal year 2016 IPPS final rule reduced standardized amounts by an additional 0.8% for a cumulative reduction of 2.4%. In the final 2017 IPPS rule for federal fiscal year 2017, CMS made a 1.5% recoupment adjustment for federal fiscal year 2017. The 21st Century Cures Act (Public Law No. 144-255) (the “Cures Act”), enacted on December 13, 2016, further reduces payments under the IPPS with additional documentation and coding adjustments.

In December 2013, the Bipartisan Budget Act of 2013 (“BBA 2013”) was enacted, which among other actions restructured Medicaid disproportionate share payments (“DSH payments”) reductions by eliminating the federal fiscal year 2014 reduction and adding the federal fiscal year 2015 reduction to that for federal fiscal year 2016, but increasing the overall level of reductions and extending cuts through fiscal year 2023. The Protecting Access to Medicare Act of 2014 further delayed the Medicaid DSH payment reductions until federal fiscal year 2017, but adjusted the level of such reductions and extended them through federal fiscal year 2024. The Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) further delays the DSH payment cuts until fiscal year 2018, while extending cuts through fiscal year 2025.

BBA 2013 extended the 2% reduction to Medicare providers and insurers at least through March 31, 2024, subject to additional Congressional action. Certain commercial Medicare Advantage plans are passing this reduction on to health care providers.

On November 2, 2015, President Obama signed into law the Bipartisan Budget Act of 2015 ( “BBA 2015”), increasing the discretionary spending caps imposed by the BCA for fiscal years 2016 and 2017 and authorizing $80 billion in increased spending over the two years. The BBA 2015 also extended the 2% reduction to Medicare providers and insurers for another year, to at least March 31, 2025, and suspended the limit on the federal government’s debt until March 2017.

It is possible that Congress will take action to eliminate some or all of the reductions in the future and any Congressional action could be made retroactive in order to eliminate some or all of the cuts even to the extent they were imposed. However, there is no certainty that Congress will take any action. Absent further Congressional action, these automatic spending cuts will become permanent. Because Congress may make changes to the budget in the future, it is impossible to predict the impact any spending cuts may have upon the Credit Group. Similarly, it is impossible to predict whether any automatic reductions to Medicare may be triggered in lieu of other spending cuts that may be proposed by Congress. If and to the extent Medicare and/or Medicaid spending is reduced under either scenario, this may have a material adverse effect upon the financial condition of the Credit Group. Ultimately, these reductions or alternatives could have a disproportionate impact on hospital providers and could have an adverse effect on the financial condition of the Credit Group, which could be material.

Debt Limit Increase. The federal government has through legislation created a debt “ceiling” or limit on the amount of debt that may be issued by the United States Treasury. In the past several years, political disputes have arisen within the federal government in connection with discussions concerning the authorization for an increase in the federal debt ceiling. Any failure by Congress to increase the federal debt limit may impact the federal government’s ability to incur additional debt, pay its existing debt instruments and to satisfy its obligations relating to the Medicare and Medicaid programs.

Management of OCF is unable to determine at this time what impact any future failure to increase the federal debt limit may have on the operations and financial condition of the Credit Group, although such impact may be material. Additionally, the market price or marketability of the Bonds in the secondary market may be materially adversely impacted by any failure of Congress to increase the federal debt limit.

Federal Legislative and Regulatory Initiatives

The discussion herein describes risks associated with certain existing federal and state laws, regulations, rules, and governmental administrative policies and determinations to which the Credit Group and any future members of the Credit Group and the health care industry are subject. While these are regularly subject to change, many of the existing provisions were enacted by or promulgated pursuant to the Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010 (collectively referred to as “ACA”), which were enacted in March 2010, to which opposition has been expressed by President Trump and his Secretary of the DHHS, Tom Price, as well as the majority leaders of each chamber of Congress and members of their caucuses. It is not possible to predict with any certainty whether or when the ACA or any specific provision or implementing measure will be repealed, withdrawn or modified in any significant respect, but a unified administration and majority in both chambers of Congress could enact legislation, withdraw, modify or promulgate rules, regulations and policies, or make determinations affecting the health care industry, OCF, the other Credit Group Members and any future Credit Group Members, any of which individually or collectively could have a material adverse effect on the operations, financial condition and financial performance of the Credit Group and any future Credit Group Members.

President Trump and certain Congressional leaders included a repeal of all or a portion of the ACA in early 2017 in statements concerning their respective legislative agendas, and Congress has already taken steps to repeal and replace the ACA. On January 20, 2017, President Trump issued an executive order directing members of his administration to facilitate the repeal and replacement of the ACA. The repeal effort, to date, has focused on individual and employer mandates, exchanges, insurance industry regulations, Medicaid expansion, and the taxes to pay for these elements of the ACA. On March 6, 2017, House Republicans unveiled a plan to repeal and replace the ACA that, among other things, eliminates the mandate for most Americans to maintain health insurance and encourages coverage through the use of tax credits on the open market, this plan was withdrawn from Congress in March 2017 due to a lack of votes to pass the legislation in the House, however, discussions regarding the ACA continue in Congress. The timing of an ultimate repeal of the ACA, and whether it would be a whole or partial repeal, is unclear. It is also unclear when or if a replacement plan would ultimately be implemented. A repeal or substantial modification of the ACA could result in additional pressure on Medicaid and Medicare funding and could have the effect of reducing the availability of health insurance to individuals who were previously insured, resulting in greater numbers of uninsured individuals, and could otherwise materially adversely affect the Credit Group and any future Credit Group Members.

On January 30, 2017, President Trump issued an executive order requiring federal agencies to remove two previously implemented regulations for every new regulation added. On February 24, 2017, President Trump issued an executive order directing each federal agency to set up a “regulatory reform task force” to review existing regulations and eliminate those which are costly or unnecessary. Based on these executive orders and the present political climate, there can be no assurances that any existing health care laws and regulations will remain in their current form. Further, there can be no assurances that any potential changes to the laws and regulations governing health care would not have a material adverse financial or operational impact on the Credit Group and any future Credit Group Members..

Further, President Trump has issued executive orders related to immigration. Any changes to laws related to visas and other immigration matters, and enforcement thereof, could impact health care providers that employ personnel who have employment-based or other visas. Finally, President Trump and the Congressional majority leaders and members of their caucuses have expressed opposition to the Dodd-Frank Wall Street Reform and Consumer Protection Act and have expressed support for “tax reform” measures that would make significant changes to the Internal Revenue Code of 1986 (the “Code”), including potential reduction of corporate and personal marginal federal income tax rates. A reduction in marginal federal income tax rates would reduce the relative value to investors of income excluded from gross income for federal income tax purposes, such as the interest on the Bonds, and thereby could adversely affect the market price and marketability of the Bonds.

Therefore, the following discussion should be read with the understanding that significant changes could occur in 2017 and beyond in many of the statutory and regulatory matters discussed.

Health Care Reform

Federal Health Care Reform. The constitutionality of the ACA has been challenged in courts around the country. In June 2012, the U.S. Supreme Court upheld most provisions of the ACA, including an “individual mandate” (which began in 2014, generally requiring individuals to have a certain amount of health insurance coverage or pay a penalty), while limiting the power of the federal government to penalize states for refusing to expand Medicaid. In June 2015, the U.S. Supreme Court in its decision in King v. Burwell upheld Treasury Regulation 26 C.F.R. § 1.36B-2(a)(1), issued under the ACA, stating that health insurance exchange purchasers can receive tax-credit subsidies, regardless of whether the purchase is made through a federal or state-operated exchange.

The content and implementation of the ACA has been, and remains, highly controversial. Efforts to repeal or substantially modify provisions of the ACA continue in Congress. The ultimate outcomes of legislative efforts to repeal, substantially amend, eliminate or reduce funding for the ACA are unknown and legal challenges to the ACA are unknown. In addition to the prospect for legislative repeal or revision, the President and members of his intended administration could seek to impose substantial changes upon the ACA through administrative action, including revised regulation and other Executive Branch action and inaction. The effect of any major legislative, judicial or administration modification, repeal or change of the ACA on the financial condition of the Credit Group cannot be predicted with certainty, but could be materially adverse.

The ACA addresses almost all aspects of hospital and provider operations and health care delivery, and has changed and is changing how health care services are covered, delivered and reimbursed. These changes have and are expected to continue to result in new payment models with the risk of lower health care provider reimbursement from Medicare, utilization changes, increased government enforcement and the necessity for health care providers to assess, and potentially alter, their business strategy and practices, among other consequences. While many providers have and are expected to receive reduced payments for care, millions of previously uninsured Americans have gained or are expected to gain health insurance coverage. State “health insurance exchanges” could fundamentally alter the health insurance market and negatively impact health care providers by e.g. enabling insurers to aggressively negotiate rates. Federal deficit reduction efforts will likely curb federal Medicare and Medicaid spending further to the detriment of hospitals, physicians and other health care providers.

As a result of the ACA, substantial changes have occurred and are anticipated to occur in the United States health care system. The ACA is impacting the delivery of health care services, the financing of health care costs, reimbursement of health care providers and the legal obligations of health insurers, providers, employers and consumers. Some of the provisions of the ACA took effect immediately or within a few months of final approval, while others were or will be phased in over time, ranging from one year to ten years. Because of the complexity of the ACA generally, additional legislation may be considered and enacted over time. The ACA has also required, and will continue to require, the promulgation of substantial regulations with significant effects on the health care industry and third party payors. Thus, the health care industry is the subject of significant new statutory and regulatory requirements and, consequently, to structural and operational changes and challenges for a substantial period of time. The full ramifications of the ACA may also become apparent only over time and through later regulatory and judicial interpretations. Portions of the ACA have already been limited and nullified as a result of legislative amendments and judicial interpretations, while others have been upheld after being challenged, and future actions and challenges may further change its impact. The uncertainties regarding the implementation of the ACA create unpredictability for the strategic and business planning efforts of health care providers, which in itself constitutes a risk.

The changes in the health care industry brought about by the ACA may have both positive and negative effects, directly and indirectly, on the nation’s hospitals and other health care providers, including the Credit Group. For example, the increase in the numbers of individuals with health care insurance occurring as a consequence of Medicaid expansion, creation of health insurance exchanges, subsidies for insurance purchase and the penalty on certain individuals who do not purchase insurance could continue to result in lower levels of bad debt and increased utilization or profitable shifts in utilization patterns for hospitals. However, the extent to which Medicaid expansion results in a shifting of significant numbers of commercially-insured individuals to Medicaid, or health insurance options on exchanges are limited or unaffordable, as well as the cost containment measures and pilot programs that the ACA requires, may offset these benefits. A negative impact to the hospital industry overall has resulted and will

likely continue from scheduled cumulative reductions in Medicare payments; such reductions are substantial. The ACA’s cost-cutting provisions to the Medicare program include reduction in Medicare market basket updates to hospital reimbursement rates under the IPPS, additional reductions to or elimination of Medicare reimbursement for certain patient readmissions and hospital-acquired conditions, as well as anticipated reductions in rates paid to Medicare managed care plans that may ultimately be passed on to providers. Industry experts also expect that government cost reduction actions may be followed by private insurers and payors. The reductions may have a material impact, and could offset any positive effects of the ACA.

Health care providers could be further subjected to decreased reimbursement as a result of implementation of recommendations of the Independent Payment Advisory Board (“IPAB”) established by the ACA. The IPAB is directed to determine whether the projected 5-year average growth in per capita Medicare program spending exceeds a specified target, and to make recommendations for cost reduction for implementation by DHHS. Those recommended reductions will be automatically implemented unless Congress adopts alternative legislation that meets equivalent savings targets. While hospitals are largely exempted from recommendations from the IPAB, industry experts also expect that government cost reduction actions may be followed by private insurers and payors. On June 22, 2016, the IPAB issued its determination that the Medicare per capita growth rate currently does not exceed the Medicare per capita target growth rate, which means there is no applicable savings target for implementation year 2018 (determination year 2016) and there will be no need for IPAB activity at least through 2017. The 2016 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds projects that the first IPAB determination that the Medicare per capita growth rate exceeds the per capita growth rate target will be in 2017.

Beginning in 2014, the ACA authorized the creation of state “health insurance exchanges” in which health insurance can be purchased by certain groups and segments of the population, expanded the availability of subsidies and tax credits for premium payments by some consumers and employers, and required that certain terms and conditions be included by commercial insurers in contracts with providers. Healthcare.gov, the health care exchange website created by the federal government under the provisions of the ACA, is designed to allow residents of states, which opted not to create their own state exchanges or to enter into a partnership with the federal government to purchase health insurance or qualify for Medicaid coverage.

In addition, the ACA imposed many new obligations on states related to health insurance. It is unclear how the increased federal oversight of state health care may affect future state oversight or affect the Credit Group. The health insurance exchanges may affect hospitals positively by increasing the availability of health insurance to individuals who were previously uninsured. Conversely, employers or individuals may shift their purchase of health insurance to new plans offered through the exchanges, which may or may not reimburse providers at rates equivalent to rates the providers currently receive. The exchanges could alter the health insurance markets in ways that cannot be predicted, and exchanges might, directly or indirectly, take on a rate-setting function that could negatively impact providers. Because the exchanges are still so new, the effects of these changes upon the financial condition of any third party payor that offers health insurance, rates paid by third-party payors to providers and, thus, the revenues of the Credit Group, and upon the operations, results of operations and financial condition of neither the Credit Group, taken as a whole, nor the Credit Group Members, can be predicted.

Additionally, the administration delayed the effective date of certain aspects of the ACA and in November 2015, BBA 2015 repealed a provision of the ACA that would require employers that offer one or more health benefit plans and have more than 200 full-time employees to automatically enroll new full-time employees in a health plan. Similarly, delaying the ACA adjusted community rating provisions for grandfathered small group plans temporarily stabilizes renewal rates for many small employers with young, healthy employees in many markets. When this delay expires, many of these small employers are expected to receive significant rate increases as they are moved toward an average “community” rate.

High deductible insurance plans have become more common in recent years, and the ACA has encouraged an increase in high deductible insurance plans as the health care exchanges include a variety of plans, several of which offer lower monthly premiums in return for higher deductibles. Many plans offered on the exchanges have high deductibles. High deductible plans may contribute to lower inpatient volumes as patients may forgo or choose less expensive medical treatment to avoid having to pay the costs of the high deductibles. There is also a potential concern that some patients with high deductible plans will not be able to pay their medical bills as they may not be

able to cover their high deductible. This factor may increase bad debt expense for hospitals and other health care providers.

The ACA will likely affect some health care organizations differently from others, depending, in part, on how each organization adapts to the legislation’s emphasis on directing more federal health care dollars to integrated provider organizations and providers with demonstrable achievements in quality care. Commencing October 1, 2012, the ACA established a value-based purchasing system for hospitals under the Medicare program, which was designed to provide incentive payments to hospital that are contingent on satisfaction of specified performance measures related to common and high-cost medical conditions, such as cardiac, surgical and pneumonia care. The ACA establishes the Medicare Savings Program (“MSSP”) and also establishes a mechanism by which the government develops and tests various demonstration programs and pilot projects and other voluntary and mandatory programs to evaluate and encourage new provider delivery models and payment structures, including “accountable care organizations” (“ACOs”) and bundled provider payments. The outcomes of these demonstration projects and programs, including their effect on payments to providers and financial performance, cannot be predicted.

On January 26, 2015, DHHS announced a timetable for transitioning Medicare payments from the traditional fee-for-service model to a value-based payment system. This schedule calls for tying 30% of traditional Medicare fee-for-service payments to quality or value through alternative payment models, such as ACOs or bundled payment arrangements, by the end of 2016, increasing to 50% by 2018. In addition, DHHS set a goal of tying 85% of all traditional Medicare fee-for-service payments to quality or value by 2016, increasing to 90% by 2018. By the end of 2014, approximately 20% of Medicare’s payments were made through alternative payment models, up from almost none in 2011. HHS announced in March 2016 that it had already met its 30 percent alternative payment arrangements goal. CMS has also implemented a mandatory bundled payment demonstration for certain joint replacement procedures in selected urban areas. Proposed rulemaking for additional mandatory bundled payment models was announced in July 2016 for three additional clinical conditions. Private insurers are also developing bundled payment programs. While bundled payments offer opportunities to provide better coordinated care and to save costs, they also entail financial risk if the episode is not well managed. This transition of Medicare payment from volume to quality and value will place increasing risk on providers and could have a significant negative impact upon the economic performance of the Credit Group. The outcomes of these projects and programs, including the likelihood of being made permanent or expanded or their effect on health care organizations’ revenues or financial performance, cannot be predicted.

The ACA contains amendments to existing criminal, civil and administrative anti-fraud statutes and increases in funding for enforcement and efforts to recoup prior federal health care payments to providers. Under the ACA, a broad range of providers, suppliers and physicians are required to adopt a compliance and ethics program. While the government has already increased its enforcement efforts, failure to implement certain core compliance program features provide new opportunities for regulatory and enforcement scrutiny, as well as potential liability if an organization fails to prevent or identify improper federal health care program claims and payments. See “BONDHOLDERS’ RISKS – Regulatory Environment” below.

The ACA is projected to expand access to Medicaid and the scope of services covered thereunder. With respect to access, Medicaid is expected to cover all individuals with incomes of less than 133% of the federal poverty level. The ACA currently gives states the option to expand Medicaid eligibility to non-elderly, non- pregnant individuals who are not otherwise eligible for Medicare, if they have incomes of less than 133% of the federal poverty level. To assist states with the cost of covering such newly eligible individuals, the federal government agreed to pay 100% of the new cost for a limited number of years. Thereafter, the cost share is expected to decrease to 90% by 2020, which decrease will occur in phases. In the event a state chooses not to participate in the expanded Medicaid program, the net effect of the reforms in the ACA could be significantly reduced. Additionally, Medicaid reimbursement rates differ by state and the effect of expanded Medicaid enrollment must be determined on a state-by-state basis. The State of Louisiana has chosen to expand Medicaid. See “BONDHOLDERS’ RISKS – Health Care Reform – Medicaid Expansion and State Health Care Reform” below.

The ACA establishes criteria for Qualified Health Plans (“QHPs”) that may participate in the state run exchanges. A QHP must meet certain minimum essential coverage requirements. Minimum essential coverage

requirements may be offered at one of four levels of coverage: bronze, silver, gold or platinum. Each QHP must agree to offer at least one plan at the silver or gold level. The ACA sets forth the minimum coverage offered under each plan level and limits the variations in premiums that may be charged for exchange coverage on the basis of age and tobacco use. A QHP must also be certified by each exchange through which the plan is offered, must be licensed in each state where it offers insurance, and the QHP must limit cost sharing with the insured. Under the ACA, individuals with family income under 400% of the Federal Poverty Level are eligible for subsidized premiums, deductibles and co-pays for coverage purchased on the exchange. Initially, only individuals and small employers will be able to access coverage through the exchanges. By 2017, large employers will also be able to use the exchanges to provide employer-based coverage to their employees. Although existing health insurance plans may continue to offer coverage in the individual and employer group markets, coverage will not satisfy an individual’s mandate unless the plan meets the ACA’s qualified health plan requirements.

At this time, it is not possible to project what effect the exchanges will have on competition in the insurance markets, the cost of coverage for employers, reimbursement rates for hospitals and physicians or the number of uninsured patients that the Obligated Group will still need to treat. Several large health insurers, including Aetna, United, Blue Cross Blue Shield, and Humana, have pulled some of their products out of certain exchanges citing larger than expected losses on those insurance products. This is largely due to sicker and costlier patients than anticipated. In addition, of the 23 health insurance cooperatives that were operational at the start of the ACA’s first open enrollment period in the fall of 2013, only 11 were still operational as of September 2016. The co- op failures are also due to sicker and costlier patients as well as benefits that were too generous and premiums that were too low. DHHS issued new regulations in May of 2016 to help the remaining co-ops maintain financial viability. CMS proposed additional new regulations on February 17, 2017 to attract health insurance issuers back to the exchanges and stabilize the individual and small group markets. However, it is unclear whether the new regulations will provide the financial stability needed.

With respect to charity care, the ACA contains many features from previous tax exempt reform proposals, including a set of sweeping changes applicable to charitable hospitals exempt under Section 501(c)(3) of the Code. The ACA: (i) imposes new eligibility requirements for 501(c)(3) hospitals, coupled with an excise tax for failures to meet certain of those requirements; (ii) requires mandatory IRS review of the hospitals’ entitlement to exemption; (iii) sets forth new reporting requirements, including information related to community health needs assessments and audited financial statements; (iv) requires hospitals to adopt and publicize a financial assistance policy, limit charges to patients who qualify for financial assistance to the lowest amount charged to insured patients, and control the billing and collection processes; and (v) imposes further reporting requirements on the Secretary of the Treasury regarding charity care levels. Failure to satisfy these conditions may result in the imposition of fines and the loss of tax-exempt status.

Medicaid Expansion and State Health Care Reform. Medicaid Expansion and State Health Care Reform. Effective December 10, 2014, Article 7 of the Louisiana Constitution was amended to provide the State Legislature with authority to levy assessments on eligible hospitals based upon an approved funding formula. Subject to federal requirements, assessment funds derived from such hospitals would qualify for federal matching funds and therefore enable the State to provide enhanced Medicaid reimbursement for inpatient and outpatient services. Assessment funds would be protected against being diverted for any other use by the Governor or the Legislature, and from the Governor’s ability to make targeted cuts to hospitals. Reimbursement rates could be decreased only to address a State budget deficit and only by a vote of two-thirds of the State Legislature. However, such rate reductions would be limited to not more than average reductions experienced by other types of Medicaid providers.

Further, on April 5, 2016, the Louisiana House of Representatives introduced Concurrent Resolution 51 (“HCR 51”) to provide for a hospital stabilization formula, which would include a tax (or “assessment”) on hospitals for purposes of funding a portion of the State's costs in expanding Medicaid. HCR 51 provides that the total assessment for each State Fiscal Year would be equal to the lesser of: 1) the State's portion of the cost of Medicaid expansion; or 2) one percent of the total net patient revenue of all hospitals included in the assessment, as reported in Medicare cost reports ending in State Fiscal Year 2015. The Louisiana Department of Health would further be required to allocate the assessments to certain or all hospitals on a pro rata basis, with assessments being collected on a quarterly basis. However, HCR 51 also provides that effective January 1, 2017, hospitals would receive enhanced reimbursement for Medicaid services by requiring the Louisiana Department of Health to revert to historically higher Medicaid rates. The Louisiana Department of Health received needed CMS approval of the

assessment and the reimbursement enhancement as of April 6, 2017. Thus, HCR 51 has not yet been implemented and the outcome of this resolution is uncertain at this time.

On January 12, 2016, Louisiana Governor John Bel Edwards issued Executive Order No. JBE 16-01, which indicates that forgoing Medicaid expansion under ACA has cost the State of Louisiana over $3 billion in lost funds, and that with Medicaid expansion, the State of Louisiana could realize State General Fund savings of nearly $100 million through State Fiscal Year 2020. The Executive Order further directed the Louisiana Department of Health to adopt any administrative rules necessary to implement Medicaid expansion no later than July 1, 2016. The Louisiana Department of Health is implementing Medicaid expansion, and over 400,000 adults have enrolled in Medicaid expansion as of April 10, 2017.

Management of the Credit Group cannot predict whether Medicaid Expansion or HCR 51 will have a fiscal impact on the revenues or operations of the Credit Group.

Other Medicaid Initiatives-Healthy Louisiana. In 2012, the Louisiana Department of Health (the State agency responsible for administering the Medicaid program) launched a complete overhaul of its legacy Medicaid system for delivery of acute care services, which resulted in the State’s first managed care system for approximately one million Medicaid enrollees. Known as “Healthy Louisiana,” this delivery system has been adopted statewide, and care for enrollees is coordinated by one of five private, managed care health plans. Initially, Healthy Louisiana consisted of two models – prepaid and shared savings. The prepaid model involves traditional, risk-bearing managed care, pursuant to which the health plan receives a monthly capitated fee for each member enrolled to provide core benefits and services. By contrast, the shared savings model contemplates that in addition to monthly fees for enrolled members, the health plan also has the opportunity to share in savings to the State that result from improved coordination of care. However, as of February 1, 2015, the State abandoned the shared savings model and transitioned solely to the more traditional, prepaid, risk-bearing model. Health plans participating in Healthy Louisiana typically use discounts and other economic incentives to manage the cost and utilization of health care services. It is not possible to predict the impact of the implementation of Healthy Louisiana on the revenues or operations of the Credit Group.

Louisiana Medicaid Expenditures. The total annual expenditure for the Louisiana Medicaid program is limited by the State legislature in the general appropriations bills. The amount and availability of funds needed to pay for services provided to Medicaid beneficiaries also hinges on, among other things, the Federal Matching Assistance Percentage (“FMAP”). The FMAP establishes the amount of federal matching dollars that are contributed to State Medicaid expenditures. If the State appropriates insufficient funds to the Medicaid program, this creates risk that payments for Medicaid services will be withheld, reduced, or delayed. Further, the FMAP is subject to change on an annual basis. For example, for State Fiscal Years 2015-2017, although the FMAP remained at approximately the same level as compared to the prior year, the State faces a budget shortfall of approximately $440 million for the next State Fiscal Year, as well as a $1.4 billion fiscal cliff for the following State Fiscal Year if temporary taxes expire. These budget issues may cause State funding for Medicaid and other programs to fall short. Such budget shortfalls or FMAP changes could lead to reductions in reimbursement to providers, including the Credit Group. It is not possible to predict the impact of such changes on the revenues or operations of the Credit Group.

Patient Service Revenues

Net patient revenues realized by the Credit Group are derived from a variety of sources and vary among the individual facilities owned and operated by the Credit Group. Certain facilities and regions may realize substantially more revenues from private payment programs, such as managed care organizations, than do others.

A substantial portion of the net patient service revenues of the Credit Group is derived from third-party payors which pay for the services provided to patients covered by third parties for services. These third-party payors include the federal Medicare program, state Medicaid programs and private health plans and insurers, including health maintenance organizations and preferred provider organizations. Many of those programs make payments to the Credit Group in amounts that may not reflect the direct and indirect costs of the Credit Group of providing services to patients.

The financial performance of the Credit Group has been and could in the future be adversely affected by the financial position or the insolvency or bankruptcy of or other delay in receipt of payments from third-party payors that provide coverage for services to their patients.

Health care providers have been and continue to be affected significantly by changes made in the last several years in federal and state healthcare laws and regulations, particularly those pertaining to Medicare and Medicaid. The purpose of much of this statutory and regulatory activity has been to reduce the rate of increase in healthcare costs, particularly costs paid under the Medicare and Medicaid programs.

The Medicare Program. Medicare is a federal health insurance system under which physicians, hospitals and other health care providers or suppliers are reimbursed or paid directly for services provided to eligible elderly persons, disabled persons and persons with end-stage renal disease. Medicare is administered by CMS. CMS delegates to the states the process for certifying hospitals to which CMS will make payment. In order to achieve and maintain Medicare certification, certain health care providers, including hospitals, must meet CMS’s “Conditions of Participation” on an ongoing basis, as determined by the state in which the provider is located and/or ongoing compliance with standards of a chosen accreditation program, such as The Joint Commission or other officially sanctioned accrediting organization. The requirements for Medicare certification are subject to change, and, therefore, it may be necessary for hospitals to effect changes from time to time in their facilities, equipment, operations, personnel, billing, policies and services. The Cures Act is intended to create broadened patient access to care, involving patients in new research, and leveraging technology to create efficiencies. The Cures Act will support efforts to improve telehealth services in Medicare and is intended to improve the process for determining which Medicare treatments are covered, potentially leading to increased access to treatments for Medicare beneficiaries. In addition to numerous provisions related to research and clinical trials, the Cures Act includes a number of changes to the Medicare program, which are described herein.

The Credit Group depends significantly on Medicare as a source of revenue. For the fiscal years ended December 31, 2015 and 2016, Medicare payments (not including Medicare managed care payments) represented approximately 22% and 21%, respectively of the System’s (defined in APPENDIX A) gross patient service revenue. For the fiscal years ended December 31, 2015 and 2016, Medicare managed care payments represented approximately 23% and 24%, respectively of the System’s gross patient service revenue. See APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – HISTORICAL FINANCIAL INFORMATION – Sources of Patient Revenue.” Because of this dependence, changes in the Medicare program may have a material effect on the Credit Group.

As the U.S. population ages, more people will become eligible for the Medicare program. Current projections indicate that demographic changes and continuation of current cost trends will exert significant and negative forces on the overall federal budget, including the ability of the federal government to continue to fund the Medicare program and changes to the way the federal government reimburses hospitals for services. The Medicare program reimburses hospitals based on a fixed schedule of rates based on categories of treatments or conditions. These rates change over time and there is no assurance that these rates will cover the actual costs of providing services to Medicare patients. Further, it is anticipated there will be reductions in rates paid to Medicare managed care plans that may ultimately be passed on to providers. The ACA institutes multiple mechanisms for reducing the costs of the Medicare program and thus reimbursements paid to hospitals, including the following:

Market Basket Reductions. Generally, Medicare payment rates to hospitals for inpatient hospital services are adjusted annually based on a “market basket” of estimated cost increases, which market basket adjustments for inpatient hospital care have averaged approximately 2-4% annually in recent years. The ACA required automatic 0.25% reductions in the “market basket” for federal fiscal years 2010 and 2011, and calls for reductions in the annual “market basket” update amount ranging from 0.10% to 0.75 % each year through federal fiscal year 2019.

Market Productivity Adjustments. Beginning in federal fiscal year 2012 and thereafter, the ACA provides for “market basket” adjustments based on overall national economic productivity statistics calculated by the Bureau of Labor Statistics. This adjustment is anticipated to result in an approximately 1% additional annual reduction to the “market basket” update. The federal fiscal year 2017 productivity adjustment for inpatient reimbursement is -0.3%. The reductions in market basket updates and the

productivity adjustments have had, and will continue to have, a disproportionately negative effect upon those providers that are relatively more dependent upon Medicare than other providers. The combination of reductions to the market basket updates and the imposition of the productivity adjustments may result in reductions in Medicare payments per discharge on a year-to-year basis.

Value-Based Purchasing. Medicare inpatient payments to hospitals participating in the CMS Hospital Value-Based Purchasing Program are made in a fiscal year to hospitals that meet certain performance standards during that fiscal year. The program is funded through a pool of money collected from participating hospital providers, as a result of the reduction of hospital inpatient care payments to these hospitals by a certain percentage each year (e.g., 2% for federal fiscal year 2017). In each federal fiscal year, the total amount collected from these reductions is pooled and used to fund value-based incentive payments to reward participating hospitals that meet or exceed certain quality performance standards established by DHHS, so the reduction of payments to a particular hospital may or may not be offset by these incentive payments.

Hospital Acquired Conditions Penalty. Under the CMS Hospital-Acquired Condition Reduction Program, Medicare inpatient payments to hospitals that are in the top quartile nationally for frequency of certain “hospital-acquired conditions” identified by CMS will be reduced by 1% of what would otherwise be payable to each hospital for the applicable federal fiscal year.

Readmission Rate Penalty. The Hospital Readmissions Reduction Program requires CMS to reduce payments to certain hospitals with excess readmissions. Medicare inpatient payments to those hospitals with excess readmissions compared to the national average for certain patient conditions (e.g., acute myocardial infarction, pneumonia and heart failure) are reduced based on the dollar value of that hospital’s percentage of excess preventable Medicare readmissions within 30 days of discharge. The current maximum penalty is 3%. CMS recently expanded the list of conditions subject to the readmission rate penalty. The Cures Act adjusted the hospital readmission reduction program to take into account the socioeconomic status of patients (specifically, the proportion of patients a hospital serves that are eligible for both Medicare and Medicaid). See below for further information on the Cures Act.

Medicare Disproportionate Share Payments. The ACA provided that, beginning in federal fiscal year 2014, hospitals receiving supplemental Disproportionate Share (“DSH”) payments from Medicare (i.e., those hospitals that care for a disproportionate share of low-income Medicare beneficiaries) were slated to have their DSH payments reduced significantly. This reduction potentially will be offset by new, additional payments based on the volume of uninsured and uncompensated care provided by each such hospital, and is anticipated to be offset by a higher proportion of covered patients as other provisions of the ACA go into effect.

On September 13, 2013, CMS issued a final rule confirming its methodology, which accounted for statewide reductions in uninsured and uncompensated care, and reduced Medicaid DSH allotments to each state. Under this final rule, the federal share of Medicaid DSH payments was reduced by $500 million in fiscal year 2014 and $600 million in fiscal year 2015 (and additional amounts through 2020). However, BBA 2013 delayed the fiscal year 2014 cuts until fiscal year 2016, but increased the overall level of reductions and extended cuts through fiscal year 2023. The Protecting Access to Medicare Act of 2014 further delayed the Medicaid DSH payment reductions until federal fiscal year 2017, but increased the level of such reductions and extended them through federal fiscal year 2024. MACRA further delays the DSH payment cuts until fiscal year 2018, while extending cuts through fiscal year 2025. There can be no assurance that DSH funding will not be further decreased beyond projected reductions or eliminated entirely. See “BONDHOLDERS’ RISKS – Patient Service Revenues – Disproportionate Share Payments” below.

Medicare Advantage. Hospitals also receive payments from health plans under the Medicare Advantage program. The ACA includes significant changes to federal payments to Medicare Advantage plans resulting in a transition to benchmark payments tied to the level of fee-for-service spending in the applicable county. Decreased federal payments to the Medicare Advantage plans could in turn affect the scope of coverage of these plans or cause plan sponsors to negotiate lower payments to providers.

Electronic Health Information Systems Medicare Incentive Payments and Payment Reductions. Components of ARRA provide for Medicare incentive payments, which began in 2011, to hospital providers meeting designated deadlines for the installation and use of electronic health information systems. For those hospital providers failing to meet the applicable deadlines, Medicare payments will be significantly reduced. See “BONDHOLDERS’ RISKS – Regulatory Environment – The HITECH Act” below.

ATRA Impact on Medicare Reimbursement. In addition to components of the ACA described herein, ATRA, also negatively affected hospital Medicare reimbursement. Specifically, ATRA requires CMS to recover $11 billion by federal fiscal year 2017 to fully recoup documentation and coding overpayments. For federal fiscal years 2014, 2015, and 2016, CMS implemented a series of cumulative - 0.8 percent adjustments, which were to help offset the $30 billion cost of deferring a 27% reduction in Medicare physician payments that would otherwise have gone into effect as well as the cost of extending for one year several CMS payment policies that would otherwise have expired. For federal fiscal year 2017, CMS calculates that $5.05 billion of the $11 billion requirement remains to be addressed. Therefore, in August 2016, CMS finalized a 1.5 percent inpatient rate reduction to complete the statutorily-specified recoupment.

Hospital Inpatient Reimbursement. Hospitals are generally paid for inpatient services provided to Medicare beneficiaries based on established categories of treatments or conditions known as diagnosis related groups (“DRGs”). The actual cost of care, including capital costs, may be more or less than the DRG rate. DRG rates are subject to adjustment by CMS, including reductions mandated by the ACA and the BCA and are subject to federal budget considerations. There is no guarantee that DRG rates, as they change from time to time, will cover actual costs of providing services to Medicare patients. For information regarding the impact of the ACA on payments to hospitals for inpatient services, see “BONDHOLDERS’ RISKS – Patient Service Revenues – The Medicare Program – Market Basket Reductions” above.

Effective October 1, 2013, CMS adopted a policy known as the Inpatient Hospital Prepayment Review “Probe & Educate” review process or the “Two-Midnight” rule. The “Two-Midnight” policy specifies that hospital stays spanning two or more midnights after the beneficiary is properly and formally admitted as an inpatient will be presumed to be “reasonable and necessary” for purposes of inpatient reimbursement. CMS adopted the policy due to growing concern with the overuse of the “observation status” at hospitals; CMS found that Medicare beneficiaries were spending extended periods of time in observation units without being admitted as inpatients. With some exceptions, stays not expected to extend past two midnights should not be admitted and instead be billed as outpatient. In April 2015, CMS announced it would delay enforcement of the “Two-Midnight” rule until September 30, 2015 and in August 2015, CMS announced it would again delay enforcement of the “Two-Midnight” rule until the end of 2015. Effective October 1, 2015, responsibility for enforcement of the “Two-Midnight” rule shifted from Medicare administrative contractors to quality improvement organizations (“QIO”), and recovery audit contractors will only conduct reviews for providers that have been referred by the related QIO. The Outpatient PPS Final Rule, issued in November 2015 and effective January 1, 2016, revised the Two-Midnight rule to allow an exception for Medicare Part A payment on a case-by-case basis for inpatient admissions that do not satisfy the two-midnight benchmark if documentation in the medical records supports that the patient required inpatient care. The “Two- Midnight” rule has had and will likely continue to have an adverse financial impact for hospitals. The CMS has announced that it will not continue to impose an inpatient payment cut to hospitals under the “Two-Midnight” rule starting in 2017 following ongoing industry criticism and a legal challenge. In the 2017 Medicare IPPS final rule released on August 2, 2016, CMS prospectively removed the inpatient payment cuts under the “Two Midnight” rule for fiscal year 2017 and onward and provided a temporary increase of approximately 0.8% payment in fiscal year 2017 to help offset the fiscal year 2014-2016 cuts under the “Two-Midnight” rule. The “Two-Midnight” rule has had an adverse financial impact for hospitals. In December 2016, the DHHS Office of Inspector General (the “OIG”) issued a report concluding that “vulnerabilities remain” under the CMS “Two-Midnight” rule and that CMS needs to improve oversight of hospital billing under this policy. Therefore, CMS may be increasing scrutiny of short inpatient stays in the near future.

Hospital Outpatient Reimbursement. Hospitals are generally paid for outpatient services provided to Medicare beneficiaries under “Outpatient PPS,” which is based upon established categories of treatments or conditions known as ambulatory payment classifications (“APCs”). The payment rate established for each APC is

based upon national median hospital costs (including operating and capital costs) adjusted for variations in labor costs across geographic areas. The actual cost of care, including capital costs, may be more or less than the reimbursements. CMS makes additional payment adjustments including: (i) outlier payments for services where the hospital’s costs exceed a threshold amount determined by CMS for that service and (ii) transitional pass-through payments for certain drugs and medical devices. Some hospital outpatient services (such as physical, speech and occupational therapy) are paid on the basis of the Medicare Physician Fee Schedule, instead of APCs. The ACA provides for a reduction to the market basket used to determine annual Outpatient PPS increases by an adjustment factor for 2010 through 2019 and by a productivity adjustment for 2012 and subsequent years. Application of the productivity adjustment can result in a market basket increase of less than zero, such that payments in a current year may be less than the prior year. There is no guarantee that APC rates, as they change from time to time, will cover actual costs of providing services to Medicare patients. Additionally, Congress or regulators in the future may impose additional limits or cutbacks in such payments or modify the method of calculating such payments.

Off-Campus Hospital Outpatient Departments. Effective January 1, 2016, the calendar year 2015 Outpatient Prospective Payment System Final Rule requires hospitals to use new modifiers for services provided to Medicare beneficiaries at off-campus hospital outpatient departments. The stated purpose of the new modifiers is to permit CMS to obtain information regarding the effect of the trend of the conversion of physician offices to off- campus hospital outpatient departments. A potential result of this information could be a future reduction in reimbursement for certain services provided at certain types of off-campus hospital outpatient departments. In any event, failure to use the modifiers correctly could jeopardize the provider-based status of associated off-campus locations. In addition, BBA 2015 created “site neutral” reimbursement for services to Medicare beneficiaries at certain off-campus locations beginning January 1, 2017 unless such location was billing as a hospital outpatient department before November 2, 2015. Services subject to the change will not be reimbursed under Medicare’s hospital outpatient prospective payment system (“OPPS”), but rather will be reimbursed under alternative payment systems (for example, at ambulatory surgery center rates).

CMS published the final rule implementing the site neutral provisions of BBA 2015 on November 14, 2016. Under the final rule, hospitals will have very limited ability to replace or expand their existing off-campus hospital outpatient departments or to expand the scope of services provided in such facilities. CMS is soliciting comments on this new payment methodology and may make adjustments to the same. However, CMS anticipates retaining this methodology through at least 2018, at which time a long-term payment approach may be adopted, which could result in further reductions to payment rates. It is unclear what the financial impact of the site neutral payment provisions will be.

The Cures Act, enacted in December 2016, expands the categories of projects that would be exempt from the decrease in OPPS reimbursement payments. They include: (i) off-campus outpatient department if the host hospital had submitted a voluntary provider-based attestation to CMS before December 2, 2015, as long as the construction of the new off-campus outpatient department is complete and the hospital is accepting or poised to accept patients; (ii) off-campus outpatient department locations providing services on or after January 1, 2018, that had a “binding written agreement with an outside unrelated party for the actual construction” of the new off-campus outpatient department before November 2, 2015, as long as the host hospital made certain attestations and certifications to CMS within 60 days of the enactment of the Cures Act and adds the department to the host hospital’s Medicare enrollment form; and (iii) off-campus outpatient departments of certain cancer hospitals that file provider-based attestations within 60 days of the date of enactment of the Cures Act (for departments meeting provider-based requirements between November 2, 2015 and the date of enactment) or within 60 days of the date of meeting provider-based requirements

Other Medicare Service Payments. Medicare payment for skilled nursing services, psychiatric services, inpatient rehabilitation services, general outpatient services and home health services are based on regulatory formulas or predetermined rates. There is no guarantee that these rates, as they may change from time to time, will be adequate to cover the actual cost of providing these services to Medicare patients.

Reimbursement of Hospital Capital Costs. Hospital capital costs apportioned to Medicare patient use (including depreciation and interest) are paid by Medicare on the basis of a standard federal rate (based upon average national costs of capital), subject to limited adjustments specific to the hospital. There can be no assurance

that future capital-related payments will be sufficient to cover the actual capital-related costs of the Credit Group’s facilities applicable to Medicare patient stays or will provide flexibility for hospitals to meet changing capital needs.

Medical Education Payments. Medicare currently pays for a portion of the costs of medical education at hospitals that have teaching programs. These payments are vulnerable to reduction or elimination. The direct and indirect medical education reimbursement programs have repeatedly emerged as targets in the legislative efforts to reduce the federal budget deficit. Legislation has capped the number of residents recognized by Medicare for reimbursement purposes and has limited reimbursement for both direct and indirect medical education costs. The DHHS 2017 budget proposes to reduce Medicare indirect medical education payments by 10%.

Medicare Bad Debt Reimbursement. Under Medicare, the costs attributable to the deductible and coinsurance amounts which remain unpaid by the Medicare beneficiary can be added to the Medicare share of allowable costs as cost reports are filed. Hospitals generally receive interim pass-through payments during the cost report year which were determined by the Medicare Administrative Contractor (“MAC”) from the prior cost report filing. Bad debts must meet the following criteria to be allowable:

• the debt must be related to covered services and derived from deductible and coinsurance amounts;

• the provider must be able to establish that reasonable collection efforts were made;

• the debt was actually uncollectible when claimed as worthless; and

• sound business judgment established that there was no likelihood of recovery at any time in the future.

The amounts uncollectible from specific beneficiaries are to be charged off as bad debts in the accounting period in which the accounts are deemed to be uncollectible. In some cases, an amount previously written off as a bad debt and allocated to the program may be recovered in a subsequent accounting period. In these cases, the recoveries must be used to reduce the cost of beneficiary services for the period in which the collection is made. In determining reasonable costs for hospitals, the amount of bad debts otherwise treated as allowable costs is reduced by 35%. Amounts incurred by a hospital as reimbursement for bad debts are subject to audit and recoupment by the MAC. Bad debt reimbursement has been a focus of MAC audit/recoupment efforts in the past.

Medicare Physician Payments. The sustainable growth rate (“SGR”) formula, a limit on the growth of Medicare payments for physician services, was enacted in 1997 and linked to changes in the U.S. Gross Domestic Product over a ten-year period. Each year since 2003, Congress provided temporary relief from scheduled “negative” updates that would have reduced physician payments. In April of 2015, Congress passed and President Obama signed the so-called “doc fix” in the form of MACRA. This law replaces the SGR formula with statutorily prescribed physician payment updates and provisions. As a result, payments under the Medicare Physician Fee Schedule for services furnished on or after April 1, 2015 were not cut by 21%. Instead, payment rates will increase annually by 0.5% through 2019. Thereafter, payment rates will be frozen at 2019 levels through 2025. In addition to the base payment methodology, physicians can earn merit-based payments based on factors including compliance with meaningful use of electronic health records requirements and demonstration of quality-based medicine. Generally, physicians will choose whether to participate in Alternative Payment Models or have their performance measured under the Merit-based Incentive Payment System. Payments to physicians and other practitioners will be adjusted depending on which pathway is chosen, and based on performance within each pathway. A substantial amount of payments will be linked to that performance: Poorly performing practitioners will have Medicare payments reduced; while those who perform well against prescribed measures could have payment increased. These changes will influence physician referral and utilization behaviors, which could affect utilization of hospital services. While the immediate payment cuts associated with the SGR formula have been eliminated, there is uncertainty regarding the impact of the Merit-based and Alternative Payment Models and it is possible that future legislative action will be taken that would once again trigger physician payment reductions. Ultimately, it remains unclear what effect this legislation will have on the Credit Group.

The Medicaid Program

Medicaid is a health insurance program for certain low-income and needy individuals and their dependents 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 rates for services; and administers its own programs. Each state must submit its Medicaid plan to CMS for review to determine if it meets the federal requirements. If it does not meet the federal requirements, a state can lose its federal funding for the program.

Under the Medicaid program, the federal government supplements funds provided by the various states for medical assistance. Payment for medical and health services is made to providers in amounts determined in accordance with procedures and standards established by state law under federal guidelines. States may reimburse the costs of hospital services for Medicaid beneficiaries and the uninsured as part of the Medicaid DSH program. The Credit Group receives substantial Medicaid reimbursements including supplemental reimbursements in the Medicaid DSH program. Fiscal considerations of both federal and state governments in establishing their budgets will directly affect the funds available to the Credit Group and other providers for payment of services rendered to Medicaid beneficiaries and reimbursement of costs for hospital services to the uninsured. The current State budget shortfall for the next State Fiscal Year is approximately $440 million, which could result in cuts to the Louisiana Department of Health budget of more than $200 million. OCF is unable to predict the effect of federal or State budget shortfalls on the revenues and operations of the Credit Group.

The ACA makes changes to Medicaid funding and substantially increases the potential number of Medicaid beneficiaries. To fund this expansion, the ACA provides that the federal government will fund 100% of the costs of this expansion from fiscal years 2014 – 2016, decreasing to 90% of the costs of this expansion in fiscal year 2020 and thereafter. In June 2012, the U.S. Supreme Court held that the federal government cannot withhold existing federal funds for states that refuse to expand Medicaid as required by the ACA. The State of Louisiana chose to expand Medicaid under the ACA in January 2016, and more than 400,000 people have enrolled since July 1, 2016. See “BONDHOLDERS’ RISKS – Health Care Reform – Medicaid Expansion and State Health Care Reform” above. While management of the Credit Group cannot predict the effect of these changes to the Medicaid program on operations, results from operations or financial condition of the Credit Group, historically Medicaid has reimbursed at rates below the cost of care. Therefore, increases in the overall proportion of Medicaid patients poses a financial risk to the Credit Group. It is uncertain to what extent this risk may be mitigated if the increased Medicaid utilization replaces previously uncompensated patients. Certain outcomes, such as Medicaid payment cuts, could put providers at greater financial risk.

For the fiscal years ended December 31, 2015 and 2016, the System received approximately 12% and 14%, respectively, of gross patient service revenues from state Medicaid programs. See APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – HISTORICAL FINANCIAL INFORMATION – Sources of Patient Revenue.” The growth in Medicaid expenditures in recent years has been augmented by the addition of the State’s Children’s Health Insurance Program, which provides Medicaid coverage for certain children above the poverty line. See “BONDHOLDERS’ RISKS – Patient Service Revenues – State Children’s Health Insurance Program” below for further information.

See also “BONDHOLDERS’ RISKS – Health Care Reform – Medicaid Expansion and State Health Care Reform” above.

Medicare and Medicaid Audits. Hospitals that participate in the Medicare and Medicaid programs are subject from time to time to audits and other reviews and investigations relating to various aspects of their operations and billing practices, as well as to retroactive audit adjustments with respect to reimbursements claimed under these programs. Medicare and Medicaid regulations also provide for withholding reimbursement payments in certain circumstances. New billing rules and reporting requirements for which there is no clear guidance from CMS or state Medicaid agencies could result in claims submissions being considered inaccurate. The penalties for violations may include an obligation to refund money to the Medicare or Medicaid program, payment of criminal or civil fines and, for serious or repeated violations, exclusion from participation in federal health programs.

Most Medicare and Medicaid audits involve the auditing of a random sample of patient services, from which any alleged overpayment is calculated and then statistically extrapolated to a larger universe of claims. Consequently, such audits typically result in alleged overpayments that are equal to many multiples of the value of the services actually audited, and can sometimes be measured in the millions of dollars. Such audits may be conducted by a variety of entities, including DHHS, OHA, DHS, DSHS, the Departments of Justice, state Attorney General Offices and private contractors of the state and federal health care programs, including Medicare carriers and intermediaries, Medicare and Medicaid Integrity Program contractors and recovery audit contractors. These multiple auditing efforts reflect increased governmental concern, enforcement and resources devoted to monitoring the Medicare and Medicaid Programs.

CMS has implemented a Recovery Audit Contractor (“RAC”) program on a nationwide basis pursuant to which CMS contracts with private contractors to conduct pre-and post-payment reviews to detect and correct improper payments in the fee-for-service Medicare program. The ACA expands the RAC program’s scope to include managed Medicare plans and Medicaid claims. CMS also employs Medicaid Integrity Contractors (“MICs”) to perform post-payment audits of Medicaid claims and identify improper payments. These programs tend to result in retroactively reduced payments and higher administration costs to hospitals.

Authorized by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), the Medicare Integrity Program (“MIP”) was established to deter fraud and abuse in the Medicare program. Funded separately from the general administrative contractor program, the MIP allows CMS to enter into contracts with outside entities and insure the “integrity” of the Medicare program. These entities, include but are not limited to, Medicare zone program integrity contractors (“ZPICs”), formerly known as program safeguard contractors, are contracted by CMS to review claims and medical charts, both on a prepayment and post-payment basis, conduct cost report audits and identify cases of suspected fraud. ZPICs have the authority to deny and recover payments as well as to refer cases to the Office of Inspector General (the “OIG”). ZPICs have the ability to compile claims data from multiple sources in order to analyze the complete claims histories of beneficiaries for inconsistencies.

The federal Medicaid Integrity Program was created by the Deficit Reduction Act in 2005 and appropriations for enforcement began in 2006. The Medicaid Integrity Program was the first federal program established to combat fraud and abuse in state Medicaid programs. Congress determined a federal program was necessary due to the substantial variations in state Medicaid enforcement efforts. The Medicaid Integrity Program’s enforcement efforts support existing state Medicaid Fraud Control Units. Federal Medicaid Integrity Contractors are classified into Review MICs, Audit MICs and Educational MICs. Review MICs perform review audits generally to determine trends and patterns of aberrant Medicaid billing practices through data mining. Audit MICs perform post- payment reviews of individual providers through desk or field audits. The Educational MICs are responsible for developing and carrying out a variety of education activities to increase and improve Medicaid enforcement efforts by state government. Once a Medicaid overpayment is identified, the state has either 60 days, or one year if there is fraud, to repay the state’s share of federal financial participation to CMS. The state is then required to collect from the provider. If the provider wins on an appeal of the identified overpayment, the state is not permitted to reclaim its federal portion, so there is very little incentive for the states to settle such cases with the provider.

Medicare and Medicaid audits may result in reduced reimbursement or repayment obligations related to past alleged overpayments and may also delay Medicare and Medicaid payments to providers pending resolution of the appeals process. The ACA explicitly gives DHHS the authority to suspend Medicare and Medicaid payments to a provider or supplier during a pending investigation of fraud. The ACA also amended certain provisions of the FCA (as defined herein) to include retention of overpayments as a violation of the FCA. It also added provisions respecting the timing of the obligation to identify, report and reimburse overpayments. The effect of these changes on existing programs and systems of the Credit Group cannot be predicted.

In February 2016, CMS issued a final rule that took effect on March 14, 2016, addressing the requirement to report and return overpayments, with an emphasis for providers on developing robust compliance programs. In the final rule, CMS imposes a new “reasonable diligence” standard for identifying overpayments that must be reported and returned within 60 days, CMS clarifies that the 60-day timeframe for report and return begins when either reasonable diligence is completed (including determination of the overpayment amount) or on the day the person received credible information of a potential overpayment if the person failed to conduct reasonable diligence and the person in fact received an overpayment. In the final rule, CMS instructed that 6 years is the appropriate

lookback period for identifying historical overpayments. The final rule also imposes an alternative duty to proactively determine whether overpayments have been made. The effect of these changes on existing programs and systems of the Credit Group cannot be predicted.

Disproportionate Share Payments. The Medicare and the Louisiana Medicaid programs each provide additional payment for hospitals that serve a disproportionate share of certain low-income patients. Some of the Credit Group’s facilities qualify as disproportionate share hospitals and receive disproportionate share payments. These facilities are expected to qualify from time to time in future years, but there can be no assurance that the same Members of the Credit Group will qualify for disproportionate share status in the future. The ACA substantially reduces federal DSH payments and disproportionate share payments are frequently the object of proposed Medicare and Medicaid payment reductions. The Protecting Access to Medicare Act of 2014 delays the beginning of Medicaid DSH payment reductions until federal fiscal year 2017 but increases the level of such reductions and extends them through federal fiscal year 2024. MACRA further delays the DSH payment cuts until fiscal year 2018, while extending cuts through fiscal year 2025. There can be no assurance that DSH funding will not be further decreased beyond projected reductions or eliminated entirely or that any of the Credit Group’s facilities will continue to qualify for disproportionate share status.

State Children’s Health Insurance Program. The State Children’s Health Insurance Program (“SCHIP”) is a federally funded insurance program for children whose families are financially ineligible for Medicaid, but cannot afford commercial health insurance. CMS administers SCHIP, but each state creates its own program based upon minimum federal guidelines. SCHIP insurance is provided through private health plans contracting with the state. Each state must periodically submit its SCHIP plan to CMS for review to determine if it meets the federal requirements. If it does not meet the federal requirements, a state can lose its federal funding for the program. Any such loss of funding or federal or state budget cuts to the program could have an adverse effect on provider revenues.

Federal funding for SCHIP was extended through September 30, 2019. When such funding expires there can be no assurances that funding for an increase will be reestablished at either a state or federal level, or that professional and /or facility reimbursement rates will not subsequently be reduced in efforts to manage costs.

Health Plans and Managed Care

Most private health insurance coverage is provided by various types of “managed care” plans, including health maintenance organizations (“HMOs”), and preferred provider organizations or (“PPOs”). To control costs, managed care plans typically contract with hospitals and other providers for discounted prices, review medical services for medical necessity, require members to pay copayments and deductibles, and channel patients to contracted providers of health care services. Medicare and Medicaid also purchase health care using managed care options. Payments to health care organizations from managed care plans typically are lower than those received from traditional indemnity or commercial insurers.

For the fiscal years ended December 31, 2015 and 2016, the System received approximately 39% and 38%, respectively, of gross patient service revenues from managed care plans (excluding Medicare managed care plans) and commercial payors. See APPENDIX A — “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – HISTORICAL FINANCIAL INFORMATION – Sources of Patient Revenue.”

In many markets, managed care plans have replaced indemnity insurance as the primary source of nongovernmental payment for healthcare services, and healthcare organizations must be capable of attracting and maintaining managed care business, often on a regional basis. Regional coverage and aggressive pricing may be required. It is also essential that contracting healthcare organizations be able to provide the contracted services without significant operating losses, which may require multiple forms of cost containment.

Many HMOs and PPOs currently pay providers on a negotiated fee-for-service basis or, for institutional care, on a fixed rate per day of care, or a fixed rate per inpatient stay, which, in each case, usually is discounted from the usual and customary charges for the care provided. As a result, the discounts offered to HMOs and PPOs may result in payment to a provider that is less than its actual cost. Additionally, the volume of patients directed to a

provider may vary significantly from projections, and/or changes in the utilization may be dramatic and unexpected, thus jeopardizing the provider’s ability to manage this component of revenue and cost.

Some HMOs employ a “capitation” payment method under which hospitals are paid a predetermined periodic rate for each enrollee in the HMO who is “assigned” or otherwise directed to receive care at a particular hospital. A hospital may assume financial risk for the cost and scope of institutional care given. If payment is insufficient to meet a hospital’s actual costs of care, or if utilization by such enrollees materially exceeds projections, the financial condition of a hospital could erode rapidly and significantly. In addition to this standard managed care risk sharing approach, private health insurance companies are increasingly adopting various additional risk sharing/cost containing measures, sometimes similar to those introduced by government payors. Providers may expect health care cost containment and its associated risk sharing to continue to increase in the coming years amongst all payors.

Often, managed care contracts are enforceable for a stated term, regardless of hospital losses and may require hospitals to care for enrollees for a certain time period, regardless of whether the payor is able to pay a hospital. Hospitals from time to time have disputes with managed care payors concerning payment and contract interpretation issues. Such disputes may result in mediation, arbitration or litigation.

With implementation of the ACA, substantial numbers of employers may elect to discontinue employer- funded medical care for employees eligible for federal assistance in securing private insurance, and the employees could then choose health insurance under the health insurance exchanges. Individuals choosing their own coverage may become highly price sensitive, which could increase the number of enrollees in HMO plans and increase the use of capitation, making price negotiations with HMO and other insurance plans more difficult.

There is no assurance that the Credit Group will maintain particular insurance contracts, existing rates or obtain contracts from other third party payors in the future. Failure to maintain contracts could have the effect of reducing OCF’s patient population and net patient services revenues. Conversely, participation may result in lower net income if participating hospitals are unable to adequately contain their costs. In part to reduce costs, health plans are increasingly implementing, and offering to purchasing employers, tiered provider networks, which involve classification of a plan’s network providers into different tiers based on care quality and cost. With tiered benefit designs, plan enrollees are generally encouraged, through incentives or reductions in copayments or deductibles, to seek care from providers in the top tier. Classification of a hospital in a non-preferred or lower tier by a significant payor may result in a material loss of volume. In addition to tiered provider networks, managed care plans are also implementing narrow provider networks in which only a select group of providers participate as in-network providers. Managed care plans often look at quality performance and cost in selecting providers to participate in their narrow networks. A provider’s exclusion from a narrow network may result in a material loss of volume. Managed care plans may offer lower reimbursement for providers in their narrow network(s) in exchange for additional volume expected from being one of a select group of network providers. This reimbursement may be insufficient to cover a network provider’s cost in providing the services. The new demands of dominant health plans and other shifts in the managed care industry may also reduce patient volume and revenue. Thus, managed care plans pose one of the most significant business risks (and opportunities) that health care organizations face.

In addition, the current trend of consolidation in the health insurance industry may increase the leverage of commercial insurers when negotiating rates with health care providers. Large health insurers that assume dominant positions in local markets might threaten to increase health insurer concentration, reduce competition and decrease choice. If any of the Credit Group Members were to terminate its agreement with any of the major managed care payers or not agree to terms proposed by such payers, it could have an impact on the financial condition of the Credit Group.

Rate Pressure from Insurers and Purchasers. Certain healthcare markets, including many communities in Louisiana, are strongly affected by large health insurers and, in some cases, by major purchasers of health services. In those areas, health insurers may have significant influence over the rates, utilization and competition of hospitals and other healthcare providers. Rate pressure imposed by health insurers or other major purchasers, including managed care payors, may have a material adverse impact on healthcare providers, particularly if major purchasers put increasing pressure on payors to restrain rate increases. Business failures by health insurers also could have a material adverse impact on contracted hospitals and other healthcare providers in the form of payment shortfalls or

delays, and/or continuing obligations to care for managed care patients without receiving payment. In addition, disputes with non-contracted payors are increasing and may result in an inability to collect billed charges from these payors.

Increased Enforcement Affecting Clinical Research

In addition to increasing enforcement of laws governing payment and reimbursement, the federal government has also stepped up enforcement of laws and regulations governing the conduct of clinical trials at hospitals. DHHS elevated and strengthened its Office of Human Research Protection, one of the agencies with responsibility for monitoring federally funded research. In addition, the National Institutes of Health significantly increased the number of facility inspections that these agencies perform. The Food and Drug Administration (“FDA”) also has authority over the conduct of clinical trials performed in hospitals when these trials are conducted on behalf of sponsors seeking FDA approval to market the drug or device that is the subject of the research. Moreover, the Office of Inspector General of the Department of Health & Human Services, in its “Work Plans,” has included several enforcement initiatives related to reimbursement for experimental drugs and devices (including kickback concerns) and has issued compliance program guidance directed at recipients of extramural research awards from the National Institutes of Health and other agencies of the U.S. Public Health Service. The United States Department of Justice may also become involved in enforcement actions relating to the use of federal funds or submission of information to federal agencies. There have been a number of recent government investigations and settlements involving hospital use of federal grant funding in connection with clinical trials and also a settlement involving the submission of claims to Medicare for services provided in a clinical trial. These agencies’ enforcement powers range from substantial fines and penalties to exclusion of researchers and suspension or termination of entire research programs, and errors in billing of the Medicare or Medicaid programs for care provided to patients enrolled in clinical trials that is not eligible for Medicare reimbursement can subject certain members of the Credit Group to sanctions as well as repayment obligations.

The Cures Act contains many provisions related to research and clinical trials, including making significant changes to the way that FDA approves new drugs and medical devices. Among other things, the legislation calls on FDA to consider new types of data, such as patient experience data, in its drug approval process. The legislation also permits drug manufacturers to utilize new types of clinical trial designs in order to collect data in the drug approval process. The intent of many of the statute’s provisions is to speed the approval of new drugs and medical devices. Whether the Cures Act realizes these goals will depend on the adoption of new FDA regulations, policy guidance, and FDA approval practices. Furthermore, final revisions to the Federal Policy for the Protection of Human Subjects (known as the “Common Rule”) were issued on January 19, 2017. These revisions are intended to reduce burden, delay and ambiguity for investigators and better protect human subjects involved in research. The impact of these recent and anticipated regulatory, policy and legislative changes on the operations of the Credit Group related to research cannot be predicted.

Negative Rankings Based on Clinical Outcomes, Cost, Quality, Patient Satisfaction and Other Performance Measures

Health plans, Medicare and Medicaid programs, 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, rank and change the quality, safety and cost of health care services provided by hospitals and health care providers. The ACA initiated a shift in reimbursements from paying for volume to paying for value, based on various health outcome measures, reporting requirements and quality and efficiency metrics. Published rankings such as “score cards” tiered hospital networks with higher co-payments and deductibles for non-emergent 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 hospitals, the members of their medical staffs and other health care providers and to influence the behavior of consumers and providers such as OCF. Currently, prevalent are measures of quality based on clinical outcomes of patient care, reduction in costs, patient satisfaction and investment in health information technology. Measures of performance set by others that characterize a hospital or a health care provider negatively may adversely affect its reputation and financial condition.

Section 340B Drug Pricing Program

Hospitals that participate (as “covered entities”) in the prescription drug discount program established under Section 340B of the federal Public Health Service Act (the “340B Program”) are able to purchase certain outpatient drugs for their patients at reduced cost. The Health Resources and Services Administration within DHHS (“HRSA”), through the Office of Pharmacy Affairs, administers the 340B Program. On August 28, 2015, HRSA issued proposed 340B Drug Pricing Program Omnibus Guidance in the Federal Register, 80 Fed. Reg. 52300, which addressed key policy issues related to the 340B Program, including, but not limited to, eligibility and registration of hospitals and outpatient facilities, individuals eligible to receive 340B drugs, drugs eligible for purchase under the 340B Program, and manufacturer compliance. On January 30, 2017, HRSA withdrew this guidance before it was finalized. If this guidance had been adopted in its current form, it would have restricted the ability of hospitals to purchase drugs under the 340B Program. Several of the Credit Group Members participate in the 340B Program and restrictions on the ability of hospitals to utilize 340B Program drugs for their patients may have an adverse material effect on the Credit Group.

Regulatory Environment

“Fraud” and “False Claims.” Nearly every aspect of hospital operation and healthcare delivery is regulated, in some cases by multiple agencies of government. The level and complexity of regulation and compliance audits appear to be increasing, imposing greater operational limitations, enforcement and liability risks, and significant and sometimes unanticipated costs. “Fraud and abuse” in government funded healthcare programs is a significant concern of federal and state regulatory agencies overseeing healthcare programs and is one of the federal government’s prime law enforcement priorities. The federal government and, to a lesser degree, state governments impose a wide variety of extraordinarily complex and technical requirements intended to prevent over utilization based on economic inducements, misallocation of expenses, overcharging and other forms of perceived abuse in the Medicare and Medicaid programs, as well as other state and federally funded healthcare programs. This body of regulation impacts a broad spectrum of hospital and other healthcare provider commercial activity, including billing, accounting, recordkeeping, medical staff oversight, physician contracting and recruiting, cost allocation, clinical trials, discounts and other functions and transactions.

Health care “fraud and abuse” laws have been enacted at the federal and state levels to broadly regulate the provision of services to government program beneficiaries and the methods and requirements for submitting claims for services rendered to the beneficiaries. Under these laws, hospitals and other health care providers can be penalized for a wide variety of conduct, including submitting claims for services that are not provided, billing in a manner that does not comply with government requirements or submitting inaccurate billing information, billing for services deemed to be medically unnecessary, or billings accompanied by an illegal inducement to utilize or refrain from utilizing a service or product.

Violations and alleged violations may be deliberate, but also frequently occur in circumstances where management is unaware of the conduct in question, as a result of mistake, or where the individual participants do not know that their conduct may violate the law. Violations may occur and be prosecuted in circumstances that do not have the traditional elements of fraud, and enforcement actions may extend to conduct that occurred in the past. Violations carry significant sanctions. The government periodically conducts widespread investigations covering categories of services or certain accounting or billing practices.

Federal and state governments have a broad range of criminal, civil and administrative sanctions available to penalize and remediate health care fraud and abuse, including the exclusion of a hospital or other health care provider from participation in the Medicare and Medicaid programs, civil monetary penalties, executing corrective action plans, and suspension of Medicare and Medicaid payments and imprisonment. Fraud and abuse cases may be prosecuted by one or more government entities and/or private individuals, and more than one of the available sanctions may be, and often are, imposed for each violation.

Laws governing fraud and abuse may apply to hospitals and other health care providers, and to nearly all individuals and entities with which a hospital or other health care provider does business. Fraud and abuse investigations, settlements, prosecutions and related publicity can have a material adverse effect on hospitals and other health care providers. Aggressive investigation tactics, negative publicity and threatened penalties can be, and

often are, used to force health care providers to enter into monetary settlements in exchange for releases of liability for past conduct. The settlements often require the provider to enter into some sort of “corporate integrity” agreement, imposing prospective restrictions, mandated compliance requirements and/or reporting obligations. These negotiated settlements may have a materially adverse impact on hospital and other health care provider operations, financial condition, results of operations and reputation. Multi-million dollar fines and settlements for alleged misconduct, fraud or false claims are not uncommon in the health care industry. These risks are generally uninsured. Government enforcement and private whistleblower suits are increasing in the hospital and health care sector. Many large hospital and other healthcare provider systems are likely to be adversely impacted. See “BONDHOLDERS’ RISKS – Regulatory Environment – Enforcement Activity” herein. Major elements of these often highly technical laws and regulations are generally summarized therein.

The ACA authorizes the Secretary of DHHS to exclude a provider’s participation in Medicare and Medicaid, as well as suspend payments to a provider pending an investigation or prosecution of a credible allegation of fraud against the provider.

False Claims Laws. The federal False Claims Act (“FCA”) makes it illegal to knowingly submit or present a false, fictitious or fraudulent claim for payment or approval for payment for which the federal government provides, or reimburses, at least some portion of the requested money or property. Because the term “knowingly” is defined broadly under the law to include not only actual knowledge but also deliberate ignorance or reckless disregard of the facts, the FCA can be used to punish a wide range of conduct. The ACA amended the FCA by expanding the number of activities that are subject to civil monetary penalties to include, among other things, failure to report and return known overpayments within statutory time limits. FCA investigations and cases have become common in the health care field and may cover a range of activity from submission of intentionally inflated billings, to highly technical billing infractions, to allegations of inadequate care. Penalties under the FCA are severe and may include damages equal to three times the amount of the alleged false claims, as well as substantial civil monetary penalties. As a result, violation or alleged violation of the FCA frequently results in settlements that require multi- million dollar payments and costly corporate integrity agreements. The FCA also permits individuals to initiate civil actions on behalf of the federal government in lawsuits called “qui tam” actions. Qui tam plaintiffs, or “whistleblowers,” can share in the damages recovered by the federal government or recover independently if the federal government does not participate. Because qui tam lawsuits are kept under seal while the federal government evaluates whether the United States will join the lawsuit, it is impossible to determine at this time whether any such actions are pending against any of the Credit Group Members and no assurances can be made that such actions will not be filed in the future. The FCA has become one of the federal government’s primary tools against health care fraud and suspected fraud. FCA violations or alleged violations could lead to settlements, fines, exclusion or reputation damage that could have a material adverse impact on a hospital and other health care providers.

Under the ACA, the FCA has been expanded to include overpayments that are discovered by a healthcare provider and are not promptly refunded to the applicable federal healthcare program, even if the claims relating to the overpayment were initially submitted without any knowledge that they were false. The final rule which took effect on March 14, 2016 requires that providers report and return identified overpayments by the later of 60 days after identification, or the date the corresponding cost report is due, if applicable. If the overpayment is not so reported and returned, it becomes an “obligation” under the FCA. This expansion of the FCA exposes hospitals and other health care providers to liability under the FCA for a considerably broader range of claims than in the past. There was initially great uncertainty in the industry as to when an overpayment is technically “identified” and the ability of a provider to determine the total amount of an overpayment and satisfy its repayment obligation within the required time period. The March 14, 2016 final rule clarified that an overpayment is considered to have been identified when the person has or should have, through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment. That final rule also established a six year lookback period, meaning overpayments must be reported and returned only if a person identifies the overpayment within six years of the date the overpayment was received.

In June 2016 the DOJ issued a rule that more than doubles civil monetary penalties under the FCA. These increases took effect on August 1, 2016 and apply to FCA violations after November 2, 2015.

In June 2016, the United States Supreme Court announced its decision in Universal Health Services, Inc. v. United States ex rel. Escobar, No. 15-7 (U.S. June 16, 2016). Prior to Escobar, lower courts had split on the issue of

whether the FCA extended to so-called “implied certification” of compliance with laws, and whether such compliance was limited to express conditions of payment or extended to conditions of participation. The United States Supreme Court affirmed the theory of “implied certification” and rejected the distinction between conditions of payment and conditions of participation for these purposes, ruling that the relevant inquiry is whether the alleged noncompliance, if known to the government, would have in fact been material to the government’s determination as to whether to pay the claim. There is considerable uncertainty as to the application of the Escobar holding, but depending on how it is interpreted by the lower courts, it could result in an expanded scope of potential FCA liability for noncompliance with applicable laws, regulations and sub-regulatory guidance.

Anti-Fraud and Abuse Provisions. The federal Medicare/Medicaid Anti-Fraud and Abuse Amendments to the Social Security Act (collectively, the “Federal Anti-Kickback Law is a criminal statute that prohibits anyone from soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in return for a referral of a patient (or to induce a referral) or the ordering or recommending of the purchase (or lease) of any item or service that is paid by any federal or state health care programs. The Anti-Kickback Law applies to many common health care transactions between persons and entities with which a hospital does business, including hospital-physician joint ventures, services agreements, director agreements, physician recruitment agreements, physician office leases, and other transactions. The members of the Credit Group participate in such arrangements in the ordinary course of business. The ACA amended the Anti-Kickback Law to provide explicitly that a claim that includes items or services resulting from a violation of the Anti-Kickback Law constitutes a false or fraudulent claim for purposes of the FCA. Another amendment provides that an Anti-Kickback Law violation may be established without showing that an individual knew of the statute’s proscriptions or acted with specific intent to violate the Anti-Kickback Law, but only that the conduct was generally unlawful. This expansion of the FCA exposes hospitals and other health care providers to liability under the FCA for a considerably broader range of claims than in the past.

Violations or alleged violations of the Anti-Kickback Law often result in settlements that require multi- million dollar payments and onerous corporate integrity agreements. The Anti-Kickback Law can be prosecuted either criminally or civilly. A criminal violation may be prosecuted as a felony, subject to a fine of up to $25,000 for each criminal act (which may be each item or each bill sent to a federal program), imprisonment and exclusion from the Medicare and Medicaid programs, any of which would have a significant detrimental effect on the financial stability of most hospitals. In addition, civil monetary penalties of up to $74,792 per violation of the Anti-Kickback statute and an “assessment” of three times the amount claimed may be imposed. Increasingly, the federal government and qui tam relators are prosecuting violations of the Anti-Kickback Law under the FCA, based on the argument that claims resulting from an illegal kickback arrangement are also false claims for FCA purposes. See the discussion under the subheading “False Claims Laws” above. The IRS has taken the position that hospitals that are in violation of the Anti-Kickback Law may also be subject to revocation of their tax-exempt status.

The State has enacted a statute prohibiting physicians and physician groups from making or receiving payments for referring or soliciting patients (the “State Anti-Kickback Law,” and, together with the Federal Anti- Kickback Law, the “Anti-Kickback Laws”), and violation by a physician or physician group could result in suspension or revocation of license or other credentials of the physician or physician group. The State Anti- Kickback Law incorporates by reference the safe harbors of the Federal Anti-Kickback Law, but the scope of the law is not limited to transactions involving state or federal programs.

Management of the Credit Group believes that the respective arrangements of members of the Credit Group with referral sources are in compliance with the Anti-Kickback Laws. However, because of the breadth of the Anti- Kickback Laws and the narrowness of the safe harbor regulations, there can be no assurances that in the future a member of the Credit Group will not be found to have violated the Anti-Kickback Laws and, if so, whether any sanction imposed would have a material adverse effect upon the operations and financial condition of the Credit Group or the continued status of the applicable members of the Credit Group as organizations described in Section 501(c)(3) of the Code.

Physician Self-Referral Prohibition. The federal “Stark Law” prohibits the referral by a physician of Medicare and Medicaid patients for certain designated health services (including inpatient and outpatient hospital services, clinical laboratory services, and radiation and other imaging services) to entities with which the referring physician has a financial relationship, unless the relationship fits within a stated exception. The Stark Law also

prohibits a hospital furnishing the designated services from billing Medicare, or any other payor or individual, for services performed pursuant to a prohibited referral. The government does not need to prove that the entity knew that the referral was prohibited to establish a Stark Law violation. If certain substantive and technical requirements of an applicable exception are not satisfied, many ordinary business practices and economically desirable arrangements between hospitals and physicians will likely constitute improper “financial relationships” within the meaning of the Stark Law, thus triggering the prohibition on referrals and billing. Most providers of designated health services with physician relationships have some exposure to liability under the Stark Law for payments to physicians. Changes to the regulations issued under the Stark statute have rendered illegal a number of common arrangements under which physician-owned entities provide services and/or equipment to hospitals and may increase risk of violation due to lack of clarity of the technical requirements. CMS has promulgated a series of regulations interpreting the Stark Law and Congress has occasionally amended the statute. The net result is an incredibly complex set of definitions, exceptions and rules that must be navigated in order to avoid running afoul of the Stark Law. Virtually all hospitals run a substantial risk of violating this statute.

Medicare may deny payment for all services related to a prohibited referral and a hospital that has billed for prohibited services is obligated to notify and refund the amounts collected from the Medicare program. For example, if an office lease between a hospital and a large group of heart surgeons is found to violate the Stark Law, the hospital could be obligated to repay CMS for the payments received from Medicare for all of the heart surgeries performed at the hospital by all of the physicians in the group for the duration of the lease, which could potentially be a significant amount. As a result, even relatively minor, technical violations of the law may trigger substantial refund obligations. Moreover, if the violations of the Stark Law were knowing, the government may also seek substantial civil monetary penalties, and in some cases, a hospital may be excluded from the Medicare and Medicaid programs. Potential repayments to CMS, settlements, fines or exclusion for a Stark Law violation or alleged violation could have a material adverse impact on a hospital and other health care providers. Increasingly, the federal government and qui tam relators are prosecuting violations of the Stark Law under the FCA, based on the argument that claims resulting from an illegal referral arrangement are also false claims for FCA purposes. See the discussion under the subheading “False Claims Laws” above. The federal government has attempted to recover the Federal portion of Medicaid claims referred to hospitals by physicians with whom they have a prohibited financial relationship.

CMS has established a voluntary self-disclosure program under which hospitals and other entities may report Stark Law violations and seek a reduction in potential refund obligations. However, the program is relatively new and therefore it is difficult to determine at this point in time whether it will provide significant monetary relief to hospitals that discover inadvertent Stark Law violations. The limited publicly available information with respect to the self-disclosure program suggests that most voluntary self-disclosure submissions remain under consideration by CMS for an extended period of time, and that it is difficult to predict how CMS will react to any specific voluntary self-disclosure. The Credit Group may make self-disclosures under this program as appropriate from time to time. Any submission pursuant to the self-disclosure program does not waive or limit the ability of the OIG or Department of Justice (“DOJ”) to seek or prosecute violations of the Anti-Kickback Law or impose civil monetary penalties.

The State has enacted a statute (“State Physician Referrals Prohibition Law”) prohibiting physicians and physician groups from referring patients to any provider of health care services or goods in which the referring physician or group has a financial interest or receives direct or indirect remuneration for referral unless the patient is given written disclosure of the financial interest. The State Physician Referral Prohibition Law also prohibits certain cross-referral arrangements. There are no references in the statute to federal safe harbors. Remuneration received after disclosure could result in violation of the State Anti-Kickback Laws even though permitted under the State Physician Referral Prohibition Law. Violation of the State Physician Referral Prohibition Law could result in a requirement that the physician or physician group refund to the patient all sums received in payment for the services or goods furnished without disclosure of the financial interest. Violation could also result in suspension or revocation of the license or other credentials of the physician or physician group.

In addition to the State Physician Referrals Prohibition Law, the Louisiana Medical Assistance Integrity Law (the “Integrity Law”) prohibits all persons from paying, offering, soliciting or receiving remuneration in return for a referral for medical services or the purchase or furnishing of any goods in connection with a State medical

assistance program, including the State’s Medicaid program. Violation of the Integrity Law constitutes fraud on the medical assistance program, discussed herein under the subheading “False Claims Laws” above.

Management of the Credit Group believes that the applicable members of the Credit Group are presently in material compliance with the physician self-referral prohibitions and the Stark Law. However, in view of the broad scope and ambiguity of the self-referral prohibitions and the Stark Law regulations, the narrowness of the exceptions and the lack of case law or regulations interpreting the self-referral prohibitions, there can be no assurance that no violation of the self-referral prohibitions will be found in the future, and if found that any sanction imposed would not have a material adverse effect on the operation or the financial condition or results of operations of such entity.

Review of Outlier Payments. CMS is reviewing health care providers that are receiving large proportions of their Medicare revenues from outlier payments. Health care providers found to have obtained inappropriately high outlier payments will be subject to further investigation by the CMS Program Integrity Unit and potentially the Office of Inspector General.

HIPAA; Privacy Requirements. The Health Insurance Portability and Accountability Act of 1996, or HIPAA, adds additional criminal sanctions for health care fraud and applies to all health care benefit programs, whether public or private. HIPAA also provides for punishment of a health care provider for knowingly and willfully embezzling, stealing, converting or intentionally misapplying any money, funds or other assets of a health care benefit program. A health care provider convicted of health care fraud could be excluded from Medicare.

HIPAA also addresses the confidentiality of individuals’ health information. Disclosure of certain broadly defined protected health information is prohibited unless expressly permitted by the HIPAA statute or regulation or authorized by the patient. HIPAA’s confidentiality provisions extend not only to patient medical records, but also to a wide variety of individually identifiable health care clinical and financial information. These patient privacy requirements also impose communication, operational, and accounting obligations that add costs and create potentially unanticipated sources of liability.

HIPAA imposes civil monetary penalties for violations and criminal penalties for knowingly obtaining or using individually identifiable health information. For more information, see “BONDHOLDERS’ RISKS – Regulatory Environment – The HITECH Act” below.

ARRA includes broad, sweeping changes to the HIPAA provisions regarding confidentiality of patient medical records. In general, ARRA increases penalties for violations of patient medical record confidentiality and strengthens enforcement and oversight. ARRA and resulting regulations also established a framework for the implementation of a nationally-based health information technology program. For more information regarding this program, see “BONDHOLDERS’ RISKS – Regulatory Environment – The HITECH Act” below.

Additionally, other federal laws and state laws address the confidentiality of individuals’ health information. Disclosure of certain broadly defined protected health information is prohibited unless expressly permitted under the provisions of relevant federal and state statutes and regulations or authorized by the patient. These add costs and create potentially unanticipated sources of legal liability.

Other Privacy Requirements. Regulations espoused under 42 C.F.R. Part 2 also provide a heightened level of privacy of records associated with the provision of substance abuse counseling and treatment by covered alcohol and substance abuse treatment programs and has enacted laws that provide greater protection for certain health information, such as mental health records. These rules are significantly more restrictive than the privacy provisions set forth in HIPAA. States may adopt privacy laws that are more restrictive than HIPAA but not less restrictive. These laws are either more detailed and/or more restrictive than HIPAA with respect to these particular types of treatment records.

Implementation of Revised ICD-10. In 2009, CMS published the final rule adopting the International Classification of Diseases, 10th Revision coding system (“ICD-10”), requiring health care organizations to implement ICD-10. On October 1, 2015, the ICD-10 diagnostic code set went live. At this time, it is too early to predict whether health care organizations will experience negative effects due to ICD-10 implementation. ICD-10

provides a common approach to the classification of diseases and other health problems, allowing the United States to align with other nations to better share medical information, diagnosis, and treatment codes. ICD-10 is not without risk as staff had to be retrained, processes redesigned, and computer applications modified as the current available codes and digit size dramatically increased. Additionally, there is a potential for temporary coding and payment backlog, as well as potential increases in claims errors. There is a potential for revenue stream disruption for health care organizations and the magnitude of the transition within the industry may add pressure to health care organizations cash flows. Health care organizations were dependent on outside software vendors, clearinghouses and third-party billing services to develop products and services to allow timely, full and successful implementation of ICD-10. At this time, however, it is not possible to predict the effects of full ICD-10 implementation. With the recent implementation deadline, the full impact of the implementation of ICD-10 is evolving.

The Cures Act and Health Information Technology and Privacy. The Cures Act contains a number of provisions regarding health information technology and health care privacy, including: (i) the privacy of protected health information used and disclosed as part of research; (ii) permitted uses and disclosures of mental health and substance abuse treatment information; and (iii) the interoperability of EHR networks and patient access to their information in EHRs. The legislation calls for a number of studies and for guidance from DHHS implementing and clarifying Cures Act provisions. Certain of the Cures Act provisions and anticipated regulations are intended to reduce regulatory or administrative burdens related to EHRs in the Medicare EHR incentive program and other Medicare programs. The impact of these recent and anticipated regulatory, policy and legislative changes on the operations of members of the Credit Group cannot be predicted.

Security Breaches and Unauthorized Releases of Personal Information. Federal, State and local 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 HIPAA, 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 consequently damage a health care provider’s reputation and materially adversely affect business operations. In a large hospital or health system, there can often be security incidents related to patient information, which stem from a variety of causes ranging from external or internal deliberate invasions by individuals or employees, to inadvertent loss or misdirection of paper or electronic records, to theft of hardware or software.

The HITECH Act. Provisions in the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”), enacted as part of ARRA, increase the minimum and maximum civil monetary penalties for violations of HIPAA and granted enforcement authority of HIPAA to state attorneys general. The HITECH Act also (i) extended the reach of HIPAA beyond “covered entities” to include the direct regulation of “business associates,” (ii) imposed a breach notification requirement on HIPAA covered entities and business associates, (iii) further limited certain uses and disclosures of individually identifiable health information, and (iv) restricted covered entities’ marketing communications.

The breach notification obligation, in particular, may expose covered entities such as hospitals to heightened liability. Under HITECH, in the event of a data privacy breach, covered entities are required to notify affected individuals and the federal government. If more than 500 individuals in any state are affected by the breach, (1) the covered entity must also notify the media and (2) the federal government posts a description of the breach on its website. Although HIPAA does not provide for a private right of action, these reporting obligations increase the risk of government enforcement as well as class action lawsuits filed under state privacy or consumer protection laws, especially if large numbers of individuals are affected by a breach.

The HITECH Act revises the civil monetary penalties associated with violations of HIPAA as well as provides state attorneys general with authority to enforce the HIPAA privacy and security regulations in some cases through a damages assessment of $100 per violation or an injunction against the violator. The revised civil

monetary penalty provisions establish a tiered system, ranging from a minimum of $100 per violation for an unknowing violation to $1,000 per violation for a violation due to reasonable cause, but not willful neglect. For a violation due to willful neglect, the penalty is a minimum of $10,000 or $50,000 per violation, depending on whether the violation was corrected within 30 days of the date the violator knew or should have known of the violation. Maximum penalties may reach $1,500,000 per calendar year for violations of identical provisions. Penalties can significantly exceed $1,500,000 where there are violations of multiple provisions occurring over multiple years.

DHHS increased the above civil monetary penalty amounts for inflation, effective September 6, 2016, to: a minimum of $110 and maximum of $55,010 per violation for an unknowing violation; a minimum of $1,100 per violation and maximum of $55,010 per violation for a violation due to reasonable cause but not willful neglect; a minimum of $11,002 and maximum of $55,010 per violation for a violation due to willful neglect that is corrected within 30 days; and a minimum of $55,010 per violation and a maximum of $1,650,300 per violation for a violation due to willful neglect that is not corrected within 30 days. Maximum penalties may now reach $1,650,300 per calendar year for multiple violations of an identical provision (with total penalties potentially exceeding this amount where there are violations of multiple provisions occurring over multiple years).

Criminal penalties will be enforced against persons who obtain or disclose personal health information without authorization, even if not a covered entity or business associate. DHHS is also beginning to perform periodic audits of health care providers, group health plans and business associates to ensure that required policies under HIPAA and the HITECH Act are in place.

Finally, the HITECH Act provides that individuals harmed by violations will be able to recover a percentage of monetary penalties or a monetary settlement based upon methods to be established by DHHS for this private recovery, although DHHS has not yet issued rulemaking to effectuate this statutory provision.

On January 25, 2013, DHHS issued comprehensive modifications to the existing HIPAA regulations to implement the requirements of the HITECH Act, commonly known as the “HIPAA Omnibus Rule.” The HIPAA Omnibus Rule became effective on March 26, 2013, and covered entities were required to be in compliance by September 23, 2013 (though certain requirements have a longer timeframe). Key aspects of the HIPAA Omnibus Rule include, but are not limited to: (i) a new standard for what constitutes a breach of protected health information, (ii) establishing four levels of culpability with respect to civil monetary penalties assessed for HIPAA violations, (iii) direct liability of business associates for certain violations of HIPAA, (iv) modifications to the rules governing research, (v) stricter requirements regarding non-exempt marketing practices, (vi) modification and re-distribution of notices of privacy practices, and (vii) stricter requirements regarding the protection of genetic information. The obligations imposed under the HIPAA Omnibus Rule could have a material adverse effect on the financial condition of health care organizations.

The HITECH Act also established programs under Medicare and Medicaid to provide incentive payments for the “meaningful use” of certified electronic health record (“EHR”) technology. Beginning in 2011, the Medicare and Medicaid EHR incentive programs began providing incentive payments to eligible professionals and eligible hospitals for demonstrating meaningful use of certified EHR technology. Health care providers demonstrate their meaningful use of EHR technology by meeting objectives specified by CMS for using health information technology and by reporting on specified clinical quality measures. Beginning in 2015, hospitals and physicians who have not satisfied the performance and reporting criteria for demonstrating meaningful use will have their Medicare payments significantly reduced. Under a revised schedule, Stage 2 of the EHR incentive program would be extended through 2016 and Stage 3 would begin in 2017 for providers having completed at least two years in Stage 2. In October 2015, CMS released a final rule specifying the criteria for participation in Stage 3 of the EHR incentive program as optional in 2017 and required for all providers beginning in 2018. Additionally, beginning in 2014, the federal government began auditing hospitals’ and providers’ records related to their attestation of being “meaningful users” in order to obtain the incentive payments. A hospital or provider that fails the audit will have an opportunity to appeal. Ultimately, hospitals or providers that fail on appeal will have to repay any incentive payments they received through these programs.

The Office for Civil Rights (“OCR”) is the administrative office that is tasked with enforcing HIPAA. OCR has stated that it has now moved from education to enforcement in its implementation of the law. Recent

settlements of HIPAA violations for breaches involving lost data and have reached the millions of dollars. Any breach of HIPAA, regardless of intent or scope, may result in penalties or settlement amounts that are material to a covered health care provider or health plan.

See APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – INFORMATION TECHNOLOGY” for information about information technology of the Credit Group.

Cybersecurity Risks. Health care providers are highly dependent upon integrated electronic medical record and other information technology systems to deliver high quality, coordinated and cost-effective health care. These systems necessarily hold large quantities of highly sensitive protected health information. As a result, the electronic systems and networks of health care providers are considered likely targets for cyberattacks and other potential breaches of their systems. In addition to regulatory fines and penalties, the health care entities subject to the 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. The Credit Group has taken, and continues to take measures to protect its information technology system against such cyberattacks, but there can be no assurance that its information technology systems will not experience a significant breach, 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 or could have an adverse effect on the ability of the Credit Group to provide health care services.

Business Associates. Under existing HIPAA regulations, covered entities must include certain required provisions in their contractual relationships with organizations that perform functions on their behalf which involve use or disclosure of protected health information. These organizations are called business associates, and have been indirectly regulated by HIPAA through those contractual obligations. The HITECH Act and the final rules promulgated thereunder provide that all of the HIPAA security administrative, physical, and technical safeguards, as well as security policies, procedures, and documentation requirements now apply directly to all business associates. In addition, the HITECH Act makes certain privacy provisions directly applicable to business associates. These changes are significant because business associates will now be directly regulated by DHHS for those requirements, and as a result, will be subject to penalties imposed by DHHS and/or state attorneys general. Likewise, to the extent a business associate is deemed to be an agent of the covered entity under the Federal common law, the covered entity will be liable for the breaches of the business associate. Covered entities have had to review and amend their business associate agreements in recent years in order to comply with these changing rules, which can be costly and administratively burdensome.

Payment Card Industry Security Standards. Health care providers have seen significant changes in the method, amount of transactions and dollar amount of patient payments. Health care providers recognize that financial data security is a paramount concern as is continuing to protect and secure patient information. Chip cards used at Europay, MasterCard and Visa (“EMV”) terminals protect against counterfeit transactions by replacing static data with dynamic data. Merchants are in the process of migrating to EMV chip card technology to improve the security of the card-present payments infrastructure. As a result, EMV is being introduced to healthcare providers.

Beginning October 1, 2015, the liability for card-present fraud shifts to whichever party is the least EMV- compliant in a fraudulent transaction. This means in practice that if a health care provider has not updated its system to accept chip cards and fraud occurs when a chip card is inserted into the terminal, the health care provider would be liable for the costs. It is not mandatory to begin using EMV compliant terminals on or after October 1, 2015 and there are no fines or other penalties, however, a health care provider that does not use EMV-compliant terminals may face much higher costs in the event of a large data breach. At this time, it is too early to predict the impact that this new technology will have on the Credit Group.

Federal Civil Monetary Penalties Law. The federal Civil Monetary Penalties Law (“CMPL”) provides for administrative sanctions against healthcare providers for a broad range of billing improprieties and other abuses. A healthcare provider is liable under the CMPL if it knowingly presents, or causes to be presented, improper claims for reimbursement under Medicare, Medicaid or other federal health care benefit programs. CMPL also prohibits: (a) a hospital from directly or indirectly paying a physician to limit or reduce medically necessary services to Medicare fee-for-service beneficiaries; or (b) a healthcare provider from offering benefits to Medicare or Medicaid

beneficiaries that such provider knows or should know are likely to induce the beneficiaries to choose the provider for their care. The CMPL authorizes imposition of a civil money penalty and treble damages. The ACA also amended the CMPL laws to establish various new grounds for exclusion and civil monetary penalties, as well as increased penalty thresholds for existing civil monetary penalties. Regulations implementing certain changes to the CMPL under the ACA were published on December 7, 2016 and effective January 6, 2017 and certain others (related to exclusion authorities) were published on January 12, 2017 with a stated effective date of February 13, 2017, but which were delayed based on the Trump administration’s executive order effectively freezing regulations, described in “–Federal Legislative and Regulatory Initiatives” above, and such delay may change in the future. Among other things, the revised CMPL regulations set forth a list of factors, both aggravating and mitigating, that the OIG considers when determining the amount of penalties to assess and period of exclusion to impose. Changes to CMPL enforcement activity based on recent revisions to the CMPL regulations cannot be predicted at this time.

Health care providers may be found liable under the CMPL even when they did not have actual knowledge of the impropriety of their action. Knowingly undertaking the action is sufficient. Ignorance of the Medicare regulations is no defense. The imposition of civil money penalties on a health care provider could have a material adverse impact on the provider’s financial condition.

Exclusions from Medicare or Medicaid Participation. The government may exclude a healthcare provider from Medicare/Medicaid program participation if such provider has been convicted of a criminal offense relating to the delivery of any item or service reimbursed under Medicare or a state health care program, any criminal offense relating to patient neglect or abuse in connection with the delivery of health care, fraud against any federal, state or locally financed healthcare program or an offense relating to the illegal manufacture, distribution, prescription, or dispensing of a controlled substance. The government also may exclude individuals or entities under certain other circumstances, such as an unrelated conviction of fraud, or other financial misconduct relating either to the delivery of healthcare in general or to participation in a federal, state or local government program. Exclusion from the Medicare/Medicaid program means that a health care provider would be decertified from program participation and no program payments can be made. Any health care provider exclusion or suspension could be a materially adverse event. In addition, exclusion of health care organization employees or independent contractors or their employees under Medicare or Medicaid may be another source of potential liability for hospitals or health systems based on services provided by those excluded individuals or entities.

Administrative Enforcement. Administrative regulations may require less proof of a violation than do criminal laws, and, thus, health care providers may have a higher risk of imposition of monetary penalties as a result of administrative enforcement actions.

Compliance with Conditions of Participation. CMS, in its role of monitoring participating providers’ compliance with conditions of participation in the Medicare program, may determine that a provider is not in compliance with its conditions of participation. In that event, a notice of termination of participation may be issued or other sanctions, such as suspension or executing potentially burdensome corrective actions plans, potentially could be imposed. If the corrective action plan is not accepted by CMS, or if it is not successfully implemented, the provider’s Medicare provider agreement could be terminated or other sanctions imposed.

Enforcement Activity. Enforcement activity against health care providers has increased, and enforcement authorities have adopted increasingly aggressive tactics. In the current regulatory climate, it is anticipated that many hospitals and physician groups will be subject to an audit, investigation, or other enforcement action regarding the health care fraud laws mentioned above.

Enforcement actions may pertain to not only deliberate violations, but also frequently relate to violations resulting from actions of which management is unaware, from mistakes or to circumstances where the individual participants do not know that their conduct is in violation of law. Enforcement actions may extend to conduct that occurred in the past. The government may seek a wide array of penalties, including withholding essential payments under the Medicare or Medicaid programs or exclusion from those programs.

Enforcement authorities are often in a position to compel settlements by providers charged with, or being investigated for false claims violations by withholding or threatening to withhold Medicare, Medicaid and/or similar payments or to recover higher damages, assessments or penalties and/or by instituting criminal action. In addition,

the cost of defending such an action, the time and management attention consumed, and the facts of a case may dictate settlement. Therefore, regardless of the merits of a particular case, a hospital could experience materially adverse settlement costs, as well as materially adverse costs associated with implementation of any settlement agreement. Prolonged and publicized investigations could be damaging to the reputation and business of a health care organization, regardless of outcome.

Certain acts or transactions may result in violation or alleged violation of a number of the federal health care fraud laws described above and, therefore, penalties or settlement amounts can be compounded. Generally these risks are not covered by insurance. Enforcement actions may involve multiple hospitals or health care providers in a health system, as the government often extends enforcement actions regarding health care fraud to other hospitals or health care providers in the same organization. Therefore, Medicare fraud related risks identified as being materially adverse as to a hospital or other health care provider could have materially adverse consequences to a health system taken as a whole.

EMTALA and the Louisiana Hospital Licensing Law. The Emergency Medical Treatment and Active Labor Act, or EMTALA, is a federal civil statute that requires hospitals to conduct a medical screening for emergency conditions and to stabilize a patient’s emergency medical condition before releasing, discharging or transferring the patient. A hospital with 100 or more beds that violates EMTALA is subject to civil penalties of up to $103,139 per offense, while a facility with fewer than 100 beds may incur penalties of up to $51,570. Proven violators may also be excluded and exclusion from Medicare and Medicaid programs. In addition, a hospital may be liable for any claim by an individual who has suffered harm as a result of a violation of EMTALA.

The Louisiana Hospital Licensing Law (the “Licensing Law”) requires licensed hospitals that are funded in part by tax-exempt bonds and which offer emergency services to provide such services within standards similar to EMTALA. A hospital violating this requirement will be denied further referrals from the State’s Department of Health. The Licensing Law also prohibits medical staff, officers and employees of any licensed hospital from denying emergency services available at the hospital based on inability to pay, race, religion or national ancestry, and requires all licensed hospitals to inform their medical staff of the prohibition. The State's Department of Health has proposed to amend certain Licensing Law provisions governing emergency services provided by free-standing emergency care facilities, which could impose additional requirements on hospitals that seek to provide emergency care at off-site facilities, and could subject such hospitals to a facility need review process. Violation of the Licensing Law could result in fines and suspension or termination of participation in State medical assistance programs. Substantial failure of a hospital to comply with the Licensing Law could result in suspension or revocation of the hospital’s license. The future cost of such mandatory free care could be material. OCF cannot predict the future impact of providing care required by EMTALA or the Licensing Law, or the proposed amendment to the Licensing Law.

Licensing, Surveys, Investigations and Accreditation. Health facilities are subject to numerous legal, regulatory, professional and private licensing, certification and accreditation requirements. These include, but are not limited to, requirements of state licensing agencies and appropriate accrediting organizations. Renewal and continuation of certain of these licenses, certifications and accreditations are based on inspections or other reviews generally conducted in the normal course of business of health facilities. Loss of, or limitations imposed on, hospital licenses, certifications or accreditations could reduce hospital utilization or revenues, or a hospital’s ability to operate all or a portion of its facilities.

Management of the Credit Group currently anticipates no difficulty renewing or continuing currently held licenses, certifications or accreditations. Nevertheless, actions in any of these areas could result in the loss of utilization or revenues, or the Credit Group’s ability to operate all or a portion of their respective facilities, and, consequently, could adversely affect OCF’s ability to make payments in amounts sufficient to make the loan Payments pursuant to the Loan Agreement or by OCF and any future Members of the Obligated Group to make payments pursuant to Obligation No. 17 and, consequently, payment of debt service on the Bonds.

Environmental Laws and Regulations. Hospitals and other health facilities are subject to a wide variety of federal, state and local environmental and occupational health and safety laws and regulations. These include but are not limited to: air and water quality control requirements, waste management requirements, specific regulatory requirements applicable to asbestos and radioactive substances, requirements for providing notice to employees and

members of the public about hazardous materials handled by or located at a hospital and requirements for training employees in the proper handling and management of hazardous materials and wastes.

Hospitals and other health facilities may be subject to requirements related to investigating and remedying hazardous substances located on their property, including such substances that may have migrated off the property. Typical hospital operations include the handling, use, storage, transportation, disposal and/or discharge of hazardous, infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants and contaminants. As such, hospital operations are particularly susceptible to the practical, financial and legal risks associated with the environmental laws and regulations. Such risks may result in damage to individuals, property or the environment; may interrupt operations and/or increase their cost, may result in legal liability, damages, injunctions or fines, may result in investigations, administrative proceedings, civil litigation, criminal prosecution, penalties or other governmental agency actions, and may not be covered by insurance.

Management of the Credit Group is not aware of any pending or threatened claim, investigation or enforcement action regarding environmental matters which management believes will have a material adverse impact on the Credit Group.

Possible Acquisitions and Other Strategic Initiatives

From time to time, management of the Credit Group considers possible acquisitions or other investments in related assets, including other hospitals, as well as other strategic initiatives that may involve the investment of substantial capital resources or other material financial commitments. Such transactions present a variety of risks, including the risk that any such transactions may be perceived negatively by the investor community and the risks that any financial investments or commitments could result in a deterioration in the financial condition or results of operations of the Credit Group and its consolidated subsidiaries. There is also the risk that any such acquisitions or transactions could require management of the Credit Group or its subsidiaries to dedicate a substantial amount of its time to the process of completing such transactions or, once completed, to the integration of such assets or new entities into the applicable member(s) of the Credit Group or its subsidiaries. As part of its ongoing planning and property management functions, the management of the Credit Group reviews the use, compatibility and business viability of many of the operations of the Credit Group members, and from time to time the Credit Group members may pursue changes in the use of, or disposition of, their facilities.

In addition to relationships with other hospitals and physicians, the Credit Group members may consider investments, ventures, affiliations, development and acquisition of other health care-related entities. These may include home health care, long-term care entities or operations, infusion providers, pharmaceutical providers, and other health care enterprises that support the overall operations of the Credit Group members. In addition, the Credit Group Members may pursue transactions with health insurers, HMOs, preferred provider organizations, third-party administrators and other health insurance-related businesses. Because of the integration occurring throughout the health care field, management will consider these arrangements if there is a perceived strategic or operational benefit for the Credit Group members. Any initiative may involve significant capital commitments and/or capital or operating risk (including, potentially, insurance risk) in a business in which the Credit Group members may have less expertise than in hospital operations. There can be no assurance that these projects, if pursued, will not lead to material adverse consequences to the Credit Group. See APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – INTRODUCTION – Strategic Partners.”

Fundraising

In recent years, the Credit Group has received substantial gifts that it uses for a variety of purposes. For fiscal years 2013 through 2016, the aggregate total of gifts, grants and bequests exceeded $88.3 million for the Credit Group. Charitable contributions may be affected by a variety of factors, including general economic conditions, tax laws, competing needs for charitable funds and reputation of the applicable member of the Credit Group. Charitable contributions are an important component enabling members of the Credit Group to pursue their respective missions, including teaching, research, and providing charitable care. In the absence of such contributions, certain programs would likely be curtailed, or alternatively, funds would be transferred from other important Credit Group priorities. Such steps could adversely affect programs and reputation of a member of the Credit Group, and the ability of OCF to make the loan Payments pursuant to the Loan Agreement or by OCF and

any future Members of the Obligated Group to make payments pursuant to Obligation No. 17 and, consequently, payment of debt service on the Bonds.

Research Matters

In fiscal year ended December 31, 2016, the Credit Group received approximately $6.2 million from public and private sources in the form of grants, contracted drug studies and private donations related to the conduct of medical research and development. Conducting such research and development is an important component of certain members of the Credit Group’s programs, both financially and in terms of their respective missions. Obtaining such financing is competitive, and retaining physicians and scientists to maintain a healthy research program depends in part upon maintaining facilities and support for such research. In addition, the development of new products through research has in the past resulted in additional revenues to the Credit Group. There is no assurance that the availability of research funding will continue or that the Credit Group will be able to attract such funding. A decrease of such funding or such research programs could have an adverse effect upon the Credit Group. Further, there is no assurance that certain members of the Credit Group’s involvement in the creation of new medical technologies will generate future income.

Conducting research involving human subjects entails risk that may be more pronounced than the risk associated with, for example, medical malpractice. Research subjects may often have an adverse response to therapy administered as part of research protocols, researchers may make mistakes, and new technology may have unintended side effects. In research contexts, adverse effects of research have the potential to generate substantial adverse publicity, and the potential conflict of interest that a researcher may have could increase liability risk and worsen the public’s reaction to any bad outcomes. The government has also subjected certain research institutions to increased scrutiny related to research mishaps or perceived conflicts of interest.

In addition, the relationships between the sponsors of research and physicians or hospitals may also implicate the Federal Anti-Kickback Law or the Federal False Claims Act. Should there be a finding of improper conduct on the part of any member of the Credit Group, it is possible that the government could suspend research operations by such member, or terminate such member’s ability to participate in government-sponsored programs.

Business Relationships and Other Business Matters

Integrated Delivery Systems. Hospitals and health care systems often own, control or have affiliations with relatively large physician groups. Generally, the sponsoring hospital or health care system is the primary 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. These goals may not be achieved, however, and an unsuccessful alliance may be costly and counterproductive to all of the above-stated goals. The ACA 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 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 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 “—Regulatory Environment” herein,

may be heightened in an integrated delivery system. The foregoing laws 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 DOJ jointly issued guidance regarding waivers and safe harbors to enable providers to participate in the Medicare Shared Savings Program (see “Accountable Care Organization,” below). Although CMS and the agencies that enforce these laws are expected 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, such as the bar on the corporate practice of medicine, or state law requirements, such as insurance laws regarding licensure and minimum financial reserve holdings of risk-bearing organizations, may also introduce complexity, risk and additional costs in organizing and operating integrated delivery systems. Tax-exempt hospitals also face the risk in affiliating with for-profit entities that the IRS will determine that compensation practices or business arrangements result in private benefit or private use or generate unrelated business income for the hospitals. 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.

The ability of hospitals or health care systems to conduct integrated physician operations may be altered or eliminated in the future by legal or regulatory interpretation or changes, or by health care fraud enforcement. In addition, participating physicians may seek their independence for a variety of reasons, thus putting a hospital or health care system’s investment at risk, and potentially reducing its managed care leverage and/or overall utilization.

Integrated delivery systems will require new infrastructures, including the appropriate mix of physician specialties, new administrative skills, close relationships between physicians and hospitals, insurance risk management, and new relationships between patients and providers. Provider organizations may be unsuccessful in assembling successful integrated networks, may not achieve savings sufficient to offset the substantial costs of creating and maintaining the necessary infrastructures to support such developments, could incur losses from assuming increased risk and could incur damage to reputations. Some health care organizations that traditionally operated hospitals may, directly or in partnership, take on actual insurance risk, market various health coverage products and access patients by way of new and presently unknown channels. Such new endeavors could adversely affect the financial and operating condition or reputation of an organization.

Physician Financial Relationships. In addition to the physician integration relationships referred to above, hospitals and health systems frequently have various additional business and financial relationships with physicians and physician groups. These are in addition to hospital physician contracts for individual services performed by physicians in hospitals. They potentially include: joint ventures to provide a variety of outpatient services; recruiting arrangements with individual physicians and/or physician groups; loans to physicians; medical office leases; equipment leases from or to physicians; and various forms of physician practice support or assistance. These and other financial relationships with physicians (including hospital physician contracts for individual services) may involve financial and legal compliance risks for the hospitals and health systems involved. From a compliance standpoint, these types of financial relationships may raise federal and state “anti-kickback” and federal “Stark” issues (see “BONDHOLDERS’ RISKS – Regulatory Environment,” above), tax exemption issues (see “BONDHOLDERS’ RISKS – Tax-Exempt Status and Other Tax Matters,” below), as well as other legal and regulatory risks, and these could have a material adverse impact on hospitals and on the treatment of interest on the Bonds.

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. These trends will require new infrastructures, including the appropriate mix of physician specialties, new administrative skills, close relationships between physicians and hospitals, insurance risk management, and new relationships between patients and providers. Provider organizations may be unsuccessful in assembling successful integrated networks, may not achieve savings sufficient to offset the substantial costs of creating and maintaining the necessary infrastructures to support such developments, could incur losses from assuming increased risk and could incur damage to reputations.

Bundled Payment Programs. The ACA established a Medicare bundled payment pilot program, under which Medicare will make a single payment for an episode of care, such as heart bypass surgery, covering some combination of hospital, physician and post-hospital care for the episode. CMS announced a proposed rulemaking for additional mandatory bundled payment models in July 2016 for three additional clinical conditions, and CMS has implemented certain mandatory bundled payment initiatives. Private insurers are also developing bundled payment programs. While bundled payments offer opportunities to provide better coordinated care and to save costs, they also entail financial risk if the episode is not well managed.

Accountable Care Organization. The ACA established a Medicare Shared Savings Program (the “MSSP”) 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 delivery of services. ACOs that achieve quality performance standards will be eligible to share in a portion of the amounts saved by the Medicare program and, depending on their participation status, may share in a portion of any losses suffered by the Medicare program. DHHS 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. In November 2011, CMS published the final rules regarding ACOs and in June 2015, CMS issued a final rule to update and improve policies governing the MSSP. The regulations are complex and it remains unclear whether the qualification requirements will be a formidable barrier to entry. In particular, because the federal ACO regulations do not preempt state law, providers in any state participating as a federal ACO must be organized and operated in compliance with such state’s existing statutes and regulations. In June 2016, CMS issued a rule that aims to revise the benchmark rebasing calculations for ACOs. While these revised benchmark rebasing calculations may be particularly attractive for high performing ACOs, the delayed onset of these revised benchmark calculations (e.g., the revised methodology would not apply for the earliest ACOs until the start of their third participation agreement in 2019) leaves the MSSP ACO landscape somewhat uncertain. Also, the Federal Trade Commission (“FTC”) and Department of Justice (“DOJ”) issued a joint statement of antitrust enforcement policy in October 2011 as applied to ACOs; CMS and the OIG issued a final rule in October 2015 on certain waivers of the Anti-Kickback Statute, Stark Law and the Civil Monetary Penalties Law for ACOs; and the IRS issued a notice and fact sheet in October 2011 addressing the impact on tax-exempt organizations participating in ACOs; however, there may remain regulatory risks for participating hospitals, as well as financial and operational risks. It is possible that hospital participants in ACOs will 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 uncertain whether the savings will be adequate to recoup the initial investment. CMS is also developing and implementing more advanced ACO payment models, such as the Next Generation ACO Model, which require ACOs to assume greater risk for attributed beneficiaries. Providers participating in MSSP and other ACO payment models developed by CMS may not be able to recoup their investments and may suffer further losses if they are not able to meet quality targets and sufficiently control the cost of care for their attributed beneficiaries. In addition, private insurers and self-insured employers are beginning to establish similar incentives for providers, requiring changes in infrastructure and organization. The potential impacts of these initiatives and the regulation for ACOs are unknown and continually evolving, but introduce greater risk and complexity to healthcare finance and operations.

Physician Medical Staff. The primary relationship between a hospital and physicians who practice in it is through a hospital’s organized medical staff. Medical staff bylaws, rules and policies establish the criteria and procedures by which a physician may obtain medical staff membership and clinical privileges, and criteria and procedures by which a physician may have his or her privileges or membership curtailed, denied or revoked. Physicians who are denied medical staff membership or certain clinical privileges or who have such membership or privileges curtailed or revoked often file legal actions against hospitals and medical staffs. Such actions may include a wide variety of claims, some of which could result in substantial uninsured damages to a hospital. In addition, failure of a hospital’s governing body to adequately oversee the conduct of its medical staff may result in hospital liability to third parties.

Physician Supply. Sufficient community-based physician supply is important to hospitals and health systems. CMS annually reviews overall physician reimbursement formulas for Medicare and Medicaid. Changes to such physician reimbursement formulas by CMS could lead to physicians ceasing to accept Medicare and/or Medicaid patients. Regional differences in reimbursement by commercial and governmental payors, along with

variations in the costs of living, may cause physicians to avoid locating their practices in communities with low reimbursement or high living costs. Hospitals and health systems may be required to invest additional resources in recruiting and retaining physicians, or may be required to increase the percentage of employed physicians or be compelled to affiliate with and provide support to physicians in order to continue serving the growing population base and maintain market share.

Competition Among Health Care Providers. Increased competition from a wide variety of sources, including specialty hospitals, other hospitals and health care systems, inpatient and outpatient health care facilities, long-term care and skilled nursing services facilities, telehealth providers, clinics, joint venture arrangements with physicians and others, may adversely affect the utilization and/or revenues of hospitals. Existing and potential competitors may not be subject to various restrictions applicable to hospitals, which in some cases may enable them to engage in only the most profitable service lines, and competition, in the future, may arise from new sources not currently anticipated or prevalent.

Specialty health care facilities or ventures that attract an important segment of an existing hospital’s admitting specialists and services that generate significant revenue may be particularly damaging. For example, some large hospitals may have significant dependence on cardiovascular and/or orthopedic surgery programs, as revenue streams from those programs may cover significant fixed overhead costs. If a significant component of such a hospital’s cardiovascular or orthopedic surgeons develop their own specialty hospital or surgery center (alone or in conjunction with a specialty hospital operator or promoter, the number of which is growing) taking with them their patient base, a hospital could experience a rapid and dramatic decline in net revenues that is not proportionate to the number of patient admissions or patient days lost. It is also possible that the competing specialty entity, as a for-profit venture, would not accept indigent patients or other payors and government programs, leaving low-pay patient populations in the full-service hospital. In certain cases, such an event could be materially adverse to a hospital. A variety of proposals have been advanced to permanently prohibit such investments. Nonetheless, a prior governmental moratorium on certain specialty hospitals has been lifted, and therefore specialty hospitals may continue to represent a competitive challenge for full-service hospitals. Various state and federal regulations have also been proposed to restrict certain structures of joint ventures between and among hospitals and physicians.

Freestanding ambulatory surgery centers may attract away significant commercial outpatient services traditionally performed at hospitals. Commercial outpatient services, currently among the most profitable for hospitals, may be lost to competitors who can provide these services in an alternative, less costly setting. Full- service hospitals rely upon the revenues generated from commercial outpatient services to fund other less profitable services, and the decline of such business may result in the significant reduction of profitable income. Competing ambulatory surgery centers, more likely a for-profit business, may not accept indigent patients or low paying programs and would leave these populations to receive services in the hospital setting. Consequently, hospitals are vulnerable to competition from ambulatory surgery centers.

Additionally, scientific and technological advances, new procedures, drugs and devices, preventive medicine and outpatient health care delivery may reduce utilization and revenues of a hospital in the future or otherwise lead the way to new avenues of competition. In some cases, hospital investment in facilities and equipment for capital-intensive services may be lost as a result of rapid changes in diagnosis, treatment or clinical practice brought about by new technology or new pharmacology.

Antitrust. Antitrust liability may arise in a wide variety of circumstances, including medical staff privilege disputes, payor contracting, physician relations, joint ventures, merger, affiliation and acquisition activities, certain pricing or salary setting activities, and anticompetitive business conduct or practices as well as other areas of activity. Consolidation transactions among health care providers is an area in which investigation and enforcement activity by federal and state antitrust agencies is particularly frequent and vigorous. The application of the federal and state antitrust laws to health care is evolving (especially as the ACA and other coordination of care initiatives are implemented), and therefore not always clear. Currently, the most common areas of potential liability for hospitals and other health care providers are joint action among providers with respect to payor contracting, medical staff credentialing disputes, hospital mergers and acquisitions and anticompetitive business conduct or practices by hospitals and other health care providers with sufficiently large market share.

Violation of the antitrust laws could result in criminal and/or civil enforcement proceedings by federal and state agencies, as well as actions by private litigants. In certain actions, private litigants may be entitled to treble damages, and in others, governmental entities may be able to assess substantial monetary fines. Investigations and proceedings arising from the application of federal and state antitrust laws can require the dedication of substantial resources by affected providers and can delay or impede proposed transactions even if ultimately it is determined that no violation of applicable law would occur as a result of the proposed transaction. Moreover, successful private or governmental litigants may obtain injunctive relief that can affect the defendant’s ability to conduct or continue certain business practices or activities.

Employer Status. Hospitals are major employers with mixed technical and nontechnical workforces. The delivery of health care and related services is labor intensive. Labor costs, including salaries, benefits and other liabilities associated with a workforce, have significant impacts on hospital operations and financial condition. Developments affecting hospitals as major employers include: (1) imposition of higher minimum or living wages; (2) enhanced occupational health and safety standards; and (3) penalization of employers of undocumented immigrants. Legislation or regulation on any of the above or related topics could have a material adverse impact on one or more Members of the Credit Group and, in turn, their ability to make debt service payments with respect to the Bonds.

Labor Relations and Collective Bargaining. Hospitals are large employers with a wide diversity of employees and medical staff. Increasingly, employees of hospitals are becoming unionized, and many hospitals have collective bargaining agreements with one or more labor organizations. Employees subject to collective bargaining agreements may include essential nursing and technical personnel, as well as food service, maintenance and other trade personnel. Renegotiation of such agreements upon expiration may result in significant cost increases to hospitals. Employee strikes or other adverse labor actions may have an adverse impact on operations, revenue and hospital reputation. Currently, none of the employees or medical staff of OCF/Credit Group are represented by a labor union.

Health Care Worker Classification. Health care providers, like all businesses, are required to withhold income taxes from amounts paid to employees. If the employer fails to withhold the tax, the employer becomes liable for payment of the tax imposed on the employee. On the other hand, businesses are generally not required to withhold federal taxes from amounts paid to a worker classified as an independent contractor. The IRS has established criteria for determining whether a worker is an employee or an independent contractor for tax purposes. If the IRS were to reclassify a significant number of hospital independent contractors (e.g., physicians medical directors or physicians) as employees, the amount of back taxes and penalties could be material.

Staffing. From time to time, the health care industry suffers from a scarcity of nursing personnel, respiratory therapists, pharmacists and other trained health care technicians. In addition, aging medical staffs and difficulties in recruiting individuals to the medical profession are predicted to result in physician shortages. A significant factor underlying this trend includes a decrease in the number of persons entering such professions. This is expected to intensify in the future, aggravating the general shortage and increasing the likelihood of hospital- specific shortages. Competition for physicians and other health care professionals, coupled with increased recruiting and retention costs may increase hospital operating costs, possibly significantly, and growth may be constrained. This trend could have a material adverse impact on the financial conditions and results of operations of hospitals and other health care facilities. This scarcity may further be intensified if utilization of health care services increases as a consequence of the ACA’s expansion of the number of insured consumers. As reimbursement amounts are reduced to health care facilities and organizations that employ or contract with physicians, nurses and other health care professionals, pressure to control and possibly reduce wage and benefit costs may further strain the supply of those professionals.

Professional Liability Claims and General Liability Insurance. In recent years, the number of professional and general liability suits and the dollar amounts of damage recoveries have increased in health care nationwide, resulting in substantial increases in malpractice insurance premiums, higher deductibles and generally less coverage. Professional liability and other actions alleging wrongful conduct and seeking punitive damages are often filed against hospitals and other health care providers. Insurance does not provide coverage for judgments for punitive damages.

Beginning in 2008, CMS refused to reimburse hospitals for medical costs arising from certain “never events,” which include specific preventable medical errors. Certain private insurers and HMOs followed suit. The occurrence of “never events” is more likely to be publicized and may negatively impact a hospital’s reputation, thereby reducing future utilization and potentially increasing the possibility of liability claims

Litigation also arises from the corporate and business activities of hospitals, from a hospital’s status as an employer or as a result of medical staff or provider network peer review or the denial of medical staff or provider network privileges. As with professional liability, many of these risks are covered by insurance, but some are not. For example, some antitrust claims or business disputes are not covered by insurance or other sources and may, in whole or in part, be a liability of the hospital or other health care provider if determined or settled adversely.

There is no assurance that the Credit Group will be able to maintain coverage amounts currently in place in the future, that the coverage will be sufficient to cover malpractice judgments rendered against the Credit Group and any future members of the Credit Group or that such coverage will be available at a reasonable cost in the future. For a description of insurance coverage maintained by the Credit Group, see APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – INSURANCE.”

Information Technology. 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. 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.

Electronic media are also increasingly being used in clinical operations, including the conversion from paper to electronic medical records, computerization of order entry functions and the implementation of clinical decision-support software. The reliance on information technology for these purposes imposes new expectations on physicians and other workforce members to be adept in using and managing electronic systems. It also introduces risks related to patient safety, and to the privacy, accessibility and preservation of health information. See “BONDHOLDERS’ RISKS – Regulatory Environment – HIPAA; Privacy Requirements” and “– Cybersecurity Risks” above. Technology malfunctions or failure to understand and use information systems properly could result in the dissemination of or reliance on inaccurate information, as well as in disputes with patients, physicians and other health care professionals. Health information systems may also be subject to different or higher standards or greater regulation than other information technology or the paper-based systems previously used by health care providers, which may increase the cost, complexity and risks of operations. All of these risks may have adverse consequences on hospitals and health care providers.

Future government regulation and adherence to technological advances could result in an increased need of the Credit Group Members to implement new technology. Such implementation could be costly and is subject to cost overruns and delays in application, which could negatively affect the financial condition of the Obligated Group.

Technical and Clinical Developments. New clinical techniques and technology, as well as new pharmaceutical and genetic developments and products, may alter the course of medical diagnosis and treatment in ways that are currently unanticipated, and that may dramatically change medical and hospital care. These could result in higher healthcare costs, reductions in patient populations, lower utilization of hospital service and/or new sources of competition for hospitals.

Tax-Exempt Status and Other Tax Matters

Maintenance of the Tax-Exempt Status of the Credit Group. The tax-exempt status of the Bonds depends upon any members of the Credit Group benefiting from the use of Bond proceeds maintaining their status as organizations described in Section 501(c)(3) of the Code (a “501(c)(3)”) or as a disregarded entity for federal law purposes whose sole member is a 501(c)(3) (each a “Benefiting Member”). The maintenance of status as a

501(c)(3) is contingent on compliance by such Benefiting Member with general rules promulgated in the Code and related regulations regarding the organization and operation of tax-exempt entities, including their operation for charitable and other permissible purposes and their avoidance of transactions that may cause their earnings or assets to inure to the benefit of private individuals. As these general principles were developed primarily for public charities that do not conduct large-scale business operations and activities, they often do not adequately address the myriad of operations and transactions entered into by a modern health care organization. Although traditional activities of health care providers, such as medical office building leases, have been the subject of interpretations by the IRS in the form of private letter rulings, many activities or categories of activities have not been fully addressed in any official opinion, interpretation or policy of the IRS.

The IRS has taken the position that hospitals which are in violation of the Anti-Kickback Law may also be subject to revocation of their tax-exempt status. See “BONDHOLDERS’ RISKS – Regulatory Environment - Anti- Fraud and Abuse Provisions” above. As a result, tax-exempt hospitals, such as OCF, which have, and will continue to have, extensive transactions with physicians are subject to an increased degree of scrutiny and perhaps enforcement by the IRS.

The ACA also contains new requirements for tax-exempt hospitals. Under the ACA, each tax-exempt hospital facility is required to (i) conduct a community health needs assessment at least once every three years and adopt an implementation strategy to meet the identified community needs, (ii) adopt, implement and widely publicize a written financial assistance policy that contains the statutory and regulatory required minimums and a policy to provide emergency medical treatment without discrimination, (iii) limit charges to individuals who qualify for financial assistance under such tax-exempt hospital’s financial assistance policy to no more than the amounts generally billed to individuals who have insurance covering such care and refrain from using “gross charges” when billing such individuals, and (iv) refrain from taking extraordinary collection actions without first making reasonable efforts to determine whether the individual is eligible for assistance under such tax-exempt hospital’s financial assistance policy. In addition, the Treasury Department is required to review information about each tax-exempt hospital’s community benefit activities at least once every three years, as well as to submit an annual report to Congress with information regarding the levels of charity care, bad debt expenses, unreimbursed costs of government programs, and costs incurred by tax-exempt hospitals for community benefit activities. The periodic reviews and reports to Congress regarding the community benefits provided by 501(c)(3) hospitals may increase the likelihood that Congress will require such hospitals to provide a minimum level of charity care in order to retain tax- exempt status and may increase IRS scrutiny of particular 501(c)(3) hospital organizations.

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. These final regulations are complex and may be 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).

The Benefiting Members participate in a variety of transactions with physicians either directly or indirectly. Management of the Credit Group believes that the transactions to which a Benefiting Member is a party are consistent with the requirements of the Code as to tax-exempt status, but, as noted above, there is uncertainty as to the state of the law.

The IRS has periodically conducted audit and other enforcement activity regarding tax-exempt health care organizations. The IRS conducts special audits of large tax-exempt health care organizations with at least $500 million in assets or $1 billion in gross receipts. Such audits are conducted by teams of revenue agents, often take years to complete and require the expenditure of significant staff time by both the IRS and the audited organization. These audits examine a wide range of possible issues, including tax-exempt bond financings, partnerships and joint ventures, unrelated business income tax, retirement plans and employee benefits, employment taxes, political contributions and other matters.

Members of the Credit Group have been and most likely will be audited from time to time by the IRS. OCF believes the members of the Credit Group have properly complied with tax laws related to their tax-exempt status and to any tax-exempt debt issued for their benefit, in each case as applicable to such member. Nevertheless due to the complexity of tax laws, including issues about which reasonable persons can differ, an audit could result in additional taxes, interest and penalties. An audit could ultimately affect a member of the Credit Group’s tax- exempt status as well as the exclusion from gross income for federal income tax purposes of the interest payable with respect to the Bonds and other tax-exempt debt issued for the benefit of one or more members of the Credit Group.

If the IRS were to find that a hospital or health care system has participated in activities in violation of certain regulations or rulings, the tax-exempt status of such entity could be in jeopardy. Although the IRS has not frequently revoked the 501(c)(3) tax-exempt status of nonprofit health care organizations, it could do so in the future. Loss of tax-exempt status by a Benefitting Member or any future Benefitting Member potentially could result in loss of tax exemption of the Bonds and of other tax-exempt debt of the Credit Group or any future member of the Credit Group. Defaults in covenants regarding the Bonds and other related tax-exempt debt and obligations likely would be triggered. Loss of tax-exempt status also could result in substantial tax liabilities on income of the Credit Group. In some cases, the IRS has imposed substantial monetary penalties on tax-exempt hospitals in lieu of revoking their tax-exempt status. In those cases, the IRS and exempt hospitals entered into settlement agreements requiring substantial payments to the IRS. For these reasons, loss of tax-exempt status of a Benefiting Member or any future Benefitting Member could have a material adverse effect on the financial condition of the Credit Group.

In lieu of revocation of exempt status, the IRS may impose a penalty in the form of excise taxes on certain “excess benefit transactions” involving 501(c)(3) organizations and “disqualified persons.” An excess benefit transaction is one in which a disqualified person or entity receives more than fair market value from the exempt organization or pays the exempt organization less than fair market value for property or services, or shares the net revenues of the tax-exempt entity. A disqualified person is a person (or an entity) who is in a position to exercise substantial influence over the affairs of the exempt organization during the five years preceding an excess benefit transaction. The statute imposes excise taxes on the disqualified person and any “organization manager” who knowingly participates in an excess benefit transaction. These rules do not penalize the exempt organization itself, so there would be no direct impact on the Credit Group or any future member of the Credit Group or the tax status of the Bonds if an excess benefit transaction were subject to IRS enforcement, pursuant to these “intermediate sanctions” rules.

State and Local Tax Exemption. The states may also scrutinize the income tax exemption of health care organizations. It is possible that legislation in the State may be proposed to strengthen its role in supervising nonprofit health systems. It is likely that the loss by a Benefitting Member of federal income tax exemption would also trigger a challenge to its state income tax exemption. Depending on the circumstances, such event could be material and adverse.

State, county (or parish) and local taxing authorities undertake audits and reviews of the operations of tax- exempt health care providers with respect to their real property tax exemptions. In some cases, particularly where authorities are dissatisfied with the amount of services provided to indigents, the real property tax-exempt status of the health care providers has been questioned. The majority of the real property of the Credit Group is currently treated as exempt from real property taxation. Although the real property tax exemptions of the Credit Group with respect to its core hospital facilities, have not, to the knowledge of management, been under challenge or investigation, an audit could lead to a challenge that could adversely affect the real property tax exemptions of one or more members of the Credit Group.

It is not possible to predict the scope or effect of future state and local legislative or regulatory actions with respect to taxation of nonprofit corporations. There can be no assurance that future changes in the laws and regulations of state or local governments will not materially adversely affect the financial condition of the Credit Group by requiring payment of income, sales, local property or other taxes.

Unrelated Business Income. In recent years, the IRS and state, county and local tax authorities have audited the operations of tax-exempt hospitals and health care systems with respect to their exempt activities and the generation of unrelated business taxable income, or UBTI. Most hospitals and health care systems participate in

activities that may generate UBTI. An investigation or audit could result in assessment of taxes, interest and penalties with respect to unreported UBTI and in some cases ultimately could affect the tax-exempt status of such entity, as well as the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds and other tax-exempt debt of the Credit Group.

Maintenance of Tax-Exempt Status of Interest on the Bonds. The Code imposes a number of requirements that must be satisfied for interest on state and local obligations, such as the Bonds, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of bond proceeds and bond financed property, limitations on the investment earnings of bond proceeds prior to expenditure, a requirement that certain investment earnings on bond proceeds be paid periodically to the United States Treasury, and a requirement that an issuer of tax-exempt obligations, including the Authority, file an information report with the IRS. OCF has covenanted in the Loan Agreement that it will comply with such requirements. Future failure by OCF or any Benefitting Member to comply with the requirements stated in the Code and related regulations, rulings and policies may result in the treatment of interest on the Bonds as taxable, retroactively to the date of issuance. The Authority has covenanted in the Indenture that it will not knowingly take any action or omit to take any action within its control, which act or omission would adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes; and in the event it should unknowingly do so or omit to do so, will promptly upon having such brought to its attention take such reasonable actions as may rescind or otherwise negate its unknowing act or omission.

IRS officials have indicated that more resources will be invested in audits of tax-exempt bonds, including the use of bond proceeds, in the charitable organization sector, with specific review of private use. In addition, the IRS sent post-issuance compliance questionnaires to several hundred nonprofit corporations that had borrowed on a tax-exempt basis regarding their post-issuance compliance with various requirements for maintaining the federal tax exemption of interest on the related bonds. After analyzing responses, IRS representatives indicated that it had commenced a number of examinations of hospital tax-exempt bond issuances with wide-ranging areas of inquiry. In the final report, issued July 1, 2011, summarizing the findings and conclusions of the questionnaires, the IRS stressed the importance of formal post-issuance compliance and record-keeping procedures which, once implemented, the borrower should continuously review. The IRS suggested that it may issue future questionnaires as part of its goal to promote post-issuance compliance.

Tax-exempt organizations must also complete schedules to IRS Form 990-Return of Organizations Exempt From Income Tax that report certain information on community benefit and other matters. On Schedule H, hospitals and health systems must report how they provide community benefit and specify certain billing and collection practices. Schedule K requires detailed information related to all outstanding bond issues of tax-exempt borrowers, including information regarding operating, management and research contracts as well as private use compliance. Tax-exempt organizations must also complete Schedule J, which requires reporting of compensation information for the organizations’ officers, directors, trustees, key employees, and other highly compensated employees. There can be no assurance that responses by management of the Credit Group to an IRS examination, questionnaire or Form 990 will not lead to an IRS review that could adversely affect the tax-exempt status, market value or marketability of the Bonds or of other outstanding tax-exempt indebtedness of the Credit Group.

The Bonds or other tax-exempt obligations issued for the benefit of the Obligated Group may be, from time to time, subject to audits by the IRS. Bond Counsel will render an opinion with respect to the tax-exempt status of the Bonds, as described under the caption “TAX EXEMPTION.” OCF has not sought to obtain a private letter ruling from the IRS with respect to the Bonds and the opinion of Bond Counsel is not binding on the IRS. There is no assurance that an IRS examination of the Bonds will not adversely affect the market value of the Bonds, or that future legislative action might limit or remove the tax-exempt status of interest on the Bonds. See “TAX EXEMPTION” herein.

Limitations on Contractual and Other Arrangements Imposed by the Internal Revenue Code. A Credit Group Member that is a tax-exempt organization is limited with respect to its use of practice income guarantees, reduced rent on medical office space, low interest loans, joint venture programs and other means of recruiting and retaining physicians. Uncertainty in this area has been reduced somewhat by the issuance by the IRS of guidelines on permissible physician recruitment practices. The IRS scrutinizes a broad variety of contractual relationships commonly entered into by hospitals and health care systems and has issued a detailed audit guide suggesting that

field agents scrutinize numerous activities of hospitals and health care systems in an effort to determine whether any action should be taken with respect to limitations on or revocation of their tax-exempt status or assessment of additional tax. Any suspension, limitation, or revocation of a Benefitting Member’s tax-exempt status or assessment of significant tax liability would have a materially adverse effect on the Credit Group and might lead to loss of tax exemption of interest on the Bonds.

Cost of Capital. From time to time, Congress has considered and is considering revisions to the Code that may prevent or limit access to the tax-exempt debt market to borrowers or issuers such as the Credit Group Members. Such legislation, if enacted into law, may have the effect of increasing the capital costs of the Credit Group Members.

Other Risk Factors

Risks Related to Outstanding Variable Rate Obligations. Certain outstanding securities secured by Obligations are variable rate obligations, the interest rates on which could rise. Such interest rates vary on a periodic basis and may be converted to a fixed interest rate. This protection against rising interest rates is limited, however, because OCF would be required to continue to pay interest at the variable rate until it is permitted to convert the obligations to a fixed rate pursuant to the terms of the applicable transaction documents. Previous credit market turmoil in the auction rate markets and dislocation among various bond insurers and swap providers triggered suddenly high interest costs to many health care organizations holding debt with interest rates that varied on a periodic basis. If certain variable rate bonds issued for the Obligated Group cannot be remarketed when holders demand payment, the Obligated Group could be forced to draw under a line of credit, liquidate investments, or apply cash to purchase variable rate bonds, thus reducing its liquid assets available to pay the Bonds and continue their revenue producing operations.

Interest Rate Swaps. Interest rate swaps, have and can from time to time experience negative trading patterns, causing many to cease to function effectively to hedge interest rate exposure. Certain swap arrangements may not be terminable except upon the payment of potentially significant termination fees by the borrowing party. In some cases, negative mark-to-market valuation of certain swap arrangements must be booked on a borrower’s balance sheet. These factors may have a material adverse impact on hospitals and health systems involved in such financial arrangements. For a discussion of OCF’s interest rate swap arrangements, see APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – HISTORICAL FINANCIAL INFORMATION – Interest Rate Swaps.” See also “ESTIMATED SOURCES AND USES OF FUNDS” herein.

Investments. The Credit Group has significant holdings in a broad range of investments. Market fluctuations may affect the value of those investments and those fluctuations may be and historically have been at times material.

Pension and Benefit Funding. As large employers, hospitals may incur significant expenses to fund pension and benefit plans for employees and former employees, and to fund required workers’ compensation benefits. Plans are often underfunded, or may become underfunded and funding obligations in some cases may be erratic or unanticipated and may require significant commitments of available cash needed for other purposes. See APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – EMPLOYEE BENEFIT PLANS.”

Bankruptcy and Insolvency. In the event that OCF or any future Members of the Obligated Group filed for protection from creditors under the United States Bankruptcy Code, the rights and remedies of the Owners of the Bonds would be subject to various provisions of the United States Bankruptcy Code. If OCF or any future Members of the Obligated Group were to commence a proceeding in bankruptcy, payments made by such Members of the Obligated Group during the 90-day period immediately preceding such commencement (or, under certain circumstances, during the preceding one-year period) may be voided as preferential transfers to the extent such payments allow the recipients thereof to receive more than they would have received in the event of the liquidation of such Members of the Obligated Group. Security interests and other liens granted by OCF and any future Members of the Obligated Group to the Trustee or the Master Trustee and perfected during such preference period may also be voided as preferential transfers to the extent such security interest or other lien secures obligations that arose prior to the date of such grant or perfection.

A bankruptcy filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against such Members of the Obligated Group and their respective property and as an automatic stay of any act or proceeding to enforce a lien upon or to otherwise exercise control over its property as well as various other actions to enforce, maintain or enhance the rights of the Trustee and the Master Trustee. If the bankruptcy court so ordered, the property of such Members of the Obligated Group, including their respective Gross Revenues, could be used for the financial rehabilitation of such Members of the Obligated Group despite any security interest of the Trustee therein. The rights of the Trustee and the Master Trustee to enforce their respective interests and other liens could be delayed during the pendency of the rehabilitation proceeding.

Such Members of the Obligated Group could also file a plan for the adjustment of its debts in any such proceeding which could include provisions modifying or altering the rights of creditors generally, or any class of them, secured or unsecured. The plan, when confirmed by a court, binds all creditors who had notice or knowledge of the plan and, with certain exceptions, discharges all claims against the debtor to the extent provided for in the plan. No plan may be confirmed unless certain conditions are met, among which are conditions that the plan be feasible and that it shall have been accepted by each class of claims impaired thereunder. Each class of claims has accepted the plan if at least two-thirds in dollar amount and more than one-half in number of the class cast votes in its favor. Even if the plan is not so accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly. Any such plan could adversely affect the Owners and Beneficial Owners of the Bonds. In addition, a Bankruptcy Court may, under certain conditions, avoid or strip the liens off of certain of the Obligated Group’s assets, which could include security interests granted to the Master Trustee for the benefit of Holders of Obligations, including Obligation No. 17.

The State’s revocatory action provides a further basis for another party to annul a contract (such as the Loan Agreement or the Mortgage), even in the absence of the filing of a bankruptcy case, if such contract caused or increased a party’s insolvency. Under the State’s revocatory action, a party is deemed insolvent if the total of its liabilities exceeds the total of its fairly appraised assets.

In the event of bankruptcy or insolvency of OCF or any future Members of the Obligated Group, there is no assurance that certain covenants, including tax covenants, contained in the Indenture, the Loan Agreement or the Master Indenture and certain other documents would survive. Accordingly, such Members of the Obligated Group, as debtors in possession, or a bankruptcy trustee could take action which might adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.

In addition, the bankruptcy of a health plan or physician group that is a party to a significant managed care arrangement with the Obligated Group or any of its affiliates, or that of any significant contract payor obligated to any one or more of the Obligated Group or its affiliates, could have material adverse effects on the Obligated Group.

The bankruptcy of a Designated Affiliate would not trigger an event of default under the Master Indenture, the Indenture or the Loan Agreement, but the bankruptcy of a Designated Affiliate could have a material adverse effect on the Credit Group. If a Designated Affiliate were to file for bankruptcy and had no contractual obligation to make payments to the Obligated Group, neither the Obligated Group nor the Obligated Group Member that controls the Designated Affiliate would be able to file a claim in a bankruptcy proceeding involving the Designated Affiliate for the payment of any amounts due on the Obligations. The Master Trustee has no contractual rights against Designated Affiliates and would not be able to file such a claim whether or not a contract existed between the Obligated Group Member and the Designated Affiliate. In addition, in the event the Obligated Group Member that controls the Designated Affiliate were to become a debtor in a bankruptcy case, the Obligated Group or such Obligated Group Member that controls the Designated Affiliate, as debtor-in-possession, or a trustee in bankruptcy, may not be able to cause the Designated Affiliate to transfer funds to the Obligated Group or the trustee in bankruptcy.

Construction Delays and Cost Overruns. The Credit Group is currently undertaking a number of construction projects and members of the Credit Group are expected to undertake additional projects in the future. Completion of such projects is subject to approval by the appropriate governmental bodies. In addition, numerous risks are involved in any such projects, including delays and increased costs due to strikes, shortages of materials, adverse weather conditions, changes in project design, inflation, and numerous other factors. Therefore, there can be

no assurances that the projects currently pursued or undertaken in the future by the Credit Group or any future members of the Credit Group will be finished on time or within budget. See APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – CAPITAL PROJECTS.”

Marketability of the Bonds. There is no assurance as to the liquidity of markets that may develop for the Bonds, the ability of beneficial owners to sell the Bonds or the price at which beneficial owners would be able to sell the Bonds. Neither the Underwriter nor any other financial institution is obligated to make a market in the Bonds, and any financial institution that does so may discontinue its market-making activities at any time without notice. Any market for the Bonds may be subject to disruption which could adversely affect the prices at which beneficial owners may sell the Bonds. The Bonds may trade at a discount from their original purchase prices depending upon interest rates, the market for obligations similar to the Bonds, the financial condition of the Credit Group and other factors.

Bond Ratings. There is no assurance that the ratings assigned to the Bonds at the time of issuance will not be lowered or withdrawn at any time, the effect of which could adversely affect the market price for, and the marketability and liquidity of, the Bonds. See “RATINGS.”

Covenants. OCF is a party to, and may from time to time become a party to, loan agreements, with credit providers, secured by Obligations, that have covenants differing from those in the Master Indenture. Should OCF fail to comply with such covenants, it is possible that an Obligation securing the loan agreement could become immediately due and payable. If the amount then due under the Obligation were not paid when due, an event of default under the Master Indenture could occur, entitling the Master Trustee to cause all of the outstanding Obligations to be immediately due and payable.

Medical Liability Litigation and Insurance. Medical liability litigation is subject to public policy determinations and legal and procedural rules that may be altered from time to time, with the result that the frequency and cost of such litigation, and resultant liabilities or insurance costs, may increase in the future. Hospitals and health systems may be affected by negative financial and liability impacts on physicians. Costs of insurance, including self-insurance, may increase dramatically. Further, the Members of the Credit Group, as applicable, each have the benefit of the protections afforded by the Louisiana Medical Malpractice Act (“MMA”), including a general damages limitation per claim of $500,000 claim in addition to medical expenses, interest and costs. Each named health care provider's individual liability is capped at $100,000, with the Louisiana Patient's Compensation Fund, the state’s quasi-public excess fund having responsibility for the balance of the $500,000 limitation. The protection of the cap extends only to claims based on “medical malpractice,” as defined by MMA and as interpreted by Louisiana courts. Recently, the Louisiana Supreme Court held that claims of hospital negligent credentialing do not fall under the MMA and, therefore, are not subject to MMA’s damages limitation. There is a risk that MMA may be further interpreted to limit the definition of “medical malpractice” exposing medical providers to greater liability.

Public Health Emergencies or Crises. The occurrence of a public health emergency or crisis, including an unexpected widespread outbreak of a contagious virus such as Ebola, Zika, or H1N1, may put stress on the capacity of part or all of the facilities of the Credit Group, could require that resources be diverted from one part of the operations of the Credit Group to another part, or could impair the operation of part or all of the facilities of the Credit Group.

Other Future Risks. In the future, the following factors, among others, may adversely affect the operations of hospitals and other health care providers, including the Credit Group, or the market value of the Bonds, to an extent that cannot be determined at this time.

(a) Adoption of legislation or implementation of regulations that would establish a national or statewide single-payor health program or that would establish national, statewide or otherwise regulated rates applicable to hospitals and other health care providers.

(b) Reduced demand for the services of hospitals and other health care providers that might result from decreases in population or loss of market share.

(d) Bankruptcy of an indemnity/commercial insurer, managed care plan or other payor.

(e) Efforts by insurers and governmental agencies to limit the cost of hospital services, to reduce the number of beds and to reduce the utilization of hospital facilities by such means as preventive medicine, improved occupational health and safety and outpatient care, or comparable regulations or attempts by third-party payors to control or restrict the operations of certain health care facilities.

(f) Efforts by employers to shifts costs of medical care to employees through increased deductibles and restrictions on covered services.

(g) The occurrence of a pandemic or a natural or man-made disaster that could damage hospitals and other health care providers’ facilities, interrupt utility service to the facilities, result in an abnormally high demand for health care services or workforce loss or otherwise impair the Credit Group’s operations and the generation of revenues from the facilities. See APPENDIX A – “INFORMATION CONCERNING OCHSNER HEALTH SYSTEM – INSURANCE.”

(h) Limitations on the availability of, and increased compensation necessary to secure and retain, nursing, technical and other professional personnel.

(i) Cost and availability of any insurance, such as professional liability, fire, automobile and general comprehensive liability coverages, which health care facilities of a similar size and type generally carry.

(j) The occurrence of a large scale terrorist attack or other mass casualty incident that increases the proportion of patients who are unable to pay fully for the cost of their care and that disrupts the operation of certain healthcare facilities by resulting in an abnormally high demand for healthcare services.

(k) Increasing deficits and other financial pressure experienced by both state and federal governments that result in significant reductions or delays in payments from governmental payers, especially Medicare and Medicaid

NO LITIGATION

The Authority

There is not now pending or, to the knowledge of the Authority, threatened, any litigation restraining or enjoining the issuance, sale or delivery of the Bonds or questioning or affecting the validity of the Bonds or the proceedings or authority under which the Bonds are to be issued. There is no litigation pending or, to the Authority’s knowledge, threatened which in any manner questions the right of the Authority to enter the Loan Agreement with OCF or to secure the Bonds in the manner provided in the Indenture.

The Credit Group

There is no action, suit, proceeding, inquiry or investigation at law or before or by any court, public board or body known to management of the Credit Group to be pending, or threatened, against OCF or any other member of the Credit Group nor, to its knowledge, is there any basis therefor, wherein an unfavorable decision, ruling or finding would adversely affect the validity of the Bonds, the Loan Agreement, Obligation No. 17, the Master Indenture or the Indenture.

The members of the Credit Group are subject to certain legal actions that, in whole or in part, are not or may not be covered by insurance because of the type of action or amount or types of damages requested (e.g., punitive damages), because of a reservation of rights by an insurance carrier, or because the action has not proceeded to a stage that permits full evaluation. Management of the Credit Group does not anticipate that any such

suits will ultimately result in damage awards or judgments that would materially adversely affect the operations or financial condition of the Credit Group.

There is no litigation of any nature now pending against OCF or any other member of the Credit Group, to the knowledge of management of the Credit Group, threatened, which, if successful, would materially adversely affect the operations or financial condition of the Credit Group.

RATINGS

Moody’s Investors Service, Inc. (“Moody’s”) and Fitch Ratings (“Fitch”) have provided ratings for the Bonds of A3 and A-, respectively. OCF has furnished to Moody’s and Fitch certain information and materials concerning the Bonds and itself. Generally, rating agencies base their ratings on such information and materials and on investigations, studies and assumptions made by the rating agencies themselves. These ratings reflect only the view of such organizations, and an explanation of the significance of such ratings may be obtained only from the rating agency furnishing such rating. There is no assurance that such ratings will be maintained for any given period of time or that such ratings will not be revised downward, suspended or withdrawn entirely by such rating agencies, if in their sole judgment, circumstances so warrant. Other than as described under “CONTINUING DISCLOSURE UNDERTAKING” below, OCF has not and neither the Authority nor the Underwriter has undertaken any responsibility either to bring to the attention of the Holders or beneficial owners of the Bonds any proposed revision, suspension or withdrawal of any rating on the Bonds or to oppose any such proposed revision, suspension or withdrawal. Any such downward revision, suspension or withdrawal of such ratings may have an adverse effect on the market price or marketability of the Bonds. A securities rating is not a recommendation to buy, sell or hold securities.

FINANCIAL ADVISOR

OCF has retained Kaufman, Hall & Associates, LLC., Skokie, Illinois, as financial advisor in connection with the issuance of the Bonds. Although Kaufman, Hall & Associates, LLC. has assisted in preparation of this Official Statement, Kaufman, Hall & Associates, LLC. was not and is not obligated to undertake, and has not undertaken to make, an independent verification and assumes no responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.

VERIFICATION

Concurrently with the issuance of the Bonds, The Arbitrage Group, Inc. (the “Verification Agent”), will deliver a report with respect to the mathematical accuracy of certain computations, contained in schedules provided to them, which were prepared by the Underwriter, relative to the sufficiency of moneys and securities deposited into the respective escrow funds established pursuant to the Escrow Agreement to pay, when due the principal, whether at maturity or upon prior redemption, interest and redemption premium requirements of the Refunded Bonds. The report of the Verification Agent will include the statement that the scope of its engagement is limited to verifying the mathematical accuracy of the aforesaid computations and that it has no obligation to update its report because of events occurring, or data or information coming to its attention, subsequent to the date of the report.

UNDERWRITING

The Bonds are being purchased by Citigroup Global Markets Inc. (the “Underwriter”). Pursuant to the Bond Purchase Contract for the Bonds, the Underwriter has agreed to purchase the Bonds at a purchase price of $______(consisting of the aggregate principal amount of the Bonds of $______, less/plus net original issue discount/premium of $______and less an underwriting discount of $______). The Purchase Contract for the Bonds provides that the Underwriter will purchase all of the Bonds, if any are purchased, and contains the agreements of OCF to indemnify the Underwriter and the Authority against certain liabilities, including certain liabilities under federal securities law.

Citigroup Global Markets Inc., the Underwriter of the Bonds, has entered into a retail distribution agreement with UBS Financial Services Inc. (“UBSFS”). Under this distribution agreement, Citigroup Global

Markets Inc. may distribute municipal securities to retail investors through the financial advisor network of UBSFS. As part of this arrangement, Citigroup Global Markets Inc. may compensate UBSFS for their selling efforts with respect to the Bonds.

The Underwriter and its affiliates are 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. The Underwriter and its affiliates have, from time to time, performed, and may in the future perform, various investment banking services for OCF or other Obligated Group Members for which they received or will receive customary fees and expenses.

In the ordinary course of their various business activities, the Underwriter and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of OCF or other Obligated Group Members.

CONTINUING DISCLOSURE UNDERTAKING

Because the Bonds are limited obligations of the Authority, payable solely from amounts received from OCF and other Obligated Group Members or from any other amounts available therefor under the Indenture as described in this Official Statement, financial or operating data concerning the Authority is not material to an evaluation of the offering of the Bonds or to any decision to purchase, hold or sell the Bonds. Accordingly, the Authority is not providing any such information. OCF, as Credit Group Representative, has undertaken all responsibilities for any continuing disclosure to Holders of the Bonds, as described in the following paragraph, and the Authority shall have no liability to the Holders of the Bonds or any other Person with respect to Rule 15c2-12, referred to in this Official Statement as the Rule, promulgated under the Securities Exchange Act of 1934 by the Securities and Exchange Commission.

OCF, as Credit Group Representative, will covenant for the benefit of Holders and Beneficial Owners of the Bonds to provide for dissemination (i) certain financial information and operating data relating to the Obligated Group not later than 120 days following the end of OCF’s fiscal year (which currently is December 31) (referred to as the “Annual Report”), commencing with the report for the December 31, 2017 fiscal year, (ii) within 45 days after the end of each fiscal quarter of each year (other than the fourth fiscal quarter), commencing with the fiscal quarter ending June 30, 2017, certain unaudited financial information relating to the Obligated Group and (iii) notices of the occurrence of certain enumerated events. The Annual Report, quarterly information and notices of certain enumerated events, if any, will be filed by OCF, as Credit Group Representative, or its dissemination agent as required by the Rule. See APPENDIX F – “FORM OF CONTINUING DISCLOSURE UNDERTAKING.” These covenants have been made in order to assist the Underwriter in complying with the Rule. In the last five years OCF has never failed to comply in all material respects with its obligations under any previous continuing disclosure undertaking to provide annual or quarterly reports or notices of material events.

TAX EXEMPTION

In the opinion of Foley & Judell, L.L.P. New Orleans, Louisiana, Bond Counsel, interest on the Bonds (including any original issue discount) is excluded from the gross income of the owners thereof for federal income tax purposes under existing law. Bond Counsel is further of the opinion that, pursuant to the Public Trust Act, the Bonds and the income thereof are exempt from all taxation by the State.

Alternative Minimum Tax Considerations

Except as described in this paragraph, interest on the Bonds will not be an item of tax preference for purposes of the alternative minimum tax on individuals and corporations. The Code, however, imposes a 20% alternative minimum tax on the “alternative minimum taxable income” of a corporation, if the amount of such alternative minimum tax is greater than the amount of the corporation’s regular income tax. Generally, a

corporation’s alternative minimum taxable income will include 75% of the amount by which a corporation’s “adjusted current earnings” exceeds a corporation’s alternative minimum taxable income. Because interest on tax- exempt obligations is included in a corporation’s “adjusted current earnings,” ownership of the Bonds could subject a corporation to alternative minimum tax consequences.

General

The Code imposes a number of requirements that must be satisfied for interest on state and local obligations to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of bond proceeds and the source of repayment of bonds, limitations on the investment of bond proceeds prior to expenditure, a requirement that excess arbitrage earned on the investment of certain bond proceeds be paid periodically to the United States, except under certain circumstances, and a requirement that information reports be filed with the IRS. The Authority and OCF have covenanted that they will, to the extent permitted by the laws of the State, comply with the requirements of the Code in order to maintain the exclusion from gross income of interest on the Bonds for federal income tax purposes.

The opinion of Bond Counsel will assume continuing compliance with the covenants of the Authority, OCF or any future Members of the Obligated Group pertaining to those sections of the Code which affect the exclusion from gross income of interest on the Bonds for federal income tax purposes and, in addition, will rely on representations by OCF with respect to matters solely within the knowledge of OCF, which Bond Counsel has not independently verified. If the Authority, OCF or any future Members of the Obligated Group should fail to comply with their respective covenants or if the foregoing representations should be determined to be inaccurate or incomplete, interest on the Bonds could become taxable from the date of issuance of the Bonds, regardless of the date on which the event causing such taxation occurs. Bond Counsel has not undertaken to determine (or to inform any person) whether any action taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may affect the tax status of interest on the Bonds.

Except as stated above, Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting from the ownership of, receipt of interest on or disposition of the Bonds. However, owners of the Bonds should be aware that the ownership of tax-exempt obligations may result in collateral federal income tax consequences to financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, corporations with Subchapter S earnings and profits and passive investment income that exceeds 25% of their gross receipts and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations. In addition, certain foreign corporations doing business in the United States may be subject to a “branch profits tax” on their effectively connected earnings and profits. These categories of owners should consult their own tax advisors as to the applicability of these consequences.

Future legislation, if enacted into law, or clarification of the Code may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation, to be subject to State income taxation or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislation or clarification of the Code may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisers regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses no opinion.

The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the IRS or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Authority, OCF or any future Members of the Obligated Group, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The Authority and OCF have covenanted, however, to comply with the requirements of the Code.

Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Authority, OCF, any future Members of the Obligated Group or the Beneficial Owners regarding the tax-exempt status of the Bonds in the event of an audit

examination by the IRS. Under current procedures, parties other than the Authority, OCF, any future Members of the Obligated Group and their respective appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Authority, OCF or any future Member of the Obligated Group legitimately disagree, may not be practicable. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Bonds, and may cause the Authority, OCF, any future Members of the Obligated Group or the Beneficial Owners to incur significant expense.

Tax Treatment of Original Issue Discount

The Bonds maturing on May 15, 20__ (the “OID Bonds”) are sold at an original issue discount. The difference between the initial public offering price, as set forth on the inside front cover page hereof, the OID Bonds and the stated principal amount payable at maturity constitutes original issue discount treated as interest which is excluded from gross income for federal income tax purposes and which is exempt from all taxation in the State subject to the caveats and provisions described above under “General.”

In the case of an owner of an OID Bond, the amount of original issue discount which is treated as having accrued with respect to such OID Bond is added to the cost basis of the owner in determining, for federal income tax purposes, gain or loss upon disposition of such OID Bond (including its sale, redemption or payment at maturity). Amounts received upon disposition of an OID 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 maturity date of such OID Bond. The amount treated as original issue discount on such OID Bond for a particular semiannual period is equal to (i) the product of (a) the yield to maturity for such OID Bond and (b) the amount which would have been the tax basis of such OID Bond at the beginning of the particular semiannual period if held by the original purchaser, (ii) less the amount of any payments on such OID Bond during the semiannual period. The tax basis is determined by adding to the initial public offering price on such OID Bond the sum of the amounts which would have been treated as original issue discount for such purposes during all prior periods. If such an OID Bond is sold between compounding dates, original issue discount which would have 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 OID Bonds should consult their own tax advisors with respect to the determination for federal income tax purposes of original issue discount accrued with respect to such OID Bonds as of any date, with respect to the accrual of original issue discount for such OID Bonds purchased on the secondary markets and with respect to the state and local tax consequences of owning such OID Bonds.

Tax Treatment of Original Issue Premium

The Bonds maturing on May 15, 20__, (the “Premium Bonds”), are offered and sold at a premium. The premium is the excess of the issue price over the stated redemption price at maturity and must be amortized on an actuarial basis by the owner of the Premium Bonds from the date of acquisition of the Premium Bonds through the maturity date thereof. The premium is not deductible for federal income tax purposes, and owners of the Premium Bonds are required to reduce their basis in the Premium Bonds by the amount of premium that accrued while they owned such Premium Bonds. Owners of the Premium Bonds should consult their own tax advisors as to the determination for federal income tax purposes of the amount of premium amortized each year with respect to the Premium Bonds, the adjusted basis of the Premium Bonds for purposes of determining the taxable gain or loss upon the sale or other disposition of the Premium Bonds (prior to maturity and at maturity) and all other federal tax consequences and any state and local tax aspects of owning the Premium Bonds.

INDEPENDENT AUDITORS

The financial statements of Ochsner Health System and Subsidiaries as of December 31, 2016 and 2015 and for the years then ended, included in APPENDIX B, have been audited by Ernst & Young LLP, independent auditors, as stated in their report included in APPENDIX B.

LEGAL MATTERS

The validity of the Bonds and certain other legal matters are subject to the approving opinion of Foley & Judell, L.L.P. New Orleans, Louisiana, Bond Counsel to the Authority. Certain legal matters will be passed upon for the Authority by its special counsel, Jacob S. Capraro, Esq., New Orleans, Louisiana, for OCF by its counsel, Liskow & Lewis, a Professional Law Corporation, New Orleans, Louisiana and for the Underwriter by its counsel, Orrick, Herrington & Sutcliffe LLP.

MISCELLANEOUS

The summaries and descriptions herein and incorporated herein of the Loan Agreement, Obligation No. 17, the Master Indenture, the Indenture, the Continuing Disclosure Undertaking and any other documents relating to the Bonds and not purporting to be quoted in full are qualified in their entirety by reference to the complete provisions of such documents, copies of which may be obtained from OCF and the Underwriter during the period of the offering and from the Trustee or Master Trustee, as applicable, thereafter.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

The distribution of this Official Statement by the Authority has been duly authorized by the Authority and approved by OCF. This Official Statement is not to be construed as a contract or agreement between the Authority or OCF and the purchasers or Holders of any of the Bonds.

LOUISIANA PUBLIC FACILITIES AUTHORITY

By: Guy Campbell III, Chairman

Approved by:

OCHSNER CLINIC FOUNDATION

By: Scott J. Posecai Executive Vice President and Chief Financial Officer

By: Bobby C. Brannon Executive Vice President and Treasurer

APPENDIX A

INFORMATION CONCERNING OCHSNER HEALTH SYSTEM

The information contained in this Appendix A has been obtained from Ochsner Health System and its Affiliates, unless otherwise noted.

TABLE OF CONTENTS Page

INTRODUCTION ...... A-1 Overview of Ochsner Health System ...... A-1 Description of Credit Group ...... A-4 Organizational Structure ...... A-6 Strategy ...... A-8 Strategic Partners ...... A-9 CAPITAL PROJECTS ...... A-11 INFORMATION TECHNOLOGY ...... A-12 HEALTH CARE OPERATIONS OF OCHSNER HEALTH SYSTEM ...... A-13 Facilities ...... A-13 Medical Staff ...... A-16 Urgent Care Clinics ...... A-18 Academic Division ...... A-18 SERVICE AREA ...... A-20 Market Presence ...... A-20 New Orleans and Louisiana ...... A-21 Selected Demographic Data ...... A-22 System Utilization Statistics ...... A-23 HISTORICAL FINANCIAL INFORMATION ...... A-24 General ...... A-24 Consolidated Statements of Operations ...... A-25 Consolidated Balance Sheets ...... A-26 Sources of Patient Revenue ...... A-27 Capital Structure ...... A-27 Interest Rate Swaps ...... A-28 Debt Service Coverage ...... A-29 Debt to Capitalization ...... A-30 Cash and Investments; Days Cash on Hand ...... A-30 Management’s Discussion and Analysis ...... A-30 CORPORATE GOVERNANCE ...... A-34 INVESTMENT POLICY ...... A-38 ASSET ALLOCATION POOLED INVESTMENT FUND ...... A-39 EMPLOYEE BENEFIT PLANS ...... A-39 ASSET ALLOCATION RETIREMENT PLAN PORTFOLIO ...... A-40 INSURANCE ...... A-40 CONTINGENCIES ...... A-41 PHILANTHROPY ...... A-41

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INTRODUCTION

Overview of Ochsner Health System

Ochsner Health System (“OHS”) is a Louisiana-based nonprofit corporation and an organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code (the “Code”) founded on providing the best patient care and medical research and education. OHS is the “parent company” of the largest non-profit, academic, multi- specialty, integrated healthcare delivery system in the Gulf Coast region (“Ochsner” or the “System”) with eight hospitals, 68 health centers and 12 Urgent Care Clinics and 4 Occupational Health Clinics. Ochsner trains more than 280 medical residents and fellows annually, has approximately 451 Doctor of Medicine students enrolled in the University of Queensland, Ochsner Clinical School, and is currently conducting more than 1,000 clinical research trials.

Ochsner’s history began when the Ochsner Clinic opened its doors to patients on January 2, 1942 in the city of New Orleans with a staff of 19 physicians and surgeons organized as a partnership to meet the needs of the community for health care services. In November 1946, the first Ochsner Foundation Hospital began operating on the grounds of a former U.S. Army base in a suburb of New Orleans. Efforts to establish a new location for Ochsner Clinic and establish the permanent Ochsner Foundation Hospital were realized when the first patient was admitted on June 12, 1954 to the then newly completed Ochsner Foundation Hospital, now known as Ochsner Medical Center (“OMC”).

Ochsner has continued to expand and strengthen its regional presence by establishing new health center locations and improving upon existing facilities. Ochsner Clinic, founded in 1942, and Alton Ochsner Medical Foundation (“AOMF”), founded in 1944, (which owned and operated Ochsner Foundation Hospital), operated the clinical operations and hospital operation as separate organizations until August 31, 2001, when Ochsner Clinic merged with a wholly owned subsidiary of AOMF, a Louisiana nonprofit corporation and an organization exempt from taxation under Section 501(c)(3) of the Code. AOMF then changed its name to Ochsner Clinic Foundation (“OCF”). Since the merger, the growth of Ochsner has been significant, including the addition of Ochsner Elmwood Hospital (2002), Ochsner Medical Center – Baton Rouge (2005), Ochsner St. Anne General Hospital (2006), Ochsner Baptist Medical Center (2006), Ochsner Medical Center – Kenner (2006), Ochsner Medical Center – Westbank Campus (2006), Ochsner Medical Center – Northshore (2010), Ochsner Medical Complex – River Parishes (2014), Ochsner Medical Complex – Iberville (2015), and 12 Urgent Care and 4 Occupational Health Clinics (2017).

Ochsner has also grown through strategic affiliations with other health care organizations. In 2013, OCF through a subsidiary entered into a management agreement with Hospital Service District No. 1 of the Parish of Terrebonne to provide management assistance and support to Leonard J. Chabert Medical Center as a public, safety net hospital for the residents of South Central Louisiana. In 2014, OCF entered into a management agreement with Hancock Medical Health Services, Inc. to provide management assistance and support to Hancock Medical Center located in Bay Saint Louis, Mississippi. In 2014, OCF through a subsidiary entered into a management agreement with Hospital Service District No. 1 of St. Charles Parish to provide management assistance and support to St. Charles Parish Hospital which operates as a public, safety net hospital for the residents of St. Charles Parish, Louisiana. Ochsner also entered into joint operating agreements with St. Tammany Parish Hospital, Terrebonne General Medical Center and Slidell Memorial Hospital, a joint venture with Acadia Healthcare and strategic partnerships with Lafayette General Health, CHRISTUS Health Louisiana and Glenwood Regional Medical Center. See “Strategic Partners” herein.

Today, OMC, the flagship hospital of Ochsner, is a nationally recognized tertiary and quaternary referral center with destination centers of excellence including cancer, neurosciences, transplantation, cardiovascular, and women’s and pediatrics services. OMC has grown to become a healthcare facility of choice for patients throughout the United States and around the world. Today, patients travel to Ochsner to experience the expertise of more than 1,100 employed physicians who practice in over 90 medical specialties and subspecialties. In 2016, more than 446,000 people from all 50 states and more than 80 countries visited Ochsner.

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Ochsner is recognized nationally for quality. Awards and recognitions in 2016 include:

• Ochsner Medical Center, Ochsner Baptist Medical Center and Ochsner Medical Center - West Bank Campus has been named to the Truven 100 Top Hospitals Award list as one of the 15 U.S. Major Teaching Hospitals.

• Ochsner Medical Center-Baton Rouge became one of only 10 hospitals in the United States to receive both the 2017 100 Top Hospitals® Award by Truven Health Analytics and the 100 Top Hospitals® Everest Award.

• Healthgrades named Ochsner Medical Center, Ochsner Health Center – Elmwood, and Ochsner Medical Center – West Bank Campus as Distinguished Hospitals for safety and quality.

• Ochsner Medical Center, Ochsner Baptist Medical Center, and Ochsner Medical Center – West Bank Campus have received the Healthgrades 2016 Distinguished Hospital Award for Clinical Excellence ™ for the seventh year in a row.

• Ochsner Medical Center, Ochsner Baptist Medical Center and Ochsner Medical Center – West Bank Campus received the Healthgrades 2016 America’s 50 Best Hospitals Award™ .

• Becker's Hospital Review has recognized Ochsner Medical Center as one of “100 Great Hospitals in America” for 2016. This is the fifth consecutive year that Ochsner Medical Center has been recognized with this award.

• Becker's Hospital Review announced Ochsner Medical Center – Baton Rouge as the only Louisiana hospital named to the 2016 “100 Great Community Hospitals” list.

• Ochsner Medical Center, Ochsner Baptist Medical Center and Ochsner Medical Center – West Bank Campus have again been ranked among the best hospitals in the country in three medical specialties, according to U.S. News and World Report’s 2016-17 Best Hospitals rankings. Ochsner Medical Center, Ochsner Baptist Medical Center and Ochsner Medical Center – West Bank Campus were also ranked #1 among the best hospitals in Louisiana and #1 among the best hospitals in the New Orleans metro area as well as being recognized among the Best Hospitals in Southeastern Louisiana.

• Ochsner has been named one of four finalists in the Health Acceleration Challenge by the Forum on Health Care Innovation – a collaboration between Harvard Business School (HBS) and Harvard Medical School (HMS) – for its work on the Ochsner Hypertension Digital Medicine Program.

• Ochsner Medical Center was recognized as first in the country for liver transplants for the fifth year in a row by CareChex® – a division of Comparion®.

• Ochsner Hospital for Children is the only children’s hospital in Louisiana to receive the 2016 Women’s Choice Award® as one of America’s Best Hospitals for Children.

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The following map indicates the locations of Ochsner’s acute care hospitals and health centers. See “Health Care Operations of the Credit Group – Facilities” herein for more information regarding Ochsner’s health care facilities.

Ochsner Health System Hospitals Ochsner Medical Center (1) Ochsner Medical Center Kenner (2) Ochsner St. Anne General Hospital (3) Ochsner Medical Center Northshore (4) Ochsner Medical Center Baton Rouge (5) Ochsner Medical Center West Bank(6) Ochsner Baptist Medical Center (7) Ochsner Elmwood Hospital (8)

Ochsner Health System Affiliate Hospitals Hancock Medical Center (9) St. Charles Parish Hospital (10) Terrebonne General Medical Center (11) Leonard J Chabert Medical Center (12) Slidell Memorial Hospital (13) St Tammany Parish Hospital(14)

* Lafayette General Health’s 7 hospitals, CHRISTUS Health Louisiana’s 6 hospitals, Glenwood Regional Medical Center and Southwest Mississippi Regional Medical Center are excluded from map as each is located outside of the Service Area as hereinafter defined.

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Description of Credit Group

OHS was formed in July 2006 and is the sole corporate member of OCF and until December 31, 2016 the sole corporate member of Ochsner Community Hospitals (“OCH”). OCH, a Louisiana nonprofit corporation and an organization exempt from taxation under Section 501(c)(3) of the Code, was formed on July 17, 2006 for the purpose of acquiring certain medical facilities from Tenet Healthcare Corporation that now operate as Ochsner Medical Center - Kenner, Ochsner Medical Center – Westbank Campus and Ochsner Baptist Medical Center. Effective December 31, 2016 OCH was merged with and into OCF, with OCF continuing as the surviving entity.

OCF is the only Obligated Group Member under the Master Indenture. Certain affiliates of OCF have been designated as Designated Affiliates and Credit Group Members under the Master Indenture. Credit Group or Credit Group Members means all Obligated Group Members and Designated Affiliates. Under the Master Indenture, Obligated Group Members are jointly and severally liable to make payments with respect to Obligations issued under the Master Indenture. Designated Affiliates are not obligated to make payments with respect to Obligations but may be required to transfer to Obligated Group Members, to the extent legally available, amounts necessary to enable the Obligated Group Members to make payments under the Master Indenture. Obligated Group Members may designate entities as Designated Affiliates under the Master Indenture, and may rescind such designation at any time. See “SECURITY FOR THE BONDS – The Master Indenture” in the front portion of this Official Statement. OCF and Designated Affiliates constituted 93.4% of the consolidated total assets of OHS as of December, 2016 and 99.9% of the consolidated total revenue of OHS for the year ended December 31, 2016. See “SECURITY FOR THE BONDS – The Master Indenture – Designated Affiliates; Credit Group and Controlling Members” in the front portion of this Official Statement.

Obligated Group Member. OCF is the only Obligated Group Member under the Master Indenture. OCF is headquartered in New Orleans, Louisiana, and, either directly or through its fully owned affiliates or subsidiaries, owns and operates seven hospitals and other healthcare facilities, including:

• OMC, a 499-bed acute care hospital located in New Orleans, Louisiana, which serves as the flagship of Ochsner, and includes an 11-story clinic building, a 137-room hotel and related medical facilities located on a main campus in Jefferson Parish at the western end of New Orleans; • Ochsner Elmwood Hospital, a 66 bed satellite hospital of OMC, located in Elmwood, Louisiana; • Ochsner Medical Center – Westbank Campus, a 165-bed acute care satellite hospital of OMC in New Orleans, Louisiana, • Ochsner Baptist Medical Center, a 102-bed acute care satellite hospital of OMC in New Orleans, Louisiana. • Ochsner Medical Center - Kenner, a 110-bed acute care hospital in Kenner, Louisiana; • Ochsner Medical Center – Baton Rouge, a 150-bed acute care hospital in Baton Rouge, Louisiana; • Ochsner Medical Center – Northshore, a 157-bed acute care hospital in Slidell, Louisiana; • 68 health centers throughout southeast Louisiana and Mississippi; • 12 Urgent Care Clinics and 4 Occupational Health Clinics throughout Greater New Orleans; and, • Several fitness centers that operate as Ochsner Fitness Center.

OCF, through its fully owned subsidiary, operates Ochsner St. Anne General Hospital, a 35-bed acute care hospital in Raceland, Louisiana;

OCF, either directly or through its fully owned affiliates or subsidiaries, provides management services and support to three hospitals:

• Leonard J. Chabert Medical Center, a 156-bed public, safety net hospital in Houma, Louisiana; • Hancock Medical Center, a 47-bed acute care hospital in Bay St. Louis, Mississippi; • St. Charles Parish Hospital, a 59-bed public, safety net hospital in Luling, Louisiana.

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OCF also has joint operating agreements with three hospitals:

• Terrebonne General Medical Center, a 321-bed acute care hospital in Houma, Louisiana; • St. Tammany Parish Hospital, a 232-bed acute care hospital in Covington, Louisiana; • Slidell Memorial Hospital, a 229-bed public acute care hospital in Slidell, Louisiana

OCF also entered into strategic partnerships to create clinical affiliations with Lafayette General Health, CHRISTUS Health Louisiana, Glenwood Regional Medical Center and Southwest Mississippi Regional Medical Center. Please refer to “Strategic Partners” below for additional information.

Designated Affiliates. Certain OCF subsidiaries have been designated as Designated Affiliates and Credit Group Members under the Master Indenture. Designated Affiliates include:

Brent House Corporation is a Louisiana nonprofit corporation, exempt from federal income taxation as an organization described in Section 501(c)(3) of the Code. OCF is the sole corporate member of Brent House Corporation. It was established in 1979 to own and operate a hotel called Brent House, which opened in 1954 and is located on the OMC campus. The hotel offers lodging to the general public with an emphasis on serving the needs of patients and their families.

Ochsner Clinic, L.L.C. (“Ochsner Clinic” or the “Clinic”) is a Louisiana limited liability company that is wholly- owned by OCF. Prior to August 31, 2001, OCF and Ochsner Clinic were separate organizations with no overlapping ownership. OCF owned and operated Ochsner Foundation Hospital and related medical facilities and properties used for hospital and for medical services and medical and administrative office space. Ochsner Clinic was privately owned by approximately 250 physicians practicing at Ochsner Clinic’s main facility on the OMC campus, at its Baton Rouge clinic facilities, and at several satellite locations. On August 31, 2001, Ochsner Clinic merged with a wholly owned subsidiary of OCF (formerly known as Alton Ochsner Medical Foundation). At the closing of the merger, the membership interests of the former physician owners of Ochsner Clinic were converted to cash payments, and Ochsner Clinic became a wholly owned subsidiary of OCF. Today, Ochsner Clinic operates several health centers throughout the region and will operate the new Baton Rouge clinic described in the Capital Projects section of this Appendix A.

Ochsner Bayou, L.L.C. is a Louisiana limited liability company, wholly-owned by OCF, organized in March 2006. Effective May 1, 2006, Ochsner Bayou, L.L.C. entered into a lease and management services agreement with the Lafourche Parish Hospital Service District No. 2 to lease and to provide management services to operate the St. Anne General Hospital of Raceland, Louisiana.

East Baton Rouge Medical Center, L.L.C. a Louisiana limited liability company, was formed in February 2005 for the purpose of entering into a joint venture with Ardent Health Services, Inc. and purchasing a 50% interest in AHS Summit Hospital, LLC located in Baton Rouge, Louisiana. Effective March 2006, AHS Summit Hospital was renamed Ochsner Medical Center – Baton Rouge. On December 31, 2007, Ochsner Clinic Foundation purchased the remaining 50% interest of AHS Summit Hospital LLC in Ochsner Medical Center – Baton Rouge, bringing its interest to 100%.

Ochsner Medical Center – Northshore, L.L.C. is a Louisiana limited liability company, wholly-owned by OCF, which was formed by OCF to purchase Northshore Regional Medical Center, now operating as Ochsner Medical Center – Northshore (“OMCNS”) from Tenet in April 2010.

Ochsner Home Medical Equipment, L.L.C. is a Louisiana limited liability company, wholly-owned by OCF, which was formed by OCF in 2009 to provide durable medical equipment and accessories to patients and others. In 2011, the corporate name was changed from Ochsner Durable Medical Equipment, L.L.C. to Ochsner Home Medical Equipment, L.L.C.

Ochsner Baptist Medical Center, L.L.C., a Louisiana limited liability company, wholly-owned by OCF, was originally formed in 2006 as a wholly owned subsidiary of OCH to purchase certain medical facilities from Tenet Healthcare Corporation. Subsequent to the merger of OCH with and into OCF, OCF now owns and operates the facility as Ochsner Baptist, a campus of Ochsner Medical Center.

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Ochsner Medical Center – Kenner, L.L.C., a Louisiana limited liability company, wholly-owned by OCF, owns and operates an acute-care general medical and surgical hospital known as Ochsner Medical Center – Kenner. It also owns Ochsner Medical Complexes - River Parishes that operates as a satellite of Ochsner Medical Center - Kenner and offers an Emergency Room, outpatient diagnostics and specialized physician services.

Ochsner Medical Center – Westbank, L.L.C., a Louisiana limited liability company, wholly-owned by OCF, was originally formed in 2006 as a wholly owned subsidiary of OCH to purchase certain medical facilities from Tenet Healthcare Corporation. Subsequent to the merger of OCH with and into OCF, OCF now owns and operates the facility as Ochsner Medical Center – Westbank Campus.

Chabert Operational Management Company, L.L.C., a Louisiana limited liability company, wholly-owned by OCF, was organized in 2013 and on June 24, 2013 entered into a management agreement with Hospital Service District No. 1 of the Parish of Terrebonne to provide management assistance and support to Leonard J. Chabert Medical Center which operates as a public, safety net hospital for the residents of South Central Louisiana.

Ochsner Physician Partners, L.L.C., a Louisiana limited liability company, wholly-owned by OCF, was organized in 2011 to create a clinically-integrated network of community physicians, employed physicians and hospitals within Ochsner.

Southern Strategic Sourcing Partners, L.L.C., a Louisiana limited liability company, wholly-owned by OCF, was organized in 2013 to provide a purchasing collaborative and help its members reduce supply costs, reduce labor associated with purchasing, receiving and distributing supplies and reduce inventories.

St. Charles Operational Management Company, L.L.C., a Louisiana limited liability company, wholly-owned by OCF, was organized in 2014 and on September 1, 2014 entered into a management agreement with Hospital Service District No. 1 of St. Charles Parish to provide management assistance and support to St. Charles Parish Hospital which operates as a public, safety net hospital for the residents of St. Charles Parish.

Organizational Structure

The chart on the following page depicts Ochsner’s organizational structure.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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Ochsner Health System

501(c)(3)

Ochsner Clinic Foundation 501(c)(3) Ochsner Health • Ochsner Medical Center Foundation, LLC • Ochsner Baptist, a campus of Ochsner Medical Center • Ochsner Medical Center-Westbank Campus • Ochsner Elmwood Hospital • Ochsner Fitness Center

Brent House East Baton Rouge Ochsner Baptist Medical Corporation Ochsner Bayou, LLC Medical Center, LLC Center, LLC 501(c)(3)

Ochsner Medical Center Chabert Operational Ochsner Medical Center Ochsner Home Medical Management Co., LLC – Northshore, LLC Equipment, LLC – Westbank, LLC

St. Charles Operational Ochsner Physician Southern Strategic Ochsner Medical Center Management Co., LLC Partners, LLC Sourcing Partners, LLC – Kenner, LLC

Ochsner Clinic, LLC iO, LLC Ochsner Health Network, LLC

Ochsner Urgent Care 1, LLC Obligated Group

Designated Affiliate of OCF

Non-Designated Affiliate / Other A-7

Strategy

Ochsner’s strategy has evolved to match the changing landscape of healthcare delivery. Ochsner has developed a tiered strategy surrounding its Destination Referral Center, Population Health Center, Solutions Center and Ochsner Health Network.

Destination Referral Center. Ochsner is committed to its community and keeping quality health care local by expanding its reach to provide care to more people regionally, nationally and internationally through hospital partnerships and affiliations and innovative ways to engage with remote parts of the community. This is evident through affiliations with Leonard J. Chabert Medical Center and Terrebonne General Medical Center in Houma, Louisiana; Hancock Medical Center in Bay St Louis, Mississippi; St. Charles Parish Hospital in Luling, Louisiana; Lafayette General Health in Lafayette, Louisiana; CHRISTUS Health Louisiana in Alexandria, Lake Charles and Shreveport-Bossier, Louisiana; Glenwood Regional Medical Center in West Monroe, Louisiana; St. Tammany Parish Hospital in Covington, Louisiana; Slidell Memorial Hospital in Slidell, Louisiana and Southwest Mississippi Regional Medical Center in McComb, Mississippi. See “Strategic Partners” herein for more information.

These clinical collaborations create an opportunity for joint investments in new programs, expansion of services, telemedicine programs to extend the reach of specialists and a streamlined process through which referring physicians can initiate patient transfers to Ochsner’s facilities. Through Ochsner’s transfer center, local, national and international patients have efficient access to specialized, high-quality care. Ochsner’s transfer center transferred over 10,000 acute and critical care patients in 2016 to Ochsner hospitals including OMC, a tertiary and quaternary referral center with destination centers of excellence including cancer, neurosciences, transplantation, cardiovascular, and women’s and pediatrics services. Referrals from affiliates and outlying facilities in 2016 increased 16% over 2015. Ochsner also leverages its community hospitals and partners as appropriate as geographic referral hospitals.

Population Health Center. Ochsner is the regional leader in population management with nearly 230,000 lives under value based contracts, including approximately 55,000 lives where it assumes full risk. Ochsner has more than 30 years of experience in managing the health and wellness of populations and a long history of risk contracts, including owning its own health plan for over 20 years before selling it in 2004. After selling the health plan, Ochsner retained the risk of certain populations through long term contracts. Its focus on population health is about sustaining health, helping manage and even prevent chronic disease through a focus on primary care, healthy lifestyle and innovative patient-centered technologies. Ochsner continues to invest in primary care and its chronic disease centers of excellence including diabetes, hypertension, heart failure, obesity, vascular disease and mental health. Ochsner works to improve quality and reduce the cost of care through predictive analytics, telemedicine, outreach and organizing services around the patient/disease. In each of the last eight years, the medical cost trend for Ochsner’s Medicare Advantage members is lower than the overall trend for Medicare. Ochsner was the first health system in the nation to integrate its electronic medical record system (“EMR”), Epic, with the Apple Watch. Through this connection, patients with chronic disease like hypertension are able to use the Apple Watch to monitor their condition and take responsibility for their own care and improve outcomes. These efforts are expected to be expanded to other chronic conditions such as diabetes, end-stage renal disease and chronic obstructive pulmonary disease.

Solutions Center. Ochsner is working to provide value to affiliates by helping to reduce the cost of healthcare through scale, providing services and technology and creating a high value healthcare network. Solutions and services include supporting integrated medical records, enterprise resource planning software and telemedicine. Ochsner is able to bring value through its infrastructure and experience installing Epic to help affiliates install Epic quickly, efficiently and cost effectively. See “Information Technology” herein. Ochsner also helped affiliates reduce supply chain costs by over 20% through its regional sourcing collaborative, Southern Strategic Sourcing Partners.

Ochsner Health Network. Ochsner Health Network’s vision is to create the highest value healthcare network in the Gulf South. Ochsner Health Network is a collaboration of culturally, clinically and financially aligned providers that fosters interdependence and cooperation among its participants to improve quality and reduce the cost of healthcare. The partnerships and strategic relationships that are built within Ochsner Health Network share knowledge, resources, processes and technology with the goal of delivering better quality care at a more affordable cost. Ochsner Health Network’s collective goal is to keep the highest quality of care local and ensure

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integrated easy access to Ochsner’s expert, specialized care when needed. Ochsner Health Network consists of 26 hospitals and its participating health systems include Ochsner Health System, St. Tammany Parish Hospital, Terrebonne General Medical Center, Slidell Memorial Hospital, Lafayette General Health and, CHRISTUS Health Louisiana.

Strategic Partners

Management of the System expects that the factors that have driven change in the health care industry will intensify for the foreseeable future, as federal and state governments, third party payors and private employers continue to vigorously pursue opportunities to obtain health care services for their constituencies in an efficient, cost-effective manner. Management of the System further expects a continuation of the health care industry trend towards consolidation to reduce market inefficiencies and achieve economies of scale. Given these expectations and management’s belief that the System may periodically require re-shaping to respond to challenges, from time to time management evaluates acquisition and affiliation opportunities that will strengthen its position in existing markets as part of the System’s overall strategic plan. Ochsner has explored potential acquisitions, new products with managed care payors, affiliations, sales or joint ventures of acute care hospital facilities, hospital assets, properties or operations and has discussed with others the feasibility of such transactions. Below is a list of affiliations that were created from these discussions. Management of the System expects these types of exploratory efforts to continue, and if any of the foregoing culminate in one or more transactions, it is possible that the current organization and assets of the Credit Group would change and such change could be significant from both an operational and financial perspective. See “SECURITY FOR THE BONDS – The Master Indenture – Other Master Indenture Covenants” and “BONDHOLDERS’ RISKS – Possible Acquisitions and Other Strategic Initiatives” in the front portion of this Official Statement and “Possible Joint Venture” below.

Hospital Service District No. 1 of the Parish of Terrebonne. On June 24, 2013, Hospital Service District No. 1 of the Parish of Terrebonne (“Terrebonne”) entered into a Cooperative Endeavor Agreement with the State of Louisiana Department of Health and Hospitals to ensure the availability of a public hospital in South Central Louisiana and continue the operation of Leonard J. Chabert Medical Center. Simultaneously OCF, through one of its affiliates, entered into a management agreement with Terrebonne to provide management assistance and support to Leonard J. Chabert Medical Center, which operates as a public, safety net hospital for the residents of South Central Louisiana. Ochsner, as manager of the facility, does not report utilization statistics related to Leonard J. Chabert Medical Center. Ochsner recognizes management fee revenue and operating expenses related to the agreement, which are included in its consolidated statements of operations.

Hancock Medical Health Services, Inc. On February 19, 2014, OCF entered into a management agreement with Hancock Medical Health Services, Inc. to provide management assistance and support to Hancock Medical Center. Hancock Medical Center’s trustees retain all powers incident to ownership of the hospital. Ochsner, as manager of the facility, does not report utilization statistics related to Hancock Medical Center. Ochsner recognizes management fee revenue and operating expenses related to the agreement, which are included in its consolidated statements of operations.

Hospital Service District No. 1 of St. Charles Parish. On September 1, 2014, OCF, through one of its affiliates, entered into a management agreement with Hospital Service District No. 1 of St. Charles Parish (“the District”) to provide management assistance and support to St. Charles Parish Hospital which operates as a public, safety net hospital for the residents of St. Charles Parish. Ochsner, as manager of the facility, does not report utilization statistics related to St. Charles Parish Hospital. St. Charles Parish Hospital remains a public hospital owned by St. Charles Parish and governed by the District board. Ochsner recognizes management fee revenue and operating expenses related to the agreement, which are included in its consolidated statements of operations.

St. Tammany Parish Hospital Service District No. 1. On September 30, 2014, OCF & OHS entered into a Joint Operating Agreement with St. Tammany Parish Hospital Service District No. 1 to coordinate resources with the goal of lowering costs, improving quality and creating a seamless clinical environment for patients in western St. Tammany Parish. St. Tammany Parish Hospital Service District No. 1 remains a public hospital. Decisions related to the Joint Operating Agreement are coordinated by a Joint Board Oversight Committee. Being financially integrated with St. Tammany Parish Hospital Service District No. 1, Ochsner recognizes other revenue or expense related to its Joint Operating Agreement with St. Tammany Parish Hospital Service District No. 1 in its consolidated statements of operations.

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Lafayette General Health. On April 27, 2015, OHS announced a strategic partnership with Lafayette General Health, the leading system in Acadiana with a network of 7 facilities, focused on increasing local access to care, improving quality and reducing the cost of healthcare and to share best practices and resources to expand services to both patients and physicians and to improve the health of the Louisiana communities they both serve today and meet the needs of new communities in the region.

CHRISTUS Health Louisiana. On June 5, 2015, OHS announced the formation of a strategic partnership with CHRISTUS Health Louisiana that has 6 facilities strategically located in 3 markets that is focused on increasing local access to care, improving quality and reducing the cost of healthcare and to share best practices and resources to expand services to both patients and physicians and to improve the health of the Louisiana communities they both serve today and meet the needs of new communities in the region.

Select Medical Corporation. On June 15, 2015, OCF entered in a joint venture with Select Medical Corporation to open a new $35 million, 60-bed acute inpatient rehabilitation hospital. Construction began in 2016 and is expected to be completed January 2018. The new partnership, which will be managed by Select Medical, will initially focus on managing Ochsner’s current acute rehab services provided in a 29-bed unit located within the Ochsner Medical Center-Elmwood Campus.

Hospital Service District No. 1 of the Parish of Terrebonne d/b/a Terrebonne General Medical Center. On August 1, 2015, OCF entered into a Joint Operating Agreement with Terrebonne to expand their successful collaborative efforts with Leonard J. Chabert Medical Center into a more formal strategic clinical partnership. The partnership creates greater opportunity for the parties to work together to focus on shared savings and decrease the overall healthcare cost while maintaining exceptionally high quality care. Under this Joint Operating Agreement, the parties will share resources, expand services, and implement advanced, patient-centered technology with a focus on continued quality improvements and cost reduction. Being financially integrated with Terrebonne General Medical Center, Ochsner may recognize other revenue related to its Joint Operating Agreement with Terrebonne General Medical Center in its consolidated statements of operations. Terrebonne General Medical Center remains a public hospital. Joint activity and decisions are coordinated by a Joint Management and Strategy Committee that includes equal representation from both parties.

St. Tammany Parish Hospital Service District No. 2 d/b/a Slidell Memorial Hospital. Effective January 1, 2016, OCF & OHS entered into a Joint Operating Agreement with St. Tammany Parish Hospital Service District No. 2 d/b/a Slidell Memorial Hospital to align both parties’ respective assets and operations located in eastern St. Tammany Parish and to share resources, expand services, and implement advanced, patient-centered technology with a focus on continued quality improvements and cost reduction by coordinating and improving resources. Slidell Memorial Hospital remains a public hospital. Pursuant to the Joint Operating Agreement, Ochsner Medical Center – Northshore and Slidell Memorial Hospital operate on an integrated basis. Joint activity and decisions are coordinated by a Strategy and Oversight Committee that includes equal representation from both parties. Being financially integrated with Slidell Memorial Hospital, Ochsner recognizes other revenue or expense related to its Joint Operating Agreement with Slidell Memorial Hospital in its consolidated statements of operations.

IASIS Glenwood Regional Medical Center. On April 6, 2016, OHS announced the formation of a strategic partnership with Glenwood Regional Medical Center focused on increasing local access to specialty care, expanding telemedicine services, sharing best practices and resources to expand services, improve quality and reduce the cost of healthcare in the Northeast Louisiana region.

Acadia Healthcare. On May 27, 2016, OCF and Acadia Healthcare entered into a joint venture to open an 82-bed behavioral health facility in LaPlace, Louisiana. The partners will repurpose the existing River Parishes Hospital to accommodate the behavioral health facility and Acadia Healthcare will invest more than $16 million in the facility build-out. Estimated to open in the fourth quarter of 2017, the new facility is expected to serve more than 2,500 inpatients and more than 3,100 outpatients. While Ochsner physicians will staff the facility, this venture will create an additional 145 jobs in St. John Parish.

St. Bernard Parish Hospital. On October 3, 2016, OCF entered into a Cooperative Endeavor Agreement with St. Bernard Parish Hospital Service District for OCF to provide certain administrative services and operational support to St. Bernard Parish Hospital, a public hospital, on an interim basis during which time the parties will

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evaluate a potential longer-term relationship to facilitate continued access to appropriate care for the residents of St. Bernard Parish.

Southwest Mississippi Regional Medical Center. On November 10, 2016, OHS and Southwest Mississippi Regional Medical Center executed a strategic partnership designed to allow the collaboration needed to offer patients access to more highly specialized innovative care locally and to provide an opportunity to share best practices and protocols while increasing learning opportunities for physicians and leaders at both organizations.

Possible Joint Venture. As discussed above under “Strategic Partners,” management continually evaluates acquisition and affiliation opportunities that are consistent with the System’s overall strategic plan. In connection with this strategy OHS has begun discussions related to a possible joint venture with an organization that owns and operates a number of acute care hospitals. These discussions are preliminary in nature and non-binding. The current expectation is that this joint venture, if consummated, would involve a commitment of OHS of up to $65 million in cash and/or debt. Any such joint venture is subject to the parties reaching agreement on its terms and the approval of the parties’ respective boards of directors.

CAPITAL PROJECTS

Historical Capital Investment. Since 2011, Ochsner has invested over $750 million on capital expenditures including strategic investments to meet patient demand and improve quality. These include a $43 million investment in the Women’s Pavilion at Ochsner Baptist Medical Center which opened in 2013 and provided an increase in capacity for women’s services in addition to creating capacity at OMC. Ochsner also invested $38 million on a new Center for Primary Care and Wellness that opened in 2014. Ochsner also invested over $122 million to upgrade its electronic medical record system to Epic EMR. Please see additional information under INFORMATION TECHNOLOGY.

Future Capital Investment. Ochsner is in the middle of a $300 million strategic capital plan that started in 2015 and is expected to be completed in 2019. The new money portion of the Bonds will be used to partially fund the projects listed below. Ochsner previously issued taxable bonds in 2015 to partially fund its strategic capital plan. Routine capital, which is funded from cash flow from operations, is not included in that total and is expected to be approximately $100 million per year.

Expand West Tower at Ochsner Medical Center. Relocating women’s services and the NICU to Ochsner Baptist Medical Center created space that allowed OMC to add 68 additional inpatient beds. The increase in patient demand from within the System and through the Regional Referral Center has continued to fill the additional capacity, reaching over 90% occupancy at peak times. Ochsner’s strategic capital plan includes an $84 million expansion of the West Tower that will add six additional floors. Three of the six floors will be completed in Phase I and add 66 incremental inpatient beds. Phase I started in 2016 and is expected to be completed May 2018. The remaining three floors capable of adding an incremental 100 inpatient beds will be shelled until needed to meet future patient demand.

Gayle and Tom Benson Cancer Center. The size of the infusion suite at the Gayle and Tom Benson Cancer Center was doubled in 2011 with the help of the first gift from Gayle and Tom Benson, and the additional capacity has already been filled. Also, there has been a 60% increase in oncology research trials from 2010 to 2014. Gayle and Tom Benson made an additional transformative gift of $20 million to help expand the cancer center. The $38.5 million expansion of the Gayle and Tom Benson Cancer Center is expected to be completed September 2019.

Elmwood Surgical Hospital. The operating rooms at OMC and Ochsner Baptist Medical Center are functioning at full capacity. Ochsner’s strategic capital plan includes a $25.0 million expansion to repurpose Ochsner Elmwood Hospital into a surgical hospital that will focus on orthopedics and low complexity cases. The project will add 8 operating rooms and 10 inpatient beds and is expected to be completed November 2018. This will allow operating rooms at OMC to be available to handle increased volume.

Imaging Center at Ochsner Medical Center. The Gayle and Tom Benson Cancer Center expansion will require relocating the existing MRI building. Additionally, the inpatient bed expansion will consume the current imaging capacity available for outpatient services. Ochsner’s strategic capital plan includes an imaging center providing these services at an approximate cost of $14.4 million and expected to be completed January 2018.

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Ochsner Medical Center - Baton Rouge Cancer Center. Ochsner’s strategic capital plan includes a $12.8 million project to convert one of the medical office buildings at Ochsner Medical Center - Baton Rouge to a cancer center to be completed May 2017. The project will expand chemotherapy services and add radiation oncology services.

Ochsner Clinic Covington Expansion. Ochsner’s strategic capital plan includes an approximate $18.6 million expansion of the Covington Clinic that will add 50 exam rooms and three operating rooms to be completed December 2017. The clinic is currently operating at capacity and the additional space will allow an expansion of neurosciences and orthopedics with a sports medicine focus.

Baton Rouge Clinic. Construction of a $72 million, 170,000 square foot Medical Office Building and Ambulatory Surgery Center to meet the demands of the Baton Rouge Region. The new building will be used to relocate the 62 physicians practicing at the Ochsner Health Center – Summa location and additional space for an additional 23 providers. The Medical Office Building will accommodate an expanded Lab, and expanded infusion suite, a new and expanded Imaging and diagnostics center, and a ground floor retail pharmacy. The Ambulatory Surgery Center will include four operating rooms and two Endo/GI suites.

INFORMATION TECHNOLOGY

Between 2012 and 2014, Ochsner invested over $122 million to upgrade its EMR to Epic. Epic helps coordinate patient care, improve patient outcomes and empower patients to become valuable partners in their healthcare experience. Today, over 75 percent of the U.S. population is now on the Epic EMR. In 2015 and in 2016, Ochsner ranked in the 99th percentile, higher than any of the other 340 organizations using Epic, by Epic’s STARS Program that recognizes how effectively organizations are using their Epic system.

Ochsner hospitals have been scored on the Healthcare Information Management Systems Society’s (“HIMSS”) EMR Adoption Model measuring how fully a hospital has integrated its EMR. HIMSS is a global, not-for-profit organization which leads efforts to optimize health engagements and care outcomes using information technology. All Ochsner facilities, including Ochsner Medical Center - Northshore, Ochsner Medical Center - Baton Rouge, Ochsner Baptist Medical Center, Leonard J. Chabert Medical Center, Ochsner St. Anne General Hospital, Ochsner Medical Center – Kenner, St. Charles Parish Hospital, Ochsner Westbank, and Ochsner Medical Center – Jefferson Highway have received HIMSS Stage 7 designations, the highest level given on information technology readiness. Ochsner Medical Center - Northshore was the first hospital across Louisiana, Mississippi, Alabama, Arkansas and Tennessee to receive the designation. To date, only Ochsner hospitals have received HIMSS Stage 7 in Louisiana.

Ochsner is developing new ways to enable patients to take part in providing their own care in their own homes. For example, Ochsner was the first health system to integrate its Epic EMR with Apple’s HealthKit app. Patients are able to provide clinicians with the health data they collect every day with wearable devices, scales and other consumer-operated devices. Over 1,000 patients are now enrolled in the Ochsner Digital Medicine program, and all of those patients are sending in home blood pressure electronically to Ochsner.

Ochsner has also embraced telehealth with significant investments to establish a network across the Gulf South. Since 2009, Ochsner’s telemedicine program has partnered with 46 hospitals across Louisiana, and has impacted more than 125,000 patients to date. Telehealth has expanded its services beyond telestroke, which allows neurologists to remotely evaluate people who have had strokes, to 41 specialties including cardiology, pediatrics, psychiatry and maternal fetal medicine.

In 2015, Ochsner formed iO, LLC, also known as innovationOchsner (“iO”), an innovation lab whose mission is to reimagine and revolutionize the experience and delivery of healthcare in a way that creates new value. iO is using technology to create new ways for patients to access quality healthcare and to collect real time health data to improve the delivery of care. Examples of iO’s work thus far include the Digital Medicine program to manage chronic disease such as hypertension, and Optimal Hospital, an inpatient intervention to improve patient care and experience as well as caregiver efficiency. iO is also collaborating with leading innovators inside and outside the healthcare industry to identify and validate promising new technologies

Ochsner created the O Bar, the first in the nation modeled on the Apple Genius Bar, where anyone, whether they are treated at an Ochsner facility or not, can come for advice on wearables, choose from a curated list of health applications, and receive training. The ultimate goal is to create an accessible environment in which Ochsner can

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educate its patients and communities on the best ways to use readily available technology to take responsibility for their own health and wellness.

HEALTH CARE OPERATIONS OF OCHSNER HEALTH SYSTEM

Facilities

Hospitals

Ochsner Medical Center is a 499-bed tertiary and quaternary teaching hospital located near uptown New Orleans, Louisiana that is fully accredited by The Joint Commission. Its diverse array of specialties, sub-specialties and clinical complexity is reflected in the December 2016 YTD Case Mix Index of 2.21. Ochsner Medical Center includes an 11-story clinic building, a 137-room hotel, The Gayle and Tom Benson Cancer Center, Ochsner Hospital for Children, Ochsner Center for Primary Care and Wellness, The Lieselotte Tansey Breast Center, destination centers of excellence including cancer, neurosciences, transplant, cardiovascular and pediatrics services, and Chronic Disease Centers of Excellence including diabetes, hypertension, heart failure, obesity, vascular disease and mental health. The Gayle and Tom Benson Cancer Center houses a hematology oncology clinic, chemotherapy infusion clinic, radiation oncology and a prostate center. It includes a multidisciplinary clinic with a full array of specialists and sub-specialists to meet the challenges presented by cancers. Ochsner Hospital for Children is a 103 bed inpatient hospital dedicated exclusively to children’s healthcare located on the OMC campus offering more than 30 pediatric specialties such as pediatric gastroenterology, pediatric hematology/oncology, pediatric cardiology and pediatric pulmonology. Ochsner Center for Primary Care and Wellness is located across the street on the north side of Jefferson Highway in a separate building for convenient access to primary care services. It has an on-site lab, radiology, mammography and pharmacy. The Lieselotte Tansey Breast Center was established to provide an interdisciplinary approach to the detection and treatment of breast disease. Surgeons and radiologists that specialize in the evaluation and management of breast disease work together in the same facility to provide women with comprehensive breast services and swift diagnosis.

Ochsner Elmwood Hospital is a 66-bed satellite campus of Ochsner Medical Center located approximately three miles from the Main Campus that is fully accredited by The Joint Commission. Services at the facility include a concussion management program, internal medicine, primary care, inpatient rehabilitation and sports medicine. It also includes office space for some administrative functions.

Ochsner Medical Center – Westbank Campus is located in Gretna, Louisiana approximately 12 miles from Ochsner Medical Center. It is a 165 bed acute care general medical and surgical hospital fully accredited by The Joint Commission. Services include a full service emergency department, women’s services, a level III NICU, orthopedic services, cardiology services and urology services. In 2008, Ochsner Medical Center – Westbank began operating as a remote campus of Ochsner Medical Center and became known as Ochsner Medical Center – Westbank Campus.

Ochsner Baptist Medical Center is located in New Orleans, Louisiana approximately four miles from Ochsner Medical Center. It is a 102 bed acute care general medical and surgical hospital fully accredited by The Joint Commission. In 2013 the NICU and women’s services were moved from Ochsner Medical Center to Ochsner Baptist Medical Center in conjunction with the opening of Ochsner Baptist’s Women’s Pavilion. This is the latest of extensive renovations at the hospital since 2006. The Women’s Pavilion includes gynecological obstetrics visits, gynecologic robotic surgery, labor and delivery, maternal fetal medicine, private labor and delivery and postpartum rooms and alternative birthing options, such as water births. Other services include a 24-hour full-service emergency department, cardiology, orthopedics, intensive care, imaging center and a laser vision center. In 2013, Ochsner Baptist Medical Center began operating as a remote campus of Ochsner Medical Center and became known as Ochsner Baptist, a campus of Ochsner Medical Center.

Ochsner St. Anne General Hospital is located in Raceland, Louisiana approximately 40 miles from Ochsner Medical Center. It is a 35 bed acute care facility fully accredited by The Joint Commission that Ochsner leases from Lafourche Parish Hospital Service District No. 2 and currently operates as a rural hospital. Services include 24-hour full-service emergency care, an intensive care unit, OB/GYN with newly renovated maternity suites, inpatient psychiatric services, orthopedics and surgery.

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Ochsner Medical Center – Baton Rouge is located in Baton Rouge, Louisiana approximately 80 miles from Ochsner Medical Center. It is a 150 bed acute care general medical and surgical hospital fully accredited by The Joint Commission. Services include 24-hour emergency care, a newly renovated family birthing center which provides alternate deliveries such as water births, the area’s only certified nurse midwife program, open-heart surgery, orthopedic procedures, robotic-assisted surgery and high-definition endoscopy.

Ochsner Medical Center – Kenner is located in Kenner, Louisiana approximately 12 miles from Ochsner Medical Center. It is a 110 bed acute care general medical and surgical hospital fully accredited by The Joint Commission. Services include 24-hour Level II emergency care, maternity and women’s services, an advanced-technology outpatient diagnostic and therapy center, an infusion center, wound care and hyperbarics, intensive care, heart and orthopedic programs and bronchial thermoplasty procedure for asthma. Ochsner Medical Center Kenner also offers one of the largest multidisciplinary neuroendocrine tumor programs in the U.S. It has attained major teaching hospital status through its expanded Graduate Medical Education Program activity via its affiliation with the Louisiana State University Health Science Centers residency programs. It also owns Ochsner Medical Complexes - River Parishes that operates as a satellite of Ochsner Medical Center - Kenner and offers an emergency room, outpatient diagnostics and specialized physician services.

Ochsner Medical Center – Northshore is located in Slidell, Louisiana approximately 37 miles from Ochsner Medical Center. It is a 157 bed acute care general medical and surgical hospital fully accredited by The Joint Commission. Services include a Pediatric Intensive Care Unit (PICU), 24-hour advanced emergency care, a rehabilitation center, and an ambulatory surgery center.

Health Centers

OCF maintains 68 health centers throughout the region listed in the table below: including an 11-story clinic building at Ochsner Medical Center; a 98,500 square foot multi-specialty facility in Covington, Louisiana that houses laboratory and an outpatient surgery center; and a four story clinic in Baton Rouge, Louisiana that houses over 100 providers, and will be replaced with the new Baton Rouge Clinic described above.

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Ochsner Medical Center Ochsner Health Center - Denham Springs Ochsner Health Center - Mid City Ochsner Health Center - O'Neal Ochsner Center for Primary Care and Wellness Ochsner Health Center - Tangipahoa Ochsner Health Center - St. James Ochsner Specialty Health Center One - Slidell Ochsner Health Center - Baptist McFarland Medical Plaza Ochsner Specialty Health Center Two - Slidell Ochsner Health Center - Baptist Napoleon Medical Plaza Ochsner Health Center For Children - Covington Ochsner Health Center - LaPlace Medical Ochsner Women’s Health Center - Covington Ochsner Medical Complex - River Parishes Ochsner Health Center - Mandeville The Gayle and Tom Benson Cancer Center Ochsner Health Center - Slidell Ochsner Health Center - Luling Ochsner Health Center - Covington Ochsner Health Center - Lakeview Ochsner Health Center for Children - Slidell Ochsner Health Center for Children - Metairie Ochsner Health Center for Children Ped. Subspecialties-Cov Ochsner Health Center for Children - Destrehan Ochsner Health Center for Children Ped. Subspecialties-Slidell Lieselotte Tansey Breast Center at Ochsner Ochsner Health Center - Pearl River Ochsner Health Center - Metairie Ochsner Women's Health Center - Slidell Ochsner Health Center - Kenner Ochsner Neurosciences Institute - Covington Ochsner Health Center For Children - New Orleans Ochsner Neurosciences Institute – Slidell Ochsner Health Center - Elmwood Ochsner Health Center - Abita Springs Ochsner Health Center - Driftwood Ochsner Health Center - Raceland Ochsner Health Center - Uptown Ochsner Health Center - Lockport Ochsner Health Center - Destrehan Ochsner Women's Health Center - Raceland Ochsner Medical Complex - River Parishes Ochsner Specialty Health Center - Cut Off Sculpting Center of New Orleans Ochsner Specialty Health Center - Raceland Ochsner Health Center - Clearview Ochsner Family Doctor Clinic - Matthews Ochsner Health Center - Zachary Ochsner Health Center - West Bank Ochsner Medical Center - Baton Rouge Ochsner Health Center - Belle Chasse Ochsner Health Center - Denham Springs South Ochsner Health Center - Gretna Ochsner Health Center - Sherwood Ochsner Health Center - Lapalco Ochsner Medical Complex - Iberville Ochsner Health Center - Algiers Ochsner Health Center - Central Ochsner Emergency Room - Marrero Oshsner Heart and Vascular Health Center - Hammond Ochsner Health Center for Children - Monroe Ochsner Health Center - Summa (Bluebonnet Blvd.) Ochsner Specialty Health Center - Cedar Lake Ochsner Health Center - Prairieville Ochsner Specialty Health Center - Hancock Medical Ctr. Ochsner Health Center - Jefferson Place Ochsner Health Center for Children - River Ridge

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The following table summarizes clinic visits, clinic relative value units (“RVUs”) and Unique Clinic Patient information at OCF’s clinic facilities:

Fiscal Year Ended Three Months Ended December 31 March 31(3)

2014 2015 2016 2016 2017

Clinic Visits 1,520,006 1,650,544 1,806,594 438,227 488,456 Clinic RVUs(2) 5,037,600 5,455,838 6,050,375 1,457,829 1,597,325 Unique Clinic Patients(1) 384,181 411,988 446,515 418,288 457,657

(1) Unique Clinic Patients include the number of patients seen in a 12 month rolling period. (2) Clinic RVUs were restated in 2014 to conform to the 2015 and 2016 presentation. (3) Unique Clinic Patients include the number of patients seen in a 12 month rolling period ended March 31.

Medical Staff

Ochsner Medical Center operates under a closed staff model which consists entirely of OCF-employed physicians. OCF employed physicians also staff Ochsner health centers. OCF employed physicians may also practice at the other acute care hospitals owned and/or operated by Ochsner, as these hospitals have open staff models under which independent physicians have admitting privileges. The 1,205 active staff physicians employed by OCF have 1,115 board certifications in 67 specialties. To adjust for changes in staff size due to retirements plus meet growth needs and to enhance its specialty mix, OCF has an ongoing program of recruitment to find qualified new physicians. The group practice grew by approximately 8% in 2016 while turnover remained low. The active staff physicians of the medical staff are categorized by profile, as follows.

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% Board % Board Specialty Number Certified Specialty Number Certified Allergy & Immunology 6 100% Pain Management 8 89% Anesthesiology 60 95% Pathology 33 100% Cardiology 56 100% Pediatric Cardiology 15 100% Cardiothoracic Surgery 7 78% Pediatric Critical Care 7 100% Cardiovascular Surgery 1 100% Pediatric Emergency Medicine 5 83% Colon & Rectal Surgery 7 100% Pediatric Gastroenterology 4 100% Critical Care Medicine 2 100% Pediatric Hematology/Oncology 2 50% Dermatology 10 100% Pediatric Infectious Disease 5 100% Emergency Medicine 61 92% Pediatric Internal Medicine 1 100% Endocrinology & Metabolic Disease 9 90% Pediatric Nephrology 3 100% Family Medicine 93 94% Pediatric Neurology 3 100% Gastroenterology 25 86% Pediatric Orthopedics 2 100% General Surgery 24 96% Pediatric Pulmonology 2 100% Gynecologic Oncology 3 75% Pediatric Surgery 5 100% Gynecology 5 100% Pediatrics 64 96% Hematology/Oncology 27 100% Physical Medicine & Rehab 9 100% Hospice & Palliative Medicine 1 100% Plastic & Reconstructive Surgery 7 100% Hypertensive Medicine 2 100% Psychiatry 25 86% Infectious Disease 14 93% Psychiatry - Child 2 100% Internal Medicine 137 84% Pulmonary Disease/Critical Care 22 88% Interventional Cardiology 6 100% Pulmonary Medicine 14 93% Maternal Fetal Medicine 7 100% Radiation Oncology/Therapeutic Radiology 4 100% Medical Genetics 1 100% Radiology - Diagnostic 59 100% Neonatology 6 100% Reproductive Endocrinology 1 100% Nephrology 18 90% Rheumatology 10 91% Neurology 47 94% Sleep Medicine 3 100% Neurosurgery 5 42% Sports Medicine 5 100% Nuclear Medicine 1 100% Teleradiology 16 100% Obstetrics & Gynecology 47 89% Thoracic Surgery 1 100% Oncology - Surgical 2 100% Transplant Surgery 6 86% Ophthalmology 21 91% Urogynecology 3 100% Orthopedic Surgery 20 95% Urology 20 95% Otolaryngology (ENT) 15 100% Vascular Surgery 3 100% Grand Total 1,115 93%

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There are approximately 1,400 independent physicians practicing at Ochsner hospitals, excluding Ochsner Medical Center and Ochsner Elmwood Hospital. They are summarized in the following table. Physicians may be credentialed at multiple facilities.

Ochsner Ochsner Ochsner Medical Ochsner Medical Medical Ochsner Ochsner Center – St. Anne Center - Center – Medical Baptist Westbank General Baton North Center – Medical Campus Hospital Rouge Shore Kenner Center Number of Independent Physicians 231 99 231 197 387 291 % Board Certified 83% 87% 93% 84% 86% 90% Number of Specialties 27 26 26 33 37 40

Urgent Care Clinics

On January 10, 2017, OHS acquired Millennium Healthcare Management, Inc. (“MHM”). The acquisition added 12 Urgent Care and 4 Occupational Health clinic locations to the services OHS provides in the Greater New Orleans area with expanded services and program options and better access to the most appropriate care at a wider range of destinations.

MHM Urgent Care Covington MHM Urgent Care River Ridge MHM Urgent Care Houma MHM Urgent Care Thibodaux MHM Urgent Care Kenner MHM Urgent Care Uptown MHM Urgent Care Lakeview MHM Urgent Care West Bank MHM Urgent Care Luling MHM Occupational Medicine Covington MHM Urgent Care Mandeville MHM Occupational Medicine Kenner MHM Urgent Care Metairie MHM Occupational Medicine Metairie MHM Urgent Care Mid-City MHM Occupational Medicine West Bank

Academic Division

Since 1944, academics has been an integral component of the mission, vision, and strategy of Ochsner. The Division of Academics adds emphasis, intellectual capital, and focus to Ochsner’s mission to educate and innovate, with the primary focus of providing the highest quality care and service to the Ochsner community and patients. A large portion of physicians completing training programs at Ochsner decide to join Ochsner’s group practice. The academic areas are operating divisions of OCF.

Residency Training Programs. OCF operates one of the nation’s largest independent academic medical centers and trains more than 280 residents and fellows annually in 25 Accreditation Council for Graduate Medical Education-accredited residency training programs. In addition, Ochsner is a joint sponsor of two programs with Louisiana State University Health Sciences Center (LSUHSC), psychiatry and urology, and is a joint sponsor of a pediatric program with Tulane University School of Medicine. These joint programs include approximately 67 residents. In addition, Ochsner provides more than 500 student months of clinical education each year to another 300 residents and fellows that rotate to OCF in various disciplines of medicine and surgery under affiliation agreements with LSUHSC, Tulane and other schools from across the country and around the world. Ochsner also supports LSU residency training programs at Ochsner Medical Center – Kenner which hosts approximately 40 residents annually in Family Practice and Internal Medicine and approximately 14 residents annually in surgical and medicine specialties training programs.

University of Queensland, Ochsner Clinical School. In the fall of 2008, Ochsner entered into a partnership with the University of Queensland School of Medicine in Brisbane, Australia to develop the University of Queensland, Ochsner Clinical School (OCS). By 2017, this program will graduate 120 medical students each year. The program is for United States citizens or permanent residents who are interested in pursuing a career in medicine and having the opportunity to study in a global program. The students complete their first and second years of training at the

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University in Brisbane followed by completion of years three and four (clinical training years) at Ochsner. The students graduate with a Doctor of Medicine (MD) degree. The graduating class of December 2016 recently celebrated a 95% match rate which is above average for U.S. Medical Schools. University of Queensland, Ochsner Clinical School medical students have been welcomed into some of the nation’s most competitive and prestigious residency programs.

Approvals and Accreditations. OCF’s Division of Academics education programs are accredited by or registered with the following agencies:

Accreditation Council for Graduate Medical Education Accreditation Council for Continuing Medical Education American Association of Medical Colleges Association of Hospital Medical Education Australian Medical Council Council on Teaching Hospitals Joint Review Committee for Education in Radiologic Technology

Allied Health / Advanced Practice Affiliations. OCF has formal affiliations with more than 100 institutions of higher learning. OCF, through allied health and advanced practice affiliations, enables students enrolled in more than 200 college and university programs throughout the United States to complete formal clinical training degree requirements. Through these affiliations, Ochsner provides clinical training and mentoring to more than 1,500 students. In addition, through a long-standing partnership with the University of Holy Cross, students in Radiologic Technology and Neurodiagnostic Technology train at Ochsner Medical Center and complete an associate or bachelor’s degree in these respective programs.

Academic Outreach. Academic Outreach Programs focus on the development of unique experiences and opportunities students and teachers interested in Science Education and Health Science Careers. Programming provides a large spectrum of experiences throughout Louisiana including job shadowing, internships, field trips, Science Saturdays for Girl Scouts, iLab Student Outreach Laboratory that is free for any school or student to use, and 2 signature programs: STAR and BEST Science! STAR (Science-Technology-Academics-Research) is a 4.5 week, 175 hour intensive summer program that immerses engaged and interested high school students in a program that provides experience working with PhD scientists and health care providers in over 70 fields and specialties including leadership development courses and a complete abstract and poster presentation along with a year-long student developed community health project. It also includes BEST Science! (Bioscience-Enrichment for Students and Teachers), a National Institutes of Health (“NIH”) Science Education Partnership Award funded 5 year project that hosts Science Teachers for a one-week paid professional development workshop in the summer aligned with National Science Standards, and brings Lab2Go Kits into the teachers’ classrooms during the school year for teacher-led, hands-on high-level experimentation in the classroom. In 2016, academic outreach activities reached 12,000 students in Louisiana with direct measurable impact on over 4,000 students.

Research. Research at OCF is organized into multiple institutes and centers as follows:

Institute for Translational Research (ITR): ITR is home to Ochsner’s laboratory-based research. ITR’s primary mission is to conduct original and innovative research in order to better understand the underlying causes of human diseases, with the ultimate goal of translating this knowledge into clinical applications that improve human health. ITR supports ongoing research programs in multiple medical disciplines including cancer, nephrology, neurosurgery, rheumatology, infectious disease and organ transplant. ITR’s research faculty employs technologies in molecular and cellular biology, physiology, biochemistry, tissue culture, live animal imaging, microscopy and bioinformatics. ITR also maintains large and small animal facilities that are fully accredited by the Association for Assessment and Accreditation of Laboratory Animal Care International.

Institute for Clinical Research (ICR): With over 1,000 clinical research studies, including both retrospective and prospective studies, OCF is the largest clinical research enterprise in the Gulf South. While clinical research is being conducted in essentially all disciplines, there is a strategic initiative to further enhance this activity in the six designated Centers of Excellence, which include cardiovascular sciences, oncology, neurosciences, transplantation, women’s health and pediatrics. In 2016, 868 new patients were enrolled in therapeutic trials and 2,330 new subjects

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were enrolled in non-therapeutic clinical trials. By the end of the year, a cumulative total of 5,638 active patients, including those enrolled in prior years, were actively participating in clinical research at OCF. Research in the ICR is funded by various federal agencies including the National institutes of Health (NIH) and Patient Centered Research Outcome Institute (PCORI) as well as numerous industry partners.

Center for Applied Health Services Research (CAHSR): The mission of CAHSR at OCF is to advance knowledge to improve clinical practices and the health and wellbeing of Ochsner’s community. Ochsner’s vision is to become a PCORI Center of Excellence in the Gulf South. The Center accomplishes its mission and vision by engaging healthcare decision makers; leading innovative research; translating research into practice; collaborating with investigators from leading academic institutions; and disseminating research findings to patients, providers, and the broader community. The Center’s research activities focus on discovering, implementing, and evaluating interventions to improve quality of care, health outcomes, patient care experience, and health professional workforce experience and to reduce the cost of care. The current focus of the CAHSR is health service delivery redesign; collaborative care team models for chronic disease management, reduction of hospital readmissions and emergency department utilization, and health information technology assessments. The CAHSR is also advancing efforts to enhance patient engagement in research through the Patient Research Advisory Board, which was established in 2015.

Center for Nursing Research (CNR): CNR was established at OCF in 2006. The mission of the CNR is to serve the healthcare community by fostering the integration of scientific evidence into quality healthcare outcomes. The CNR is staffed by two doctoral prepared nurse scientists that lead inter-professional research teams in conducting research that focus on improving quality outcomes in hospitalized older adults and in high-risk neonates. In addition, the Center provides evidence-based practice and research consultative, and mentored services to both acute care and ambulatory nurses throughout the Ochsner Health System.

SERVICE AREA

Market Presence

Ochsner is among the largest fully-integrated health care delivery systems in the Gulf Coast region, and the most comprehensive regional system in Southeast Louisiana. Ochsner’s service area includes Jefferson Parish, Orleans Parish, St. Tammany Parish, East Baton Rouge Parish, Livingston Parish, St. Charles Parish, Lafourche Parish, St. John the Baptist Parish, Plaquemines Parish, St. Bernard Parish, Terrebonne Parish, Tangipahoa Parish, Ascension Parish, Iberville Parish, Pearl River County, Harrison County and Hancock County. The following chart depicts Ochsner’s inpatient discharge volume and growth.

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Ochsner Inpatient Discharge Volume New Orleans, Baton Rouge, Northshore, Bayou Regions(7)

2016 System 2014 2015 (Q1-3) Ochsner Health System(1) 51,609 55,056 42,137 OHS Affiliates(2) 28,879 29,146 22,324 LCMC/WJMC(3) 34,232 34,550 27,007 FMOL(4) 31,608 30,610 15,981 HCA(5) 18,433 18,736 14,881 EJGH 15,748 15,465 11,083 BR General 16,620 15,194 10,952 Woman’s 14,376 14,058 10,277 North Oaks 9,990 9,618 7,860 Other(6) 18,824 18,741 15,244 Total Discharges 240,319 241,174 177,746

Source: LHIN LA Database. Includes All Payors (Commercial, Medicaid, Medicare and Government). Excludes Well Newborns, Self Pay, Indigent & Other Uninsured Payors.

(1) Ochsner Health System includes: Ochsner Medical Center, Ochsner Baptist Medical Center, Ochsner Medical Center - Kenner, Ochsner Medical Center – Westbank Campus, Ochsner Medical Center -Northshore, Ochsner St. Anne & Ochsner Medical Center - Baton Rouge. (2) OHS Affiliates includes: Leonard Chabert, St. Charles, St. Tammany Parish Hospital, Slidell Memorial Hospital, and Terrebonne General Medical Center. (3) LCMC includes: Children's Hospital, Touro Infirmary, and University Medical Center. LCMC does not include New Orleans East Hospital. (4) FMOL includes Our Lady of the Lake Regional Medical Center, St. Elizabeth & Our Lady of Angels (5) HCA includes Tulane University Hospital & Clinic and Lakeview Regional Medical Center (6) Each Hospital included in Other has a discharge share of less than 3%. (7) New Orleans, Baton Rouge, Northshore, Bayou Regions include Jefferson Parish, Orleans Parish, St. Tammany Parish, East Baton Rouge Parish, Livingston Parish, St. Charles Parish, Lafourche Parish, St. John the Baptist Parish, Plaquemines Parish, St. Bernard Parish, Terrebonne Parish, Tangipahoa Parish, Ascension Parish.

New Orleans and Louisiana

New Orleans and Louisiana have made improvements since Hurricanes Katrina and Rita devastated the region in 2005. The state has proven to be a favorable business climate and is ranked #4 in Site Selection’s magazine’s 2015 ‘Top State Business Climate Rankings.’ Additionally, Louisiana is ranked as the #2 State by Forbes for “Business Cost” and received seven key rankings in Business Facilities 2015 Annual Report, which includes, #1 in ‘Workforce Training’, #3 in ‘Best Business Climate’, and #4 in ‘Economic Growth Potential.’ New Orleans is the #1 city in the nation with the fastest growing Median Wage growth since 2005 according to the Bureau of Labor Statistics (2015) published by Forbes as well as the #1 ‘City for Creative Professionals’.

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Selected Demographic Data

The following tables set forth certain demographic data for the System’s Service Area, the State of Louisiana and the United States for the calendar years 2010, 2016 and 2021 (projected).

2021 POPULATION 2010 2016 (Projected)

Service Area(1) 2,501,587 2,644,460 2,751,651 State 4,533,372 4,685,427 4,820,116 U.S. 308,745,538 322,431,073 334,341,965

Source: Truven Health Analytics

(1) Service area includes Jefferson Parish, Orleans Parish, St. Tammany Parish, East Baton Rouge Parish, Livingston Parish, St. Charles Parish, Lafourche Parish, St. John the Baptist Parish, Plaquemines Parish, St. Bernard Parish, Terrebonne Parish, Tangipahoa Parish, Ascension Parish, Iberville, Parish, Pearl River County, Harrison County and Hancock County.

TOP TEN EMPLOYERS IN THE GREATER NEW ORLEANS REGIONS

EMPLOYER Number of Employees Ochsner Health System 16,711 Louisiana Children’s Medical Center Health 6,675 Jefferson Parish School Board 6,631 St. Tammany Parish School Board 5,400 Tulane University 3,301 ACME Truck Line Inc. 3,150 Jefferson Parish Government 2,485 East Jefferson General Hospital 2,068 HRI Properties 2,000 West Jefferson Medical Center 1,914

Source: Employer website and Parish Economic Development Websites

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System Utilization Statistics

The following table summarizes certain historical information concerning utilization, provided on a combined utilization basis, for years 2014 through 2016 and for the three months ended March 31, 2016 and March 31, 2017.

Three Three Months Months Ended Ended 2014 2015 2016 Mar 2016 Mar 2017 Licensed Beds(1) 1,267 1,283 1,284 1,272 1,284 Average Number of Beds in Use(2) 1,346 1,371 1,372 1,360 1,367 Discharges Including Newborn 62,517 65,843 67,454 16,501 17,534 Discharges Excluding Newborn 56,771 60,186 61,341 15,061 15,996 Patient Days Including Newborn 301,055 313,483 326,145 81,459 86,746 Patient Days Excluding Newborn 287,706 300,526 312,349 78,167 83,246 Average Daily Census(3) 788 824 853 859 925 Percent Occupancy(3) 58.54% 60.04% 62.20% 63.14% 67.66% Average Length of Stay 4.8 4.8 4.8 4.9 4.9 Adjusted Patient Days(3) 576,981 612,443 659,409 160,403 173,447

Utilization Statistics by Facility – Three Months Ended March 31, 2017

Ochsner OMC OMC Ochsner Medical OMC Ochsner Baton North OMC Baptist Center West Bank St. Anne Rouge Shore Kenner Med Ctr Total Licensed Beds(1) 565 165 35 150 157 110 102 1,284 Average Number of Beds in Use(2) 561 181 35 159 165 110 156 1,367 Discharges Including Newborn 7,027 2,072 543 2,202 1,271 1,933 2,486 17,534 Discharges Excluding Newborn 7,027 1,826 469 1,885 1,271 1,702 1,816 15,996 Patient Days Including Newborn 44,963 8,854 1,881 7,931 5,522 7,175 10,420 86,746 Patient Days Excluding Newborn 44,963 8,252 1,718 7,264 5,522 6,618 8,909 83,246 Average Daily Census(3) 500 92 19 81 61 74 99 925 Percent Occupancy 89.05% 50.66% 54.54% 50.76% 37.19% 66.85% 63.45% 67.66% Average Length of Stay 6.4 4.3 3.5 3.6 4.3 3.7 4.2 4.9 Adjusted Patient Days(3) 81,136 17,015 7,362 21,528 11,639 15,764 19,003 173,447

Utilization Statistics by Facility – Year Ended December 31, 2016

Ochsner OMC OMC Ochsner Medical OMC Ochsner Baton North OMC Baptist Center WestBank St. Anne Rouge Shore Kenner Med Ctr Total Licensed Beds(1) 565 165 35 150 157 110 102 1,284 Average Number of Beds in Use(2) 561 181 35 159 165 115 156 1,372 Discharges Including Newborn 27,751 7,842 1,989 8,421 4,595 7,146 9,710 67,454 Discharges Excluding Newborn 27,751 6,854 1,678 7,127 4,595 6,216 7,120 61,341 Patient Days Including Newborn 167,747 32,606 7,102 29,522 21,551 25,815 41,802 326,145 Patient Days Excluding Newborn 167,747 30,237 6,422 26,767 21,551 23,578 36,047 312,349 Average Daily Census(3) 458 83 18 73 59 64 98 853 Percent Occupancy 81.70% 45.64% 50.13% 46.00% 35.69% 56.02% 63.13% 62.20% Average Length of Stay 6.0 4.2 3.6 3.5 4.7 3.6 4.3 4.8 Adjusted Patient Days(3) 304,024 62,330 33,424 81,365 43,580 57,519 77,167 659,409 ______(1) Data excludes NICU and Nursery Beds (2) Data excludes Nursery beds, but includes NICU beds, a large number of beds in use will yield an amount greater than the number of licensed beds (3) Data excludes Normal Newborn Days

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HISTORICAL FINANCIAL INFORMATION

General

The following financial information reflects the operating results and financial condition of Ochsner derived from the audited consolidated financial statements of OHS. The summary of financial information should be read in conjunction with the consolidated financial statements and related notes contained in Appendix B.

The selected financial data for the three month periods ended March 31, 2017 and 2016, included below, was derived from interim consolidated financial information of the System, which has not been audited but includes all adjustments, consisting of normal recurring adjustments, that System management considers necessary for a fair presentation on a basis consistent with the audited financial statements.

The results for the three-month period ended March 31, 2017 is not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2017.

OCF is the only Obligated Group Member under the Master Indenture. Certain affiliates of OHS have been designated as Designated Affiliates and Credit Group Members under the Master Indenture. Credit Group and Credit Group Members mean all Obligated Group Members and Designated Affiliates. The Credit Group constituted 93.4% of the consolidated total assets of OHS as of December 31, 2016 and 99.9% of the consolidated total revenue of OHS for the twelve months ended December 31, 2016. OHS is not a Credit Group member; nor does OHS have any obligation to pay the principal of or interest on the Bonds. See “SECURITY FOR THE BONDS – The Master Indenture” in the front portion of this Official Statement.

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Consolidated Statements of Operations

The following table contains a summary of the Consolidated Statements of Operations of the System for the years ended December 31, 2014 through 2016 and the three-month periods in 2016 and 2017 ended March 31.

OCHSNER HEALTH SYSTEM CONSOLIDATED STATEMENTS OF OPERATIONS ($ In Thousands)

Fiscal Year Ended Three Months Ended December 31 March 31 (Unaudited)

2014 2015 2016 2016 2017 Unrestricted Revenues Net Patient Service Revenue $ 1,918,218 $ 2,117,008 $ 2,285,483 $ 551,349 $ 585,841 Provision for Bad Debts (83,508) (95,738) (88,454) (24,887) (21,399) Net Patient Service Revenue Less Provision for Bad Debts 1,834,710 2,021,270 2,197,029 526,462 564,442 Premium Revenue 267,283 289,420 286,186 71,331 73,388 Other Operating Revenue 209,205 277,671 322,978 76,377 102,049 Net Assets Released from Restrictions Used for Operations 3,649 4,132 6,040 1,639 1,246 Total Unrestricted Revenues 2,314,847 2,592,493 2,812,233 675,809 741,125

Expenses: Salaries and Wages 1,037,062 1,152,055 1,258,517 304,751 325,948 Benefits 151,788 158,432 179,299 43,802 49,086 Medical Services to Outside Providers 129,218 142,255 132,534 38,686 36,370 Medical Supplies and Services 358,842 416,142 480,654 112,638 129,611 Other Operating Expenses 458,445 503,381 542,293 123,508 138,186 Depreciation and Amortization 98,270 103,683 115,832 27,548 30,358 Interest 40,124 49,469 52,718 14,137 12,417 Total Expenses 2,273,749 2,525,417 2,761,847 665,070 721,976

Income from Operations 41,098 67,076 50,386 10,739 19,149

Non-Operating Gains and Losses: Investment and Other Realized Gains (Losses), Net 44,303 16,264 7,613 (9,198) 14,994 Loss on Early Extinguishment of Debt - (12,982) (39,110) - - Unrealized Gains (Losses) Gains on Alternative Investments (1,072) (4,826) 10,241 1,060 8,236 Total Non-Operating Gains (Losses) 43,231 (1,544) (21,256) (8,138) 23,257

Excess of Revenues Over Expenses $ 84,329 $ 65,532 $ 29,130 $ 2,601 $ 42,406

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Consolidated Balance Sheets

The following table contains a summary of the Consolidated Balance Sheets of the System as of December 31, 2014, 2015 and 2016.

OCHSNER HEALTH SYSTEM CONSOLIDATED BALANCE SHEETS ($ In Thousands)

Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2016 Assets $ 158,658 $ 290,803 $ 121,569 Cash and Cash Equivalents Assets Limited as to Use Required for Current Liabilities 2,687 3,858 5,600 Patient Accounts Receivable, Net 213,827 225,527 252,598 Accounts Receivable Other 71,690 76,671 99,516 Inventories 42,384 50,409 56,022 Prepaid Expenses and Other Current Assets 26,205 37,634 39,731 Estimated Third-Party Payor Settlements 25,164 17,552 19,626 Total Current Assets 540,615 702,454 594,662 Assets Limited as to Use: By Board for Capital Improvements, Charity, Research, and Other 445,703 619,703 729,436 Under Bond Indenture Agreements 44,009 36,040 21,477 Under Self-Insurance Trust Fund 9,740 11,921 9,135 Donor-Restricted Long-Term Investments 63,163 65,533 78,433 Total Assets Limited as to Use 562,615 733,197 838,481 Less Assets Limited as to Use Required for Current Liabilities (2,687) (3,858) (5,600) Noncurrent Assets Limited as to Use 559,928 729,339 832,881 Investments in Unconsolidated Affiliates, Real Estate, and Other 6,301 6,653 14,045 Property, Net 734,873 754,843 821,692 Goodwill 43,077 43,077 43,558 Intangible Assets 11,482 11,482 11,467 Other Assets 8,240 23,950 32,534 Total Assets $1,904,516 $2,271,798 $2,350,839 Liabilities and Net Assets Accounts Payable $ 117,814 $ 140,116 $ 150,332 Accrued Salaries, Wages, and Benefits 136,296 148,252 149,483 Deferred Revenue 15,520 12,850 9,669 Estimated Third-Party Payor Settlements 5,331 4,778 3,769 Bonds Payable, Current Portion 6,230 6,740 7,030 Notes Payable, Current 52,985 52,430 52,430 Long-Term Debt, Current Portion 15,364 17,858 15,566 Other Current Liabilities 28,248 30,919 30,927 Total Current Liabilities 377,788 413,943 419,206 Pension and Postretirement Obligations 156,907 152,346 166,532 Bonds Payable 559,511 810,166 828,408 Long-Term Debt 190,147 203,741 188,693 Other Long-Term Liabilities 28,453 36,038 36,982 Total Liabilities 1,312,806 1,616,234 1,639,821 Unrestricted Net Assets 523,310 565,116 596,966 Temporarily Restricted Net Assets 45,003 66,685 88,219 Permanently Restricted Net Assets 23,397 23,763 25,833 Total Net Assets 591,710 655,564 711,018 Total Liabilities and Net Assets $ 1,904,516 $ 2,271,798 $ 2,350,839

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NOTE: In April 2015, The FASB issued Accounting Standards Update (ASU) 2015-03, Simplifying the Presentation of Debt Issuance Costs, requiring debt issuance costs to be reported in the balance sheet as a direct deduction from the face value of the debt for periods beginning after December 15, 2015. In accordance with ASU 2015-03, OCF deducted deferred financing costs from Bonds Payable and Long Term Debt starting in Q1-2016. For comparability, 2014 to 2015 have been restated in the exhibit above.

Sources of Patient Revenue

The following table lists the approximate percentages of combined gross patient service revenues for the System by payor category for the years ended December 31, 2014 through 2016.

Ochsner Health System Payor Groupings 2014 2015 2016

Managed Care and Commercial 39% 39% 38% Medicare Managed Care 23% 23% 24% Medicare – Traditional 22% 22% 21% Medicaid 12% 12% 14% Other 4% 4% 3% TOTAL 100% 100% 100%

Capital Structure

As of December 31, 2016, the System had outstanding bonds payable consisting of the following tax-exempt revenue bonds issued by the Louisiana Public Facilities Authority (“LPFA”) on behalf of OCF and OCH: (1) OCF Series 2007A issued September 2007, due serially in each of the years 2009 through 2022, with term bond maturities in 2027, 2039, 2043 and 2047, and annual interest rates ranging from 5.00% to 5.50%, a portion of which was refunded by the 2015 Refunding Bonds as described below and the remainder of which is expected to be refunded by the Bonds as described under “PLAN OF FINANCE” in the front portion of this Official Statement; (2) OCH Series 2007B issued September 2007, due serially in each of the years 2009 through 2014, with term bond maturities in 2022, 2027, 2038 and 2047, and annual interest rates ranging from 5.00% to 5.50%, a portion of which was refunded by the 2015 Refunding Bonds as described below and the remainder of which is expected to be refunded by the Bonds as described under “PLAN OF FINANCE” in the front portion of this official statement; (3) OCF Refunding Series 2015 issued August 2015, due serially in each of the years 2016 through 2035, with term bond maturities in 2040 and 2047, and annual interest rates ranging from 2.00% to 5.00%; and (4) OCF Refunding Series 2016 issued May 2016, due serially in each of the years 2023 through 2036, with term bond maturities in 2041 and 2047, and annual interest rates ranging from 3.00% to 5.00%. Ochsner also had outstanding the OCF Series 2015 taxable bonds, which were issued by OCF in June 2015, are due in 2045, and have an annual interest rate of 5.9%.

Also outstanding were Notes Payable as follows: a 4.61% Senior Secured Note, entered into March 2013, and due March 2033; a 5.26% Senior Secured Note, entered into December 2013, and due December 2028; and a 5.09% Senior Secured Note, entered into July 2014, and due August 2034.

Three promissory notes are also outstanding: the first was entered into in December 2013, interest on this note is variable but fixed with an interest rate swap agreement at 3.97%, with final principal payment due December 2020; the second was entered into in October 2014, interest at 3.75%, with final principal payment due October 2021; the third was entered in September 2015, interest on this note is variable but fixed with an interest rate swap agreement at 4.13%, with a final payment due September 2022. In connection with the lease of the buildings on the campus of Ochsner St. Anne General Hospital beginning in May 2006, OCF purchased certain equipment and fixtures, in addition to the working capital of the hospital from the Lafourche Parish Hospital Service District No. 2 by issuing a note payable. This note carries a variable interest rate whose annual interest rate ranged from 0.88% to 1.85% through December 31, 2016. This note has a maturity date coinciding with the termination date of the lease which is currently May 2026 and subject to six (6) consecutive 5-year renewal option periods. Ochsner also has various software and equipment loans, with maturities on varying dates from 2017 through 2020, in addition to various capital lease obligations. The table below describes the debt profile of the System, assuming the issuance of the Bonds as described under “PLAN OF FINANCE” in the front portion of this Official Statement.

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OCHSNER HEALTH SYSTEM As of December 31, 2016

Series Par Outstanding Pro forma Final Maturity Interest Mode Series 2007A(5) $ 250,805,000 $ 4,240,000 5/15/2047 Fixed Series 2007B(2)(5) 53,445,000 750,000 5/15/2047 Fixed Series 2015 Taxable 252,820,000 252,820,000 5/15/2045 Fixed Series 2015 Tax Exempt Refunding 112,815,000 112,815,000 5/15/2047 Fixed Series 2016 Tax Exempt Refunding 155,660,000 155,660,000 5/15/2047 Fixed Series 2017 Tax Exempt Refunding - 257,555,000 12/31/2047 Fixed Series 2017 New Money - 154,465,000 12/31/2047 Fixed March 2013 Note Payable (1) 6,126,905 6,126,905 3/31/2033 Fixed December 2013 Promissory Note 54,027,842 54,027,842 12/31/2028 Fixed July 2014 Note Payable(1) 74,286,238 74,286,238 8/15/2034 Fixed December 2013 Promissory Note 14,697,917 14,697,917 12/30/2020 Variable(4) October 2014 Promissory Note 19,066,667 19,066,667 10/31/2021 Fixed September 2015 Promissory Note 27,000,000 27,000,000 9/30/2022 Variable(4) 2006 Working Capital Note(3) 8,604,288 8,604,288 5/1/2026 Variable Software and Equipment Loans(3) 3,131,231 3,131,231 N/A N/A Capital Lease Obligations(3) 14,910,925 14,910,925 N/A N/A TOTAL $1,047,397,013 $1,160,157,013

Note:

(1) Not an obligation of a credit group member or a supplemental obligation of the Master Indenture. (2) Guaranteed by Ochsner Clinic Foundation and effective upon the merger of Ochsner Community Hospitals with and into Ochsner Clinic Foundation on December 31, 2016, Ochsner Clinic Foundation assumed all of the indebtedness of Ochsner Community Hospitals, including the 2007B bonds. (3) Not secured by an Obligation issued under the Master Indenture. (4) OCF entered into an interest rate swap agreement to synthetically fix the interest rate. (5) Pro forma includes May 15, 2017 Debt Service Payment.

See “PLAN OF FINANCE” in the front portion of this Official Statement. Ochsner Clinic Foundation also has a loan agreement with a bank which provides a credit line. The interest rate of the note is defined as the 30 day LIBOR index plus one hundred fifty (150) basis points, and it is set to expire/renew on June 15, 2017. The balance as of December 31, 2016 was $52,430,000.

Interest Rate Swaps

OCF has entered into certain interest rate swaps (the “Swaps”) to manage its exposure to interest rate risk associated with variable rate debt.

As of December 31, 2016, the Swaps have an outstanding aggregate notional principal amount of $41,697,916. The notional amounts of these swaps decline over time and terminate by September 30, 2022. On the swap agreement related to the December 2013 Promissory Note, OCF pays a 1.97% fixed interest rate on the outstanding notional amount based on the outstanding principal balance of the 2013 Loan to the counterparty and receives the floating amount of 30-day LIBOR as of the date of rate-set. The effect of the swap agreement is to fix OCF’s interest rate on the 2013 Loan at 3.97%. On the swap agreement related to the September 2015 Promissory Note, OCF pays a 1.88% fixed interest rate on the outstanding notional amount based on the outstanding principal balance of the 2015 Loan to the counterparty and receives the floating amount of 3-month LIBOR as of the date of rate-set. The effect of the swap agreement is to fix OCF’s interest rate on the 2015 Loan at 4.13%. As of December 31, 2016 the total fair value of both swaps was $164,000. The fair value represents the estimated amount that OCF would pay or receive if the swaps were terminated at year end.

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Debt Service Coverage

The table below includes the System’s coverage of the Maximum Annual Debt Service on Long-Term Indebtedness for the years ended December 31, 2014 through 2016 (both as defined in the Appendix attached to this Official Statement entitled “SUMMARY OF THE MASTER INDENTURE”). The pro forma column assumes the issuance of the Bonds and the application of the proceeds thereof as described under the caption “PLAN OF FINANCE” in the front portion of this Official Statement. Dollar amounts are in thousands.

Fiscal Year Ended December 31 2014 2015 2016 2016 Pro Forma Excess of Revenues over Expenses $ 84,329 $ 65,532 $ 29,130 $ 29,130 Plus: Depreciation and Amortization 98,270 103,683 115,832 115,832 Plus: Interest 40,124 49,469 52,718 52,718 Plus: Unrealized Losses (Gains) on Alternative 1,072 4,826 (10,241) (10,241) Investments Plus: Loss on Early Extinguishment of Debt - 12,982 39,110 39,110 Income Available for Debt Service $223,795 $236,492 $226,549 $226,549

Historical Maximum Annual Debt Service-Credit $ 52,323 $ 66,075 $ 65,281 $ 69,371 Group(1) Coverage of Maximum Annual Debt Service-Credit 4.3x 3.6x 3.5x 3.3x Group(1)

Historical Maximum Annual Debt Service-OHS(2) $ 63,421 $ 79,076 $ 78,282 $ 71,446 Coverage of Maximum Annual Debt Service-OHS(2) 3.5x 3.0x 2.9x 3.2x

______(1) MADS calculated in accordance with Master Indenture, which includes the member entities of the Credit Group and excludes non-designated affiliates. Balloon indebtedness is assumed to be amortized over a 30-year period. Interest on Balloon Indebtedness, which includes all of the variable rate debt and the Taxable Bonds, is based on a rate equal to the average Thirty- Year Revenue Bond Index, as published in the Bond Buyer’s Index for the previous six-month period (3.41%). Interest on all other debt, including the Bonds, is based on the actual fixed rate. (2) MADS calculated to include the entire System, i.e. both the Credit Group and non-designated affiliates. Balloon indebtedness is assumed to be amortized over a 30-year period. Interest on Balloon Indebtedness, which includes all of the variable rate debt and the Taxable Bonds, is based on a rate equal to the average Thirty-Year Revenue Bond Index, as published in the Bond Buyer’s Index for the previous six-month period (3.41%). Interest on all other debt, including the Bonds, is based on the actual fixed rate. Pro Forma Maximum Annual Debt Service includes adjustments to reflect the issuance of the Bonds and the application of the proceeds thereof as described under the caption “PLAN OF FINANCE” in the front portion of this Official Statement.

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Debt to Capitalization

The table below includes the System’s Debt to Capitalization for the years ended December 31, 2014, 2015 and 2016. The pro forma column assumes the issuance of the Bonds and the application of the proceeds thereof as described under the caption “PLAN OF FINANCE” in the front portion of this Official Statement. Dollar amounts are in thousands.

2014 2015 2016 2016 Pro Forma

Series 2007, 2015 and 2016 Bonds Payable(1) $ 559,511 $ 810,166 $ 828,408 $ 538,223 Series 2017 Refunding Bonds Payable(1) - 278,210 Series 2017 New Money(1) - 163,879 Other Long Term Debt 190,147 203,741 188,693 188,693 Total Long Term Indebtedness 749,658 1,013,907 1,017,101 1,169,005

Unrestricted Net Assets 523,310 565,116 596,966 596,666 Total Capitalization 1,272,968 1,579,023 1,614,067 1,765,971

Long Term Debt to Total Capitalization 58.9% 64.2% 63.0% 66.2% (2)

(1) Bonds Payable amounts reflect par value of bonds plus premium/(less discount) and are net of deferred financing costs, i.e. reflect the current balance sheet presentation for all years presented and the Pro Forma amounts. (2) Ochsner maintains a line of credit with a balance of $52,430,000 on December 31, 2016, that has a current maturity of less than 1 year. However, if included in this calculation, the Pro forma Debt to Capitalization would be 67.2%.

Cash and Investments; Days Cash on Hand

The table below includes Cash and Investments and Days Cash on Hand at December 31, 2014, 2015, and 2016. Dollar amounts are in thousands.

Cash and Investments Days Cash on Hand 2014 2015 2016 2014 2015 2016 Monthly Liquidity $535,164 $828,635 $720,629 89 124 99 Liquidity greater than 30 days and less than one year 51,445 64,295 114,000 9 10 16 Locked Up (liquidity one year or more) 17,753 17,576 16,376 3 3 2 Total $604,362 $910,506 $851,005 101 137 117

Management’s Discussion and Analysis

Three Months Ended March 31, 2017 Compared with Three Months Ended March 31, 2016

OHS had Income from Operations of $19.1 million (2.6% of Total Unrestricted Revenues) for the first three months of 2017 compared to $10.7 million (1.6% of Total Unrestricted Revenues) for the first three months of 2016 and operating EBITDA was $62.2 million (8.4% of Total Unrestricted Revenues) for the first three months of 2017 compared to $52.5 million (7.8% of Total Unrestricted Revenues) for the first three months of 2016.

The System achieved Total Unrestricted Revenues of approximately $741.1 million for the first three months of 2017, an increase of $65.3 million or 9.7% over the same period in 2016 primarily due to organic growth as well as an increase in patients referred from affiliates and outlying facilities through OHS’s regional referral center. Net Patient Service Revenue Less Provision for Bad Debts increased $38.0 million or 7.2%. Premium Revenue increased $2.1 million. When comparing the first three months of 2017 to the first three months of 2016, discharges increased 6.2%, patient days increased 6.5%, inpatient surgical procedures increased 8.4%, outpatient surgical procedures increased 10.8%, emergency room visits increased 2.0%, clinic relative value units increased 9.6%, clinic visits increased 11.5%, and unique clinic patient visits increased 9.4%. OHS continues to see an increase in

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patients referred from affiliates and outlying facilities through its regional referral center. Inpatient transfers to Ochsner Medical Center in the first three months of 2017 increased 13.0% over the first three months of 2016. Revenue received from any of our managed or affiliated hospitals is not included within Net Patient Service Revenue.

Other Operating Revenue for the first three months of 2017 was $102.0 million, a $25.7 million increase over the first three months of 2016. Other Operating Revenue for the first three months of 2017 includes a $3.9 million increase related to pharmacy revenue and a $7.0 million increase related to funding in 2017 from partners of partially owned subsidiaries formed exclusively for charitable, educational and scientific purposes compared to the first three months of 2016. Other Operating Revenue for the first three months of 2017 also includes $8.9 million of insurance proceeds. Other Operating Revenue includes $11.2 million in the first three months of 2017 and $8.9 million in the first three months of 2016 of revenue related to management agreements and joint operating agreements.

The Provision for Bad Debt for Ochsner Health System, as a percentage of Patient Service Revenue – Net of Contractual Allowances and Discounts and Premium Revenue net of Medical Services to Outside Providers, was 3.4% for the first three months of 2017 compared to 4.3% for the first three months of 2016. A portion of the reduction in bad debt can be attributed to Louisiana expanding Medicaid in July 2016 which increased Medicaid as a percentage of gross revenue from 13% in the first three months of 2016 to 17% in the first three months of 2017. Bad Debt and Charity Care combined accounted for 4.4% of Patient Service Revenue – Net of Contractual Allowances and Discounts and Premium Revenue net of Medical Services to Outside Providers for the first three months of 2017 compared to 6.2% for the first three months of 2016.

Salaries and Wages for the first three months of 2017 were $325.9 million, a $21.2 million increase over the first three months of 2016. The majority of the increase is related to additional staffing and additional providers needed to meet increased patient demand. Total providers increased by 9.4% or 124 full-time equivalents (“FTEs”). That includes an 8.1% increase in physicians, or 73 FTEs, and a 12.1% increase in the number of other providers, or 51 FTEs. Ochsner employs over 1,200 active staff physicians and over 500 other providers.

Medical Services to Outside Providers expense for the first three months of 2017 decreased by $2.3 million from the first three months of 2016. The System currently provides services to approximately 35,000 senior members under a capitation contract for both physician and hospital services.

Medical Supplies and Services increased by $17.0 million when comparing the first three months of 2017 to the first three months of 2016. Medical Supplies and Services as a percentage of Total Unrestricted Revenues was 17.5% for the first three months of 2017 and 16.7% for the first three months of 2016. Approximately $6.5 million of the increase is due to increased drug expenses primarily due to an increased volume of chemotherapy and infusion drugs. Ochsner continues to see a continuing shift toward higher acuity patients, which contributed to an approximate $4.5 million increase in medical supplies and implants related to Transapical Valve replacements, Cath Lab procedures and Electrophysiology Lab procedures.

Other operating expenses which includes building and equipment, insurance, professional services and general and administrative expenses for the first three months of 2017 increased by $14.7 million over the first three months of 2016. $2.9 million of the increase is related to software maintenance contracts. $3.9 million of the increase is related to sales tax due to changes to the Louisiana State Sales Tax legislation that went into effect during April 2016. $2.4 million of the increase is related to attorney and consulting expenses associated with increased merger and acquisitions activity, including the acquisition of the MHM Urgent Care clinics. $1.1 million of the increase is related to an increase in outside physician services, and associated costs, at Leonard J. Chabert Medical Center.

OHS had a non-operating gain of $23.3 million for the first three months of 2017 and a non-operating loss of $8.1 million for the first three months of 2016. Non-operating gains and losses include realized gains and losses, as well as changes in the market value of the pooled investment portfolio.

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Fiscal Year Ended December 31, 2016 Compared with Fiscal Year Ended December 31, 2015

OHS had Income from Operations of $50.4 million (1.8% of Total Unrestricted Revenues) for 2016 compared to $67.1 million (2.6% of Total Unrestricted Revenues) for 2015 and operating EBITDA was $219.6 million (7.8% of Total Unrestricted Revenues) for 2016 compared to $220.5 million (8.5% of Total Unrestricted Revenues) for 2015. Operating performance in 2016 was negatively impacted by changes to the Louisiana state sales tax legislation that went into effect in April 2016 and the record flooding in Baton Rouge in August 2016.

The System achieved Total Unrestricted Revenues of approximately $2.8 billion for 2016, an increase of $219.7 million or 8.5% over the same period in 2015 primarily due to organic growth as well as an increase in patients referred from affiliates and outlying facilities through OHS’s regional referral center. Net Patient Service Revenue Less Provision for Bad Debts increased $175.8 million or 8.7%. Premium Revenue decreased $3.2 million. When comparing 2016 to 2015, discharges increased 1.9%, patient days increased 3.9%, inpatient surgical procedures increased less than 1 percent, outpatient surgical procedures increased 11.2%, emergency room visits increased 2.9%, clinic relative value units increased 10.9%, clinic visits increased 9.5%, and unique clinic patients visits increased 7.7%. OHS continues to see an increase in patients referred from affiliates and outlying facilities through its regional referral center. Inpatient transfers to Ochsner Medical Center in 2016 increased 13.9% over 2015. Revenue received from any of our managed or affiliated hospitals is not included within Net Patient Service Revenue.

Other Operating Revenue for 2016 was $323.0 million, a $45.3 million increase over 2015. Other Operating Revenue for 2016 includes a $7.9 million increase related to pharmacy revenue, a $7.0 million increase in EHR incentives and an $11.3 million increase related to funding in 2016 from partners of partially owned subsidiaries formed exclusively for charitable, educational and scientific purposes. Other Operating Revenue includes $42.0 million in 2016 and $38.1 million in 2015 related to management agreements and joint operating agreements.

The Provision for Bad Debt for Ochsner Health System, as a percentage of Patient Service Revenue – Net of Contractual Allowances and Discounts and Premium Revenue net of Medical Services to Outside Providers, was 3.6% for 2016 compared to 4.2% for 2015. A portion of the reduction in bad debt can be attributed to Louisiana expanding Medicaid in July 2016 which increased Medicaid as a percentage of gross revenue from 12% in 2015 to 14% in 2016. Bad Debt and Charity Care combined accounted for 5.0% of Patient Service Revenue – Net of Contractual Allowances and Discounts and Premium Revenue net of Medical Services to Outside Providers for 2016 compared to 6.5% for 2015.

Salaries and Wages for 2016 were $1.3 billion, a $106.5 million increase over 2015. The majority of the increase is related to additional staffing and additional providers needed to meet increased patient demand. Total providers increased by 10.2% or 128 full-time equivalents (“FTEs”). That includes a 5.6% increase in physicians, or 49 FTEs, and a 21.0% increase in the number of other providers, or 78 FTEs. Ochsner employs over 1,200 active staff physicians and over 500 other providers.

Medical Services to Outside Providers expense for 2016 decreased by $9.7 million from 2015. The System currently provides services to approximately 35,000 senior members under a capitation contract for both physician and hospital services.

Medical Supplies and Services increased by $64.5 million when comparing 2016 to 2015. Medical Supplies and Services as a percentage of Total Unrestricted Revenues was 17.1% for 2016 and 16.1% for 2015. $34.6 million of the increase is due to increased volume in the pharmacies and an increase in chemotherapy and infusion drugs. Ochsner continues to see a continuing shift toward higher acuity patients. $20.3 million of the increase is due to an increase in medical supplies and implants, related to Transapical Valve replacements, Cath Lab procedures and Electrophysiology Lab procedures.

Other operating expenses which includes building and equipment, insurance, professional services and general and administrative expenses for 2016 increased by $38.9 million over 2015. $8.1 million of the increase is related to software maintenance contracts. $2.1 million of the increase is related to dietary purchased services that we previously included in salary and supplies expense. $7.7 million of the increase is related to sales tax due to changes to the Louisiana State Sales Tax legislation that went into effect during April 2016.

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Excluding the loss on early extinguishment of debt, OHS had a non-operating gain of $17.9 million for 2016 and $11.4 million for 2015. Non-operating gains and losses include realized gains and losses, as well as changes in the market value of the pooled investment portfolio. 2016 also includes a $39.1 million loss on early extinguishment of debt related to the advance refunding of the Series 2011 Bonds. Similarly, 2015 includes a $13.0 million loss on early extinguishment of debt related to refinancing a portion of the Series 2007 Bonds.

At December 31, 2016, Ochsner Health System had unrestricted cash and investments of $851.0 million which equates to 117 days cash on hand. The $59.5 million decrease from December 2015 includes a $27.1 million increase in Patient Accounts Receivable – Net and a $22.8 million increase in Other Receivables. Also, OHS spent $54.3 million more in 2016 on capital expenditures than was spent in 2015, primarily related to the strategic capital plan that started in 2015. This was offset by a $46.1 million of net realized and unrealized non-operating gains due to changes in the market value of the pooled investment portfolio.

Fiscal Year Ended December 31, 2015 Compared with Fiscal Year Ended December 31, 2014

OHS had Income from Operations of $67.1 million (2.6% of Total Unrestricted Revenues) for 2015 compared to $41.1 million (1.8% of Total Unrestricted Revenues) for 2014 and Excess of Revenues over Expenses of $65.5 million (2.5% of Total Unrestricted Revenues) for 2015 compared to $84.3 million (3.6% of Total Unrestricted Revenues) for 2014. Operating EBITDA was $220.5 million (8.5% of Total Unrestricted Revenues) for 2015 compared to $179.5 million (7.8% of Total Unrestricted Revenues) for 2014. Total Unrestricted Revenues grew approximately 12.0% due to organic growth as well as an increase in patients referred from affiliates and outlying facilities through OHS’s regional referral center. Expenses did not increase at the same pace as revenue. Salaries and Wages increased 11.1% versus the 12.0% increase in Total Unrestricted Revenues. Expenses related to Medical Supplies and Services are being controlled by supply chain initiatives targeting waste prevention and cost reduction.

The System achieved Total Unrestricted Revenues of $2.6 billion for 2015, an increase of $277.6 million or 12.0% over 2014 primarily due to an increase in patient volume. Net Patient Service Revenue Less Provision for Bad Debts increased $186.6 million or 10.2%. Premium Revenue increased $22.1 million or 8.3% primarily due to an increase in Medicare Advantage covered lives. When comparing 2015 to 2014, discharges increased 6.0%, patient days increased 4.5%, inpatient surgical procedures increased 7.7%, outpatient surgical procedures increased by 5.7%, emergency room visits increased 9.5%, clinic relative value units increased 8.3%, and clinic visits increased 8.6%. OHS continues to see an increase in patients referred from affiliates and outlying facilities through its regional referral center. Inpatient transfers to Ochsner Medical Center in 2015 increased 36.4% over 2014. Revenue received from any of our managed or affiliated hospitals is not included within Net Patient Service Revenue.

Other Operating Revenue for 2015 was $277.7 million, a $68.5 million increase over 2014. Other Operating Revenue for 2015 includes a $67.6 million increase in pharmacy revenues.

The Provision for Bad Debt for Ochsner Health System, as a percentage of Net Patient Service Revenue and Premium Revenue net of Medical Services to Outside Providers, was 4.2% for 2015 compared to 4.1% for 2014. Bad Debt and Charity Care combined accounted for 6.5% of Net Patient Service Revenue and Premium Revenue net of Medical Services to Outside Providers for 2015 compared to 6.7% for 2014.

Salaries and Wages for 2015 were $1.2 billion, a $115.0 million increase over 2014. The majority of the increase is related to additional staffing and additional providers needed to meet increased patient demand. Total providers increased by 8.8% or 101 full-time equivalents (“FTEs”). That includes a 6.3% increase in physicians, or 52 FTEs, and a 15.1% increase in the number of other providers, or 49 FTEs. Ochsner employs over 1,000 active staff physicians and over 479 other providers.

Medical Services to Outside Providers expense for 2015 increased by $13.0 million over 2014 primarily due to an increase in Medicare Advantage covered lives and an increase in pharmacy costs related to those members. The System currently provides services to approximately 35,000 senior members under a capitation contract for both physician and hospital services.

Medical Supplies and Services increased by $57.3 million when comparing 2015 to 2014. Medical Supplies and Services as a percentage of Total Unrestricted Revenues was 16.1% for 2015 and 15.5% for 2014. The increase is

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due to pharmacy costs associated with increased volume in the inpatient and outpatient pharmacies and a continuing shift toward higher acuity procedures, including an 8.5% increase in transplants and a 7.7% increase in inpatient surgical procedures.

Other Operating Expenses, which includes building and equipment, insurance, professional services and general and administrative expenses, for 2015 increased by $44.9 million over 2014. $20 million of the increase is related to physician purchased services and $15 million of the increase is related to building and equipment expenses.

Non-Operating Gains and Losses for 2015 includes a $13.0 million Loss on Early Extinguishment of Debt related to refinancing a portion of the Series 2007 Bonds. Non-Operating Gains and Losses also includes gains due primarily to market appreciation of the pooled investment portfolio for 2015 of $11.4 million compared to $43.2 million for 2014.

At December 31, 2015, Ochsner Health System had unrestricted cash and investments of $910.5 million which equates to 137 days cash on hand. The $306.1 million increase from December 2014 includes the June 2015 issuance of $252.8 million taxable bonds and a $30 million term loan on September 30, 2015.

CORPORATE GOVERNANCE

Governance. OHS is governed by a nineteen member Board of Directors that includes ten community directors, eight senior physician directors, and the CEO of OHS. The Board of Directors is responsible for directing and overseeing the business and affairs of Ochsner in a manner that contributes to the accomplishment of Ochsner’s community benefit mission. The Boards of Directors of OHS and OCF have substantial overlapping members. In October 2016, the Boards of Directors of OHS and OCF each unanimously approved amendments to the Bylaws and Articles of Incorporation of each of OHS and OCF, respectively (collectively, the “Board Expansion Amendments”), that would allow, but not require, each Board to expand its total Board seats by up to six (6) additional directors, for a total of up to twenty-five (25) directors on each Board. The Board Expansion Amendments provide that senior physician directors shall at all times continue to comprise the current proportion of at least forty-two percent (42%) of each Board of Directors and a majority of each Board shall continue to be comprised of community directors. Final approval and implementation of the Board Expansion Amendments is pending approval of the senior physicians of OCF, which such approval is anticipated by May 1, 2017.

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Year Expiration of Appointed to Current Board Term(1) Suzanne Mestayer CEO, Thirty North Investments, LLC 2004 2020 New Orleans, LA Thomas Davis (Duncan) CEO, Parish Concrete, LLC 2015 2018 Mandeville, LA William H. Hines Managing Partner, Jones Walker 2003 2019 New Orleans, LA R. Parker LeCorgne President, Dr. G.H. Tichenor Antiseptic Co. 2007 2018 New Orleans, LA James E. Maurin Chairman, Stirling Properties, Inc. 2003 2019 Covington, LA Jefferson G. Parker Vice Chairman, Iberia Bank 2007 2018 New Orleans, LA Robert J. Patrick Managing Partner, The Patrick Companies 2009 2020 New Orelans, LA Steve Stumpf CEO, Durr Heavy Construction, LLC 2010 2018 Harahan, LA Jose S. Suquet Chairman of the Board, President & CEO 2006 2019 Pan American Insurance Company New Orleans, LA Andrew B. Wisdom Principal, Crescent Capital Consulting 2004 2017 New Orleans, LA Pedro Cazabon, M.D. Section Head, Department of General 2014 2017 Internal Medicine Richard Deichmann, M.D. Deputy Head of School and Students 2014 2017 Ochsner Clinical School/University of Queensland Dennis Kay, M.D. Chairman, Department of Radiology 2008 2017 George Loss, M.D. Chief, Multi-Organ Transplant Institute 2011 2018 Associate Chairman, Dept of Surgery Dana H. Smetherman, M.D. Vice Chair, Clinical Affairs, Dept of Radiology 2013 2020 David E. Taylor, M.D. Chairman, Pulmonary Care/Critical Care 2013 2020 Timothy Ridell, M.D. AMD Family Practice Northshore 2016 2019 Vincent “Butch” Adolph, M.D. Section Head, Pediatric Surgery 2016 2019 Warner L. Thomas President & CEO, Ochsner Health System 2012

(1) When a Director’s term expires they will continue to serve until re-elected or until successors have been chosen.

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Executive Leadership. The executive management team of the health system consists of the following individuals:

Warner L. Thomas, President and Chief Executive Officer. Mr. Thomas, age 51, assumed the role of Ochsner Health System President and Chief Executive Officer on September 1, 2012. As the President and CEO of Ochsner, Louisiana’s largest non-profit health system, he is responsible for the system’s overall strategic growth and development. He joined Ochsner in 1998 and served for 14 years as Ochsner’s President and Chief Operating Officer. Mr. Thomas brought to Ochsner ten years of administrative expertise in management, finance, operations and strategic planning. Prior to Ochsner, he served as President and Chief Executive Officer of Foundation Medical Partners, Inc., a multi-specialty physician group subsidiary of the Southern New Hampshire Health System in Nashua, NH. Mr. Thomas’ expertise and ability are nationally recognized. In 2014, Mr. Thomas was appointed to the Medicare Payment Advisory Commission, which advises Congress on issues affecting Medicare. He has served as Chairman of the American Hospital Association Section for Health Systems Governing Council, and is a past member of the Board of the American Medical Group Association and Association of American Medical Colleges Advisory Panel for Health Care and Council of Teaching Hospitals. Mr. Thomas received his Master’s Degree in Business Administration in 1994 from Boston University Graduate School of Management and an undergraduate degree in Management Advisory Services with a double major in Accounting and Computer Information Systems from New Hampshire College in Manchester, NH. He is a Certified Public Accountant (Inactive), served on the board of the American Medical Group Association, a Fellow in The American College of Healthcare Executives, a member of the Young Presidents Organization (YPO), a member of the New Orleans Business Council, serves as a board member of The Idea Village, serves as a board member of the Greater New Orleans Foundation and serves as a board member of the Louisiana Hospital Association.

Bobby C. Brannon, Executive Vice President and Treasurer. Mr. Brannon, age 73, has responsibility for the corporate Treasury functions including Investment Portfolio Management, Insurance and Capital Financing. Mr. Brannon has been an employee of Ochsner Clinic Foundation for the past 42 years, serving as Controller, Vice President and Director of Finance, and Executive Vice President, Director of Finance & Treasurer. Prior to joining Ochsner Clinic Foundation, Mr. Brannon was a manager with Haskins & Sells (presently Deloitte & Touche LP) where he worked for more than eight years. He received his Bachelor of Science degree in Accounting from Mississippi State University in 1966. He is a member of Financial Executives International, the American Institute of Certified Public Accountants, the Healthcare Financial Management Association, and past president of the World Trade Center of New Orleans, currently serving on its finance committee, and is a member of the Jefferson Business Council.

Robert I. Hart, M.D., Executive Vice President and Chief Medical Officer. Robert I. Hart, M.D., age 58, assumed the role of Executive Vice President and Chief Medical Officer of Ochsner Health System on September 1, 2016 and is responsible for overseeing all aspects of physician performance, quality and clinical integration within Ochsner’s hospitals, health centers and physician group practice. Dr. Hart received his undergraduate degree from Texas Tech University in Lubbock, Texas, and his medical degree from the University of Texas Medical School in Houston, Texas. He completed his internship and residency at the University of Texas Affiliated Hospitals in Houston. Dr. Hart is board-certified in Internal Medicine and Pediatrics and has been on the staff of Ochsner Clinic Foundation since 1994. After serving as Associate Medical Director for Primary Care in Baton Rouge for seven years, he served as Medical Director for the Baton Rouge Region from August 2008 until December 2014. Dr. Hart was appointed Regional Medical Director of OMC New Orleans in January 2015.

Michael Hulefeld, Executive Vice President and Chief Operating Officer. Mr. Hulefeld, age 44, has operational oversight for all clinical services throughout the system. Mr. Hulefeld joined Ochsner in 1998 as an Administrative Fellow. In 1999 he was named Manager of Musculoskeletal Services for Ochsner Clinic and in 2001 he became Director of New Orleans Satellite Clinics. From there, Mr. Hulefeld was named Vice President of Satellite and Ancillary Services, a position he held for four years. He spent two years as the Chief Operating Officer of Ochsner Medical Center - the flagship hospital in the Ochsner Health System and three years as the Chief Executive Officer. Mr. Hulefeld graduated from Xavier University in Cincinnati, Ohio and received a Master’s Degree in Health Services Administration from the University of Michigan. He serves as board chair of the Stuart Hall School for Boys.

William McDade, MD, PhD, Executive Vice President and Chief Academic Officer. William McDade, MD, PhD, age 56, joined Ochsner Health System on July 5, 2016 as the Executive Vice President and Chief Academic Officer and he is responsible for the undergraduate medical school in partnership with the University of Queensland;

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graduate and continuing medical education programs; and research initiatives. Dr. McDade most recently served as a Professor of Anesthesiology and Critical Care at the University of Chicago. He is a board-certified anesthesiologist who has maintained his clinical practice in addition to his work in research, teaching and administration. He also served as an Associate Dean at the Pritzker School of Medicine for 10 years prior to taking on his most recent role as a Deputy Provost for the University of Chicago campus for six years. He has been named a senior scholar in the Bucksbaum Institute for Clinical Excellence; received the Distinguished Faculty Award for Excellence in Diversity and Inclusion, and the Distinguished Alumnus Award in the Biological Sciences Division at the University of Chicago; and, was awarded the James M. Whittico Award by the National Medical Association for combining quality care with ongoing community service. He is a member of Alpha Omega Alpha. He is a past president of the Chicago Medical Society and the Illinois State Medical Society and most recently served as the chair of the ISMS Board of Trustees. Dr. McDade has also impacted healthcare on a national level. He currently serves as a member of the American Medical Association’s Board of Trustees. He is Past Chair of the AMA Council on Medical Education, represents the ASA at the AMA House of Delegates, and served as Chair of the Anesthesiology Section of the National Medical Association and recently completed his term as a Director for the Board of the Accreditation Council for Graduate Medical Education. He represents the AMA at the National Board of Medical Examiners, was appointed by the U.S. Secretary of Education to the National Committee on Foreign Medical Education and Accreditation, serves as a member of the National Heart Lung and Blood Institute’s Sickle Cell Disease Advisory Committee, and serves as a Commissioner for The Joint Commission. Dr. McDade received his B.S. in Chemistry from DePaul University, his M.D. and Ph.D. in Biophysics and Theoretical Biology from the University of Chicago and completed his internship there as well. He also completed a residency at Massachusetts General Hospital- Harvard Medical School.

Pete November, Executive Vice President and Chief Administrative Officer. Mr. November, age 47, is responsible for Legal Services, development and execution of new acquisitions and partnerships, Internal Audit, Facilities and Real Estate, Information Technology, Compliance, Post Acute Care Services and Supply Chain Services. Mr. November also has shared responsibility in leading the integration of our new partners and affiliations into the Ochsner Health Network. Prior to joining Ochsner in 2012, Mr. November served as the Executive Vice President, General Counsel, Secretary and Director of Acquisitions for LHC Group. He was also a partner at the legal firm of Alston & Bird, LLP. Mr. November is a graduate of the University of Kentucky and received his Juris Doctor at the University of Kentucky College of Law. He is also a Certified Public Accountant.

Scott J. Posecai, Executive Vice President and Chief Financial Officer. Mr. Posecai, age 59, joined the Ochsner Clinic in 1987 and was named Chief Financial Officer of the Ochsner Clinic in 1995, a role he held until the merger of the Ochsner Clinic and the Alton Ochsner Medical Foundation in 2001. Upon the merger, he was named Chief Financial Officer of Ochsner Clinic Foundation and is currently the Executive Vice President and Chief Financial Officer for Ochsner Health System. Currently, Mr. Posecai is responsible for Accounting, Financial Planning & Analysis, Reimbursement, Managed Care Contracting, Revenue Cycle and Financial Operations for the System. Mr. Posecai holds a Bachelor of Science degree in Accounting from the University of New Orleans and is a licensed Certified Public Accountant. Prior to joining the Ochsner Clinic in 1987, he held positions in the Accounting, Treasury and International Tax Department of Ocean Drilling & Exploration Company, a subsidiary of Murphy Oil. He is a member of the American Institute of Certified Public Accountants, Louisiana Society of Certified Public Accountants and the Health Management Academy.

David Carmouche, MD, Senior Vice President and President of Ochsner Health Network. Dr. Carmouche, age 49, is responsible for the Ochsner Health Network where its 27 member hospitals are collaborating and building upon the strengths of each partner to deliver the highest possible level of care locally, reduce health care costs, improve quality and safety and increase access to Ochsner’s highly-specialized care as a national referral center and the region’s leading health system. Before joining Ochsner, Dr. Carmouche served as the Executive Vice President of External Operations and Chief Medical Officer at Blue Cross Blue Shield of Louisiana in Baton Rouge where he successfully led important initiatives designed to organize care, improve quality and increase affordability. In that role he led a physician-friendly, comprehensive primary care population health program. Dr. Carmouche earned a Bachelor of Science in Biology from Tulane University, a Medical Degree from LSU-NO School of Medicine, and completed a Residency in Internal Medicine at the University of Alabama at Birmingham. He also completed the Executive Program for Managing Health Care Delivery at the Harvard Business School.

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Michelle Dodenhoff, Senior Vice President and Chief Development Officer. Ms. Dodenhoff, age 53, leads the philanthropic efforts of Ochsner Health System. Throughout her career, she has served in a number of development roles. Prior to Ochsner, Ms. Dodenhoff was the Vice President for Development and Alumni Affairs at the University of South Carolina and was responsible for all programs and activities related to philanthropic support and alumni engagement. She has also spent more than a decade with Tulane University Health Sciences Center where she served as the Director of Annual Giving, Director of Alumni Relations and Annual Giving, and Director of Major Gifts. She has also worked on behalf of Longue Vue House and Gardens in New Orleans, Louisiana where she was responsible for the creation and implementation of a first time comprehensive development program. A native of New Orleans, Ms. Dodenhoff earned her BA in Economics from Hollins University in Roanoke, Virginia. She has volunteered her time with a number of civic and educational organizations.

David Gaines, CEO of System Retail Services and Marketing. Mr. Gaines, age 51, is responsible for the areas of Executive/Corporate Wellness, the Brent House Hotel, Elmwood Fitness Center, Durable Medical Equipment, and the development and growth of other retail services. In addition, David oversees the Marketing and Communication functions for the System and Government Relations. Prior to joining Ochsner, Mr. Gaines was the Chief Operating Officer of MNS Ventures Inc., a venture capital investment firm, where he was responsible for the business operations of several start-up companies in the Southeast and Midwest Regions. He was also President of M&G Shipping/Unishippers, a MNS Ventures investment franchise, providing transportation solutions to companies across the U.S. David attended the University of Minnesota Graduate School of Business and received his Bachelor of Arts Degree from the University of New Orleans.

Mark Muller, Senior Vice President of Strategy & Business Development. Mr. Muller, age 56, is the Senior Vice President of Strategy & Business Development. Mr. Muller is responsible for the Ochsner annual operating calendar, strategic plan, market analysis, and business development including innovation, telemedicine, local and regional development, and international growth. Prior to joining Ochsner, Mr. Muller served as Enterprise General Manager with GE Healthcare and was responsible for strategic relationships with the largest for-profit and not-for- profit health systems in the U.S., helping them meet their clinical, operational and financial goals. Previously, Mr. Muller was responsible for GE’s largest partnership with the HealthTrust Purchasing Group and all its shareholders and members including HCA, LifePoint, and other for-profit health systems. Mr. Muller’s career with GE spanned healthcare, industrial, and consumer industries including leadership positions in Corporate Accounts, Business Development & Analysis, Field Service, Customer Service, and Operations Support & Finance with GE Healthcare, GE Appliances, and GE Industrial Systems. In addition, Mr. Muller is a graduate of the GE Financial Management Program and is Six Sigma Green Belt certified. Mr. Muller is also Kaplan-Norton Master Class certified in the Balanced Scorecard process. In addition, Mr. Muller completed Harvard Business School’s Healthcare Executive Education program. Mr. Muller has earned a B.S. degree in Business Administration, graduating summa cum laude from Valparaiso University in Valparaiso, IN. Mr. Muller has also served on the Jefferson Parish Chamber of Commerce Board of Directors including Chair of their Strategic Plan Implementation Committee. In addition, Mr. Muller has served on the Chief Strategy Officer Forum Steering Committee for the Health Management Academy.

Tracey Schiro, Senior Vice President and Chief Human Resources Officer. Ms. Schiro, age 44, joined Ochsner in 2007 as Assistant Vice President, Compensation, Benefits, and HRIS. In 2012, she was promoted to Vice President, HR Employee Services where she led HR Operations and HRIS teams. Prior to joining Ochsner, Tracey worked for Coca-Cola Enterprises for 10 years in progressing HR leadership roles. She received her B.S. degree in Management with a Human Resources Concentration in 1996 and her Masters of Business Administration in 2011 from the University of New Orleans.

INVESTMENT POLICY

Ochsner’s Investment Committee, in conjunction with the counsel of investment consultants, provides advice and direction on investment management to Ochsner management and staff who conduct the maintenance of the invested funds.

The Pooled Investment Fund (the “Fund”) is comprised of various types of assets including Endowment, Donor-restricted, Board Designated and Unrestricted Funds. The primary financial objectives of the Pooled Investment Fund are to (1) provide a stream of relatively predictable, stable, and constant earnings in support of annual budgetary needs; (2) preserve and enhance the real (inflation adjusted) value of the assets of the Fund; and

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(3) provide support for capital investment needs of Ochsner as they arise. The long-term investment objectives of the plan are to (1) attain the average annual total return in excess of Ochsner’s long term cost of borrowing (net of investment management fees) over rolling five-year periods; (2) outperform the Fund’s custom benchmark; and (3) outperform the median return of institutions with broadly similar investment objectives and policies.

The asset allocation is designed to provide a diversified mix of asset classes to minimize portfolio-level volatility and to provide reasonable assurance that no manager, class of securities, or individual holding will have a disproportionate impact on aggregate results. Risk management practices include various criteria for each asset class including measurement against several benchmarks and investment guidelines for each class of assets which enumerate types of investment allowed in each category. Asset allocations and investment performance are formally reviewed periodically by the Investment Committee at their regularly scheduled meetings.

ASSET ALLOCATION POOLED INVESTMENT FUND

Actual December 31, 2016 Target Allocation Fixed Income 15% 15% Equity securities 48 45 Diversifying Assets 28 30 Inflation Hedging 9 10

EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plan — Certain employees of OCF and its subsidiaries are covered under a defined benefit pension plan (the “Defined Benefit Plan”). The Defined Benefit Plan is non-contributory and provides benefits that are based on the participants’ credited service and average compensation during the last five years of covered employment. As of December 31, 2006, benefit accruals ceased for all plan participants under age 40 and those over age 40 who elected to freeze their retirement plan benefits. OCF made an additional change to the Defined Benefit Plan in 2009, and as of December 31, 2009, benefit accruals ceased for all plan participants under age 55 with less than 10 years of service (rounded to the nearest 6 months). Physician/executive participants are frozen as of December 31, 2009, regardless of age and service. Participants who are not frozen as of December 31, 2009, could accrue benefits until the earlier of age 65 or December 31, 2014. No new participants are allowed to enter the Defined Benefit Plan. OCF makes contributions to its qualified plan that satisfies the minimum funding requirements under the Employee Retirement Income Security Act of 1974. These contributions are intended to provide not only for benefits attributed to services rendered to date but also those expected to be earned in the future. The Defined Benefit Pension Plan as of December 31, 2016 and December 31, 2015 was underfunded by $(149.4) million and $(136.2) million, respectively.

Asset allocations and investment performance are formally reviewed at regularly scheduled meetings several times during the year by the Investment Committee of OCF. OCF utilizes an investment consultant and multiple managers for different asset classes. The Investment Committee takes into account liquidity needs of the plan to pay benefits in the short term and the anticipated long-term obligations of the Defined Benefit Plan.

The primary financial objectives of the Defined Benefit Plan are to: (1) provide a stream of relatively predictable, stable, and constant earnings in support of the Defined Benefit Plan’s annual benefit obligations; and (2) preserve and enhance the real (inflation-adjusted) value of the assets of the Defined Benefit Plan. The long-term investment objectives of the Defined Benefit Plan are to: (1) attain the average annual total return assumed in the Defined Benefit Plan’s most recent actuarial assumptions (net of investment management fees) over rolling five-year periods; (2) outperform the Defined Benefit Plan’s custom benchmark; and (3) outperform the median return of a pool of retirement funds to be identified in conjunction with OCF’s investment consultant.

The asset allocation is designed to provide a diversified mix of asset classes including U.S. and foreign equity securities, fixed income securities, real estate investment trusts, natural resources, cash, and funds to hedge against deflation and inflation. Risk management practices include various criteria for each asset class including

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measurement against several benchmarks, achievement of a positive risk adjusted return, and investment guidelines for each class of assets that enumerate types of investment allowed in each category.

ASSET ALLOCATION RETIREMENT PLAN PORTFOLIO

December 31, 2016 Target Allocation Fixed Income 16% 15% Equity securities 40 40 Diversifying Assets 25 33 Inflation Hedging 8 10 Private Equity/Venture Capital 4 2 Cash 7 0

Defined Contribution Plans — All employees of OCF meeting eligibility requirements may participate in the Ochsner Clinic Foundation 401(k) Plan (the “Plan”). OCF may annually elect to make a retirement contribution on behalf of eligible employees in an amount up to 2% of the participant’s annual eligible compensation. In addition, OCF may annually elect to make a match for eligible employees of 50% of the first 4% the employees contribute into their 401(k). At December 31, 2016 and 2015, OHS has accrued approximately $28.1 million and $24.6 million for matching contributions to the Plan for the 2016 and 2015 fiscal years, respectively.

Certain OCF employees are also covered under a 457(f) plan. The 457(f) plan was created to replace 100% of the benefit target for employees under age 65 as of December 31, 2009, whose benefits in the Defined Benefit Plan were frozen. The participant pays taxes at vesting and payout occurs at the later of age 65 or retirement. Participants of the 457(f) plan also participate in the 401(k) contributions. OHS’ consolidated balance sheets reflect a liability of approximately $13.6 million and $12.6 million for the 457(f) plan at December 31, 2016 and 2015 respectively.

Other Postretirement Benefits — OCF also provides certain health care and life insurance benefits for retired employees. OCF funds these benefits on a pay-as-you-go basis. The obligations under the postretirement plan are $2.0 million and $1.9 million at December 31, 2016 and 2015, respectively.

INSURANCE

Ochsner carries commercial insurance covering all buildings, machinery, contents and business interruption. Property is insured against risks of physical loss or damage, except as excluded; the exclusions are primarily risks that are considered uninsurable, such as wear and tear, rust, termite damage, and settling and cracking. Flood coverage, losses from named windstorms, and losses from earthquake are included in the coverage, subject to separate limitations. Separate coverage is provided for terrorism.

Ochsner carries professional and general liability insurance coverage for up to $65 million each of annual aggregate claims subject to certain deductible provisions. OCF is self-insured with respect to the first $3.0 million of each claim for professional liability with an annual aggregate exposure of $6.0 million. General liability claims are subject to a retention of $1.0 million per claim and $2.0 million annual aggregate. OHS also carries additional coverage on certain community hospitals that carry similar coverage with lower self-retention and aggregate levels.

Ochsner participates in the Louisiana Patients’ Compensation Fund. This limits the liability of a health care provider involved in a medical malpractice incident to $100,000. The self-insured retention for professional liability coverage anticipates this limitation.

A trust fund to cover liability for the self-insured retention is held in trust by a major bank. Disbursements are made from the trust fund for self-insured claims, claims administration costs, and legal fees. The trust fund assets and the liability for claims are recorded in OCF’s financial statements.

Ochsner’s policy is to require the general contractor for any major facility improvement project to furnish evidence of commercial general liability insurance with coverage limits of $1 million per claim and $2 million policy aggregate, for owners’ protective liability insurance with coverage limits of $1 million per claim and $1 million policy aggregate, and for auto liability, bodily injury, and property damage insurance with a coverage limit of $1.0 million per occurrence. The contractor must also provide evidence of an umbrella liability policy with a coverage

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limit of $5 million, evidence of workers compensation insurance providing statutory coverage limits, and evidence of employers’ liability insurance with a coverage limit of $1.0 million each per accident, disease-policy limit, and disease-each employee.

CONTINGENCIES

The health care industry as a whole is subject to numerous laws and regulations of federal, state, and local governments. See “BONDHOLDERS’ RISKS” in the front portion of this Official Statement. Compliance with these laws and regulations can be subject to future government review and interpretation as well as regulatory actions unknown or unasserted at this time. Such compliance with laws and regulations in the health care industry has come under increased government scrutiny. OHS and its subsidiaries are parties to various legal proceedings and potential claims arising in the ordinary course of their business. Management of OHS believes the reserves it has established for these issues are adequate and does not believe, based on current facts and circumstances and after review with counsel, that these matters will have a material adverse effect on OHS’ consolidated statements of financial position or results of operations.

PHILANTHROPY

OHS conducts fundraising efforts for capital projects and to support certain designated programs. It raised cash and net pledges of $10.3 million, $35.2 million, and $29.6 million for the years ended December 31, 2014, 2015 and 2016 respectively. Ochsner’s Philanthropy team achieved remarkable results through programs like Leave Your Legacy, Annual Giving, service line major gift initiatives and special events. An additional transformative gift from Gayle and Tom Benson of $20 million to help expand the cancer center helped make 2015 a record year with $35.2 million in donations. For the three-months ended March 2017, OHS has raised over $4.6 million in donations for capital projects, planned gifts and special events.

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APPENDIX B

FINANCIAL STATEMENTS OF OCHSNER HEALTH SYSTEM AND SUBSIDIARIES FOR THE FISCAL YEARS ENDED DECEMBER 31, 2016 AND 2015

[THIS PAGE INTENTIONALLY LEFT BLANK] C ONSOLIDATED F INANCIAL S TATEMENTS

Ochsner Health System and Subsidiaries Years Ended December 31, 2016 and 2015 With Report of Independent Auditors

Ernst & Young LLP

Ochsner Health System and Subsidiaries

Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Contents

Report of Independent Auditors...... 1

Consolidated Financial Statements

Consolidated Balance Sheets ...... 3 Consolidated Statements of Operations ...... 5 Consolidated Statements of Changes in Net Assets ...... 6 Consolidated Statements of Cash Flows ...... 7 Notes to Consolidated Financial Statements...... 8

1610-2104035 Ernst & Young LLP Tel: +1 504 581 4200 3900 One Shell Square Fax: +1 504 596 4233 701 Poydras Street ey.com New Orleans, LA 70139

Report of Independent Auditors

The Board of Directors Ochsner Health System and Subsidiaries

We have audited the accompanying consolidated financial statements of Ochsner Health System and its subsidiaries, which comprise the consolidated balance sheets as of December 31, 2016 and 2015, and the related consolidated statements of operations, 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 Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of 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. 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 financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the 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 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 financial statements.

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

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A member firm of Ernst & Young Global Limited

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ochsner Health System and its subsidiaries at December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.  April 24, 2017

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A member firm of Ernst & Young Global Limited Ochsner Health System and Subsidiaries

Consolidated Balance Sheets (In Thousands)

December 31, 2016 2015 Assets Current assets: Cash and cash equivalents $ 121,569 $ 290,803 Assets limited as to use required for current liabilities 5,600 3,858 Patient accounts receivable – net 252,598 225,527 Accounts receivable other 99,516 76,671 Inventories 56,022 50,409 Prepaid expenses and other current assets 39,731 37,634 Estimated third-party payor settlements 19,626 17,552 Total current assets 594,662 702,454

Assets limited as to use: By Board for capital improvements, charity, research, and other 729,436 619,703 Under bond indenture agreements 21,477 36,040 Under self-insurance trust fund 9,135 11,921 Donor-restricted long-term investments 78,433 65,533 Total assets limited as to use 838,481 733,197 Less assets limited as to use required for current liabilities (5,600) (3,858) Non-current assets limited as to use 832,881 729,339

Investments in unconsolidated affiliates, real estate, and other 14,045 6,653 Property – net 821,692 754,843 Goodwill 43,558 43,077 Intangible assets 11,467 11,482 Other assets 32,534 23,950 Total assets $ 2,350,839 $ 2,271,798

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December 31, 2016 2015 Liabilities and net assets Current liabilities: Accounts payable $ 150,332 $ 140,116 Accrued salaries, wages, and benefits 149,483 148,252 Deferred revenue 9,669 12,850 Estimated third-party payor settlements 3,769 4,778 Bonds payable – current portion 7,030 6,740 Notes payable – current 52,430 52,430 Long-term debt – current portion 15,566 17,858 Other current liabilities 30,927 30,919 Total current liabilities 419,206 413,943

Pension and postretirement obligations 166,532 152,346 Bonds payable 828,408 810,166 Long-term debt 188,693 203,741 Other long-term liabilities 36,982 36,038 Total liabilities 1,639,821 1,616,234

Commitments and contingencies (Notes 5 and 17)

Net assets: Unrestricted 596,966 565,116 Temporarily restricted 88,219 66,685 Permanently restricted 25,833 23,763 Total net assets 711,018 655,564

Total liabilities and net assets $ 2,350,839 $ 2,271,798

See notes to financial statements.

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Consolidated Statements of Operations (In Thousands)

Year Ended December 31, 2016 2015 Unrestricted revenues: Patient service revenue – net of contractual allowances and discounts $ 2,285,483 $ 2,117,008 Provision for bad debts (88,454) (95,738) Net patient service revenue, less provision for bad debts 2,197,029 2,021,270 Premium revenue 286,186 289,420 Other operating revenue 322,978 277,671 Net assets released from restrictions used for operations 6,040 4,132 Total unrestricted revenues 2,812,233 2,592,493

Expenses: Salaries and wages 1,258,517 1,152,055 Benefits 179,299 158,432 Medical services to outside providers 132,534 142,255 Medical supplies and services 480,654 416,142 Other operating expenses 542,293 503,381 Depreciation and amortization 115,832 103,683 Interest 52,718 49,469 Total expenses 2,761,847 2,525,417 Operating income 50,386 67,076

Non-operating gains (losses): Investment and other realized gains – net 7,613 16,264 Loss on early extinguishment of debt (39,110) (12,982) Unrealized gains (losses) on alternative investments 10,241 (4,826) Total non-operating losses (21,256) (1,544)

Excess of revenues over expenses $ 29,130 $ 65,532

See notes to financial statements.

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Consolidated Statements of Changes in Net Assets (In Thousands)

Year Ended December 31, 2016 2015 Unrestricted net assets Excess of revenues over expenses $ 29,130 $ 65,532 Change in net unrealized gains (losses) on investments excluding alternative investments 28,251 (16,820) Net assets released from restrictions used for capital acquisitions 918 1,001 Pension-related changes other than net periodic pension costs (26,449) (7,907) Increase in unrestricted net assets 31,850 41,806

Temporarily restricted net assets Contributions 25,892 26,810 Investment income 2,601 5 Net assets released from restrictions used for: Operations (6,041) (4,132) Capital acquisitions (918) (1,001) Increase in temporarily restricted net assets 21,534 21,682

Permanently restricted net assets Contributions 2,070 366 Increase in permanently restricted net assets 2,070 366

Increase in net assets 55,454 63,854 Net assets – beginning of year 655,564 591,710 Net assets – end of year $ 711,018 $ 655,564

See notes to financial statements.

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Consolidated Statements of Cash Flows (In Thousands)

Year Ended December 31, 2016 2015 Operating activities Increase in net assets $ 55,454 $ 63,854 Adjustments to reconcile increase in net assets to net cash provided by operating activities: Pension-related changes other than net periodic pension costs 26,449 7,907 Depreciation and amortization 115,832 103,683 Provision for bad debts 88,454 95,738 Non-cash portion of loss on early extinguishment of debt 3,196 3,603 Amortization of deferred financing costs and debt discounts 498 1,080 Income from equity-method investments, net of cash received (62) (352) Net realized and unrealized (gains) losses on investments (42,653) 5,363 Gain on contribution of property to joint venture (6,994) – Other, net (2,070) (1,245) Changes in operating assets and liabilities, net of acquisitions: Patient accounts receivable (115,525) (107,438) Other current and non-current assets (41,110) (32,508) Accounts payable 1,189 18,981 Accrued expenses and other liabilities (17,475) 2,927 Net cash provided by operating activities 65,183 161,593

Investing activities Purchases of assets whose use is limited and other investments (256,336) (220,787) Sales and maturities of assets whose use is limited and other investments 192,980 44,842 Capital expenditures (166,159) (114,444) Other (948) 3,016 Net cash used in investing activities (230,463) (287,373)

Financing activities Repayment of bonds payable and long-term debt (175,183) (140,158) Proceeds from long-term borrowings 174,369 404,357 Payments of debt financing costs (2,229) (3,824) Payments on capital lease obligations (2,981) (2,816) Proceeds from contributions restricted for long-term investments 2,070 366 Net cash (used in) provided by financing activities (3,954) 257,925

Net (decrease) increase in cash and cash equivalents (169,234) 132,145 Cash and cash equivalents – beginning of year 290,803 158,658 Cash and cash equivalents – end of year $ 121,569 $ 290,803

See notes to financial statements.

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Notes to Consolidated Financial Statements

December 31, 2016

1. Summary of Significant Accounting Policies

Organization

Ochsner Health System (OHS or Ochsner) is a not-for-profit, non-stock membership corporation and the parent company of Ochsner Clinic Foundation (OCF).

OCF, located in New Orleans, Louisiana, is a not-for-profit institution that, either directly or through its fully owned subsidiaries, owns and operates an acute care hospital known as Ochsner Medical Center (OMC), an 11-story clinic building, a 143-room hotel and related medical facilities located on a main campus in Jefferson Parish at the western end of New Orleans. OCF also owns 100% of the outstanding common stock of Ochsner System Protection Company (OSPC), a captive insurance company domiciled in Louisiana. OCF owns Ochsner Medical Center West Bank and Ochsner Baptist Medical Center, which are operated as remote campuses of OMC. It also owns and operates health centers throughout southeast Louisiana; owns a hospital in Baton Rouge that operates as Ochsner Medical Center Baton Rouge; owns a hospital in Slidell, Louisiana that operates as Ochsner Medical Center – North Shore; owns a hospital in Kenner, Louisiana that operates as Ochsner Medical Center – Kenner; operates a hospital in Raceland, Louisiana known as Ochsner St. Anne General Hospital; and owns several fitness centers that operate as Ochsner Fitness Center. OCF also provides management assistance and support for a hospital in Houma, Louisiana, known as Leonard J. Chabert Medical Center (Chabert); for a hospital in Luling, Louisiana, known as St. Charles Parish Hospital (SCPH); and for a hospital in Bay St. Louis, Mississippi known as Hancock Medical Center (Hancock). OCF also entered into an agreement with St. Bernard Parish Hospital (SBPH) in Chalmette, Louisiana in October of 2016 to provide certain administrative services and operational support on an interim basis while both parties evaluate a potential longer-term relationship.

Prior to December 31, 2016, Ochsner Community Hospitals (OCH) owned and operated Ochsner Medical Center – Kenner. It also owned Ochsner Medical Center West Bank and Ochsner Baptist Medical Center and leased these 2 facilities to OCF. OCH was merged with and into OCF effective December 31, 2016.

Basis of Presentation and Principles of Consolidation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). The consolidated financial statements include the accounts of OHS and OCF and their wholly owned subsidiaries.

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Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

All intercompany accounts and transactions have been eliminated upon consolidation. The assets of any member of the consolidated group may not be available to meet the obligations of other members in the group, except as disclosed in Notes 7, 8, and 9.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP 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 consolidated financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include investments with a maturity of three months or less when purchased, excluding amounts whose use is limited by board designation, under bond indenture agreements, or under self-insurance agreements.

Inventories

Inventories are stated at the lower of first-in, first-out cost or market value.

Pledges Receivable

Unconditional promises to give are recognized as revenues at their fair values in the period received. Pledges receivable are recorded net of necessary discounts and allowances. The current portion of pledges receivable is recorded in accounts receivable other and the non-current portion is recorded in other assets in the consolidated balance sheets.

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Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Pledges receivable as of December 31 are expected to be realized as follows (in thousands):

2016 2015

In one year or less $ 11,302 $ 5,564 Between one and five years 13,217 11,309 Greater than five years 11,761 8,052 36,280 24,925 Less discount (ranging from 0.63%–4.50% at December 31, 2016 and 2015) and allowance for uncollectible pledges (2,478) (2,227) Pledges receivable – net $ 33,802 $ 22,698

Investments

Investments held by OHS are included in assets limited as to use in the consolidated balance sheets. Substantially all of OHS’ investments are designated as other-than-trading investments. Investments in equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the consolidated balance sheets. Investments also include investments in private equity funds, hedge funds, real estate funds, offshore fund vehicles, and funds of funds structured as limited liability corporations or partnerships or trusts. These investments are termed alternative investments in the notes to the consolidated financial statements and are accounted for under the equity method, which approximates fair value. These funds invest in certain types of financial instruments, including, among others, futures and forward contracts, options, and securities sold not yet purchased, intended to hedge against changes in the market value of investments. These financial instruments, which involve varying degrees of risk, may result in loss due to changes in the market (market risk).

Investment income or loss (including realized gains and losses on investments, interest, and dividends) is included in excess of revenues over expenses unless the income or loss is restricted by donor or law. Unrealized gains and losses on investments, other than alternative investments, are excluded from excess of revenues over expenses. If management believes a decline in the value of a particular investment is temporary, the decline is included in change in net unrealized gains (losses) excluding alternative investments on the consolidated statements of changes in net assets. If the decline is evaluated as being other than temporary, the carrying value of the

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Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued) investment is written down and an impairment loss is recorded in non-operating gains and losses in the consolidated statements of operations. OHS recorded impairment losses on investment securities of approximately $1.6 million and $4.9 million for the years ended December 31, 2016 and 2015, respectively.

Assets Limited as to Use

Assets limited as to use primarily include assets held by trustees under indenture agreements, self-insurance trust agreements, investments restricted by donors, and designated assets set aside by the Board of Trustees (the Board) primarily for future capital improvements, over which the Board retains control and may, at its discretion, subsequently use for other purposes. Amounts required to meet current liabilities of OHS have been classified in the consolidated balance sheets as current assets.

Property – Net

Property improvements and additions are recorded at cost and capitalized and depreciated on the straight-line basis over the following estimated useful lives of the assets:

Years

Land improvements 5–25 Buildings and building improvements 10–40 Leasehold improvements 12–20 Equipment, furniture, and fixtures 2–20

Impairment of Long-Lived Assets

OHS evaluates the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. There were no impairment charges on long-lived assets recognized for the years ended December 31, 2016 or 2015.

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Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Capitalization of Interest

OHS capitalizes interest expense on qualifying construction-in-progress expenditures based on an imputed interest rate estimating OHS’ average cost of borrowed funds. Such capitalized interest becomes part of the cost of the related asset and is depreciated over its estimated useful life. Capitalized interest costs totaled approximately $2.2 million and $0.9 million for the years ended December 31, 2016 and 2015, respectively.

Goodwill and Intangible Assets

Goodwill and intangible assets, consisting primarily of trade name and employment contracts, were recorded mainly as a result of the merger of Alton Ochsner Medical Foundation with Ochsner Clinic LLC in 2001, which resulted in the creation of OCF. Goodwill represents the excess of the fair value of the consideration conveyed in the acquisition over the fair value of net assets acquired. Goodwill and indefinite-lived intangible assets arising from business combinations are not amortized, but rather are tested for impairment at least annually at the reporting unit level. Impairment is the condition that exists when the carrying amount of goodwill or intangible assets exceeds its implied fair value. Additional impairment assessments may be performed on an interim basis if OHS encounters events or changes in circumstances that would indicate that it is more likely than not that the carrying value of goodwill or intangible assets has been impaired. OHS has selected October 31 as its annual testing date and has determined that its reporting unit is OCF.

For purposes of the October 31, 2016, annual impairment test, OHS applied the optional provisions of Accounting Standards Update (ASU) No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment, which provides for a qualitative impairment analysis. A qualitative impairment analysis concluded that it was more likely than not that the fair value exceeded the carrying value of the applicable reporting units. Therefore, the two-step impairment analysis was not required, and no impairment charge was recorded as of the October 31, 2016, annual impairment test.

Due to the merger of OCH into OCF, OHS performed an additional quantitative impairment assessment as of December 31, 2016. The first step in the impairment process is to estimate the fair value of the reporting unit and then compare it to the carrying value, including goodwill. If the fair value exceeds the carrying value, no further action is required and no impairment loss is

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Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued) recognized. OHS determined that the use of the income and market approaches were the most appropriate methods of measuring fair value of the reporting units. These are considered Level 3 valuations in the valuation hierarchy described in Note 2.

Under the income approach, fair value is estimated using a discounted cash flow analysis. Under the market approach, fair value is estimated using a guideline company method and a comparable transaction method. Both the income approach and the market approach require significant assumptions to determine the fair value of each reporting unit. The significant assumptions used in the income approach include estimates of future revenues, profits, capital expenditures, working capital requirements, operating plans, industry data, and an appropriate discount rate for each reporting unit. The significant assumptions used in the market approach include the determination of appropriate market comparables and estimated multiples of net revenue and earnings before interest, taxes, depreciation, and amortization. OHS engaged a third- party valuation firm to assist in these fair value calculations for 2016 and 2015. OHS performed Step 1 of the impairment test using a quantitative impairment analysis as of December 31, 2016, as well as for the annual impairment test as of October 31, 2015, and concluded the fair value exceeded the carrying value, and no further action was required for 2016 or 2015.

Deferred Revenue

OHS, through OCF, engages in research activities funded by contracts from U.S. Government agencies and other private sources. Revenue related to grants and contracts is recognized as the related costs are incurred. Amounts received from grant and contract sponsors for which OCF has not yet fulfilled its obligations are included in deferred revenue in the accompanying consolidated balance sheets and recognized in future periods once the obligations have been satisfied.

Deferred revenue also includes amounts related to Medicaid supplemental payments which are yet to be recognized as revenue, as well as payments received in advance of services rendered for OCF’s electronic health records (EHR) services agreements (see Note 14).

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Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Deferred Financing Costs

In connection with the issuance of bonds and long-term debt, certain financing costs were capitalized, and are being amortized over the respective lives of the bonds and long-term debt. These costs are approximately $11.5 million and $11.9 million net of accumulated amortization at December 31, 2016 and 2015, respectively, and are included as a reduction to bonds payable and long-term debt in the accompanying consolidated balance sheets.

Derivative Financial Instruments

OHS utilizes interest rate swap agreements to manage its interest rate exposure. Changes in the fair value of OHS swaps not designated as hedges are recorded as non-operating gains and losses in the consolidated statements of operations. Changes in the fair value of OHS swaps that are designated as hedges are recorded as changes in unrestricted net assets in the consolidated statements of changes in net assets.

Estimated Workers’ Compensation, Professional and General Liability, and Employee Health Claims

OHS is self-insured for workers’ compensation, professional and general liability, and employee health claims. The provisions for estimated workers’ compensation, professional liability, and employee health claims include estimates for the ultimate costs for both reported claims and claims incurred but not reported. These estimates incorporate OHS’ past experience, as well as other considerations, including the nature of claims, industry data, relevant trends, and the use of actuarial information.

Accounting for Pension and Other Postretirement Plans

OHS recognizes the overfunded or underfunded status of its pension and other postretirement plans as an asset or liability in its consolidated balance sheets. Changes in the funded status of the pension and other postretirement plans are reported as a change in unrestricted net assets presented below the excess of revenues over expenses financial statement line item in the consolidated statement of changes in net assets in the year in which the changes occur.

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Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Reinsurance

OSPC relies on reinsurance to limit its retained property insurance risk. In entering into reinsurance agreements, management considers a variety of factors, including the creditworthiness of reinsurers. In preparing its financial statements, management makes estimates of amounts receivable from reinsurers, which includes consideration of amounts, if any, estimated to be uncollectible by management based on an assessment of factors including an assessment of the creditworthiness of the reinsurers. OSPC cedes 100% of the underlying risk, and as a result, OSPC retains no insurance risk. However, OSPC is not relieved of its primary obligation and is subject to credit risk of its reinsurers. OSPC’s last reinsurance contract ended on May 31, 2014. Its expiration coincided with the expiration of the last policy written by OSPC.

Temporarily and Permanently Restricted Net Assets

Temporarily restricted net assets are those whose use by OHS has been limited by donors to a specific time period or purpose. Permanently restricted net assets have been restricted by donors to be maintained by OHS in perpetuity.

Consolidated Statements of Operations

For purposes of presentation, all revenues and expenses are reported as operating except for investment income, the loss from early extinguishment of debt, and other gains and losses – net, which are reported as non-operating.

Excess of Revenues Over Expenses

The consolidated statements of operations include excess of revenues over expenses, which represents OHS’ performance indicator. Changes in unrestricted net assets, which are excluded from excess of revenues over expenses, consistent with industry practice, include unrealized gains and losses on other-than-trading investments, contributions used to acquire property and equipment, and pension-related changes other than net periodic pension costs.

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Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Net Patient Service Revenue

Net patient service revenue is recognized as services are performed and is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. Amounts OHS receives for treatment of patients covered by governmental programs such as Medicare and Medicaid and other third-party payors such as health maintenance organizations, preferred provider organizations, and other private insurers are generally less than OHS’ established billing rates. Additionally, to provide for accounts receivable that could become uncollectible in the future, OHS establishes an allowance for doubtful accounts to reduce the carrying value of such receivables to their estimated net realizable value. Third-party accounts are pursued until all payments and adjustments are posted to the patient account. For those accounts with a patient balance after third-party liability is finalized or accounts for uninsured patients, the patient receives statements and collection letters. Patients who express an inability to pay are reviewed for potential sources of financial assistance, including OHS’ charity care policy. If the patient is deemed unwilling to pay, the account is written off as bad debt and transferred to an outside collection agency for additional collection efforts.

Accordingly, the revenues and accounts receivable reported in OHS’ consolidated financial statements are recorded at the net amount expected to be received. Retroactively calculated contractual adjustments arising under reimbursement agreements with third-party payors are accrued on an estimated basis in the period the related services are rendered and are adjusted as final settlements are determined.

Charity Care

OHS provides care to patients who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Records of charges foregone for services and supplies furnished under the charity care policy are maintained to identify and monitor the level of charity care provided. Because OHS does not pursue collection of amounts determined to qualify as charity care, they are not reported as revenue. OHS estimates its costs of care provided under its charity care programs by applying a ratio of direct and indirect costs to charges to the gross foregone charges associated with providing care to charity patients. OHS’ gross charity care charges include only services provided to patients who are unable to pay and qualify under

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Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

OHS’ charity care policies. The ratio of cost to charges is calculated based on OHS’ total expenses divided by gross patient revenue. During the years ended December 31, 2016 and 2015, the estimated costs incurred by OHS to provide care to patients who met certain criteria under its charity care policy were approximately $42.2 million and $54.4 million, respectively.

Community Benefit

Since December 2010, OHS and four other health care providers have formed 14 nonprofit organizations with the purpose to create a vehicle to provide services to low-income and needy patients. Expenditures recorded by OHS to fund the organizations for the years ended December 31, 2016 and 2015, were approximately $40.7 million and $50.8 million, respectively, and are included in other operating expenses in the consolidated statements of operations.

Provision and Allowance for Doubtful Accounts

To provide for accounts receivable that could become uncollectible in the future, OHS establishes an allowance for doubtful accounts to reduce the carrying value of such receivables to their estimated net realizable value. The primary uncertainty lies with uninsured patient receivables and deductibles, co-payments, or other amounts due from individual patients. Payment pressure from managed care/indemnity payors also affects OHS’ provision for doubtful accounts.

There are various factors that can impact collection trends, such as changes in the economy, which in turn have an impact on unemployment rates and the number of uninsured and underinsured patients, the volume of patients through OHS’ emergency departments, the increased burden of co-payments and deductibles to be made by patients with insurance, and business practices related to collection efforts. These factors continuously change and can have an impact on collection trends and the estimation process.

OHS has an established process to determine the adequacy of the allowance for doubtful accounts that relies on a number of analytical tools and benchmarks to arrive at a reasonable allowance. No single statistic or measurement determines the adequacy of the allowance for doubtful accounts. Some of the analytical tools that OHS utilizes include, but are not limited to, historical cash collection experience, revenue trends by payor classification, and revenue days in accounts receivable. Accounts receivable are written-off after collection efforts have been followed in accordance with OHS’ policies.

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Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Other Operating Revenue

Other operating revenue includes pharmacy revenue, rental revenue, durable medical equipment rentals and sales, gift shop revenues, EHR incentive payments, revenue from joint operating agreements and management agreements, income from equity-method investees, fitness center revenue, hotel revenue, and revenues from other miscellaneous sources.

HIT Incentive Payments and Other Benefits

Beginning in 2012, OHS, through OCF, achieved compliance with certain of the health information technology (HIT) requirements under the American Recovery and Reinvestment Act of 2009. As a result, OCF recognized approximately $9.4 million and $2.4 million in other operating revenue in the accompanying consolidated statements of operations for 2016 and 2015, respectively, for EHR incentives related to Medicaid and Medicare programs. These incentives partially offset the operating expenses OCF has incurred and continues to incur from its investment in HIT systems. At December 31, 2016, OCF had approximately $0.6 million included in accounts receivable other in the accompanying consolidated balance sheets related to these incentives. No such receivables were recorded for these incentives at December 31, 2015. OHS accounts for EHR incentive payments under the grant accounting model as grants related to income.

Medicare and Medicaid EHR incentive payments are recognized as revenue after OHS has determined it is reasonably assured to comply with the meaningful use criteria over the entire applicable compliance period. OHS’ compliance with the meaningful use criteria is subject to audit by the federal government.

Donor-Restricted Gifts

Unconditional promises to give cash and other assets are reported at fair value at the date the promise is received, which is then treated as cost. The gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the consolidated statements of operations as net assets released from restrictions. Contributions for which restrictions are met in the same period in which the unconditional promise to give is received are recorded as unrestricted revenue.

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Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Fair Value of Financial Instruments Other Than Investments

The following methods and assumptions were used by OHS in estimating the fair value of its financial instruments:

Current Assets and Liabilities

OHS considers the carrying amounts of financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair values.

Bonds Payable

The fair values of OHS’ revenue bonds are based on currently traded values of similar financial instruments as disclosed in Note 8.

Notes Payable and Long-Term Debt

OHS considers the carrying value of its notes payable and long-term debt to approximate fair value at December 31, 2016, due to the variable nature of the interest rate or based on a comparison of its fixed rates to current market rates.

Income Taxes

OHS and its subsidiaries qualify as tax-exempt organizations under Section 501(a) and are described in Section 501(c)(3) of the Internal Revenue Code and are exempt from federal and state income taxes. Management annually reviews its tax positions and has determined that there are no material uncertain tax positions that require recognition in the accompanying consolidated balance sheets. The statute of limitations remains open for tax years 2013 through 2016 in OHS’ main tax jurisdictions.

Concentration of Credit Risk

OHS grants credit without collateral to its patients, most of whom are local residents and are insured under third-party payor agreements.

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Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Risks and Uncertainties

OHS’ business could be impacted by continuing price pressure on new and renewal business, OHS’ ability to effectively control health care costs, additional competitors entering OHS’ markets, and federal and state legislation in the area of health care reform. Changes in these areas could adversely impact OHS’ operations in the future.

In March 2010, the Patient Protection and Affordability Care Act (ACA), a comprehensive health care reform bill, was signed into law. The legislation is complex and will be phased in over several years.

OHS is unable to predict the full impact of the ACA on its future revenues and operations at this time due to the law’s complexity, the limited amount of implementing regulations and interpretive guidance, uncertainty regarding the ultimate number of uninsured patients who will obtain insurance coverage, uncertainty regarding future negotiations with payors, and gradual or potentially delayed implementation. However, OHS expects that several provisions of the ACA could have a material effect on its business. Any reductions to OHS’ reimbursement under the Medicare and Medicaid programs by the ACA could adversely affect its business and results of operations to the extent such reductions are not offset by increased revenues from providing care to previously uninsured individuals.

Reclassification

Certain prior year amounts have been reclassified to conform to the 2016 presentation as disclosed in Note 10. These reclassifications had no impact on total assets, liabilities, or changes in net assets.

New Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs is not affected by the amendments in ASU 2015-03. The provisions of ASU 2015-03 were effective for OHS starting January 1, 2016. The

1610-2104035 20 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued) adoption of ASU 2015-03 and reclassification of debt issuance costs resulted in reductions in other assets, bonds payable, and long-term debt of approximately $11.9 million, $9.1 million, and $2.8 million, respectively, as of December 31, 2015.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This ASU requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures when conditions give rise to substantial doubt about a company’s ability to continue as a going concern within one year from the financial issuance date. The provisions of ASU 2014-15 were effective for OHS starting January 1, 2016. The adoption of this guidance did not have an impact to OHS’ consolidated financial statements.

Pending Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 provides for a single comprehensive principles-based standard for the recognition of revenue across all industries through the application of the following five-step process:

Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

Among other provisions and in addition to expanded disclosure about the nature, amount, timing, and uncertainty of revenue, as well as certain additional quantitative and qualitative disclosures, ASU 2014-09 changes the health care industry specific presentation guidance under ASU 2011-07, Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities. The provisions of ASU 2014-09 are effective for OHS starting January 1, 2018, including interim periods within that reporting period. Early application is permitted only for annual periods beginning after December 15, 2016, including interim periods within that reporting period. OHS is currently evaluating the impact on its consolidated financial statements from the adoption of this guidance.

1610-2104035 21 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 requires that investments in equity securities, and other ownership interests in an entity that do not result in consolidation and are not accounted for under the equity method, be measured at fair value at the end of each reporting period, and the resulting changes in fair value be recognized in excess of revenues over expenses. OHS will no longer be able to recognize unrealized holding gains and losses on equity securities it classifies today as available for sale in other changes in unrestricted net assets. The provisions of ASU 2016-01 are effective for OHS starting January 1, 2018, including interim periods within that reporting period. The adoption of ASU 2016-01 will result in a reclassification of unrealized holding gains and losses on equity securities from other changes in unrestricted net assets to excess of revenues over expenses.

In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 requires companies that lease assets to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The pronouncement will also require additional disclosures about the amount, timing, and uncertainty of cash flows arising from leases. The provisions of ASU 2016-02 are effective for OHS starting January 1, 2019, including interim periods within that reporting period, and early adoption is permitted. Management is currently evaluating the impact of this pronouncement on OHS’ consolidated financial statements.

In August 2016, the FASB issued ASU 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. Under the new standard, the presentation of financial information for not-for-profits, specifically with respect to liquidity, financial performance, and cash flows, will be simplified and provide more relevant information to donors, grantors, creditors, and other users. This includes areas such as net asset classification, investment return, expenses, liquidity and availability of resources, and a change in the presentation of operating cash flows. The provisions of ASU 2016-14 are effective for OHS for the fiscal year starting January 1, 2018, and for interim periods starting January 1, 2019, and early adoption is permitted. Management is currently evaluating the impact of this pronouncement on OHS’ consolidated financial statements.

1610-2104035 22 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice on how certain transactions are classified in the statement of cash flows. The new standard addresses eight issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investments; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The provisions of ASU 2016-15 are effective for OHS starting January 1, 2018, including interim periods within that reporting period, and early adoption is permitted. Management is currently evaluating the impact of this pronouncement on OHS’ consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments in ASU 2017-07 require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. It also requires the other components of net periodic pension cost and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The provisions of ASU 2017-07 are effective for OHS starting January 1, 2019, including interim periods within that reporting period, and early adoption is permitted. Management is currently evaluating the impact of this pronouncement on OHS’ consolidated financial statements.

1610-2104035 23 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2. Assets Limited as to Use and Related Fair Value Measurements and Disclosures

Accounting Standards Codification (ASC) 820, Fair Value Measurement, establishes a common definition for fair value to be applied to U.S. GAAP requiring use of fair value, establishes a framework for measuring fair value, and expands disclosures about such fair value measurements. ASC 820 establishes a hierarchy for ranking the quality and reliability of the information used to determine fair values. ASC 820 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1 – Unadjusted quoted market prices in active markets for identical assets or liabilities.

Level 2 – Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices are observable for the asset or liability.

Level 3 – Unobservable inputs for the asset or liability.

OHS endeavors to utilize the best available information in measuring fair value. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Transfers into and transfers out of the hierarchy levels are recognized as if they had taken place at the end of the reporting period. There were no transfers between Level 1 and Level 2 in the years ended December 31, 2016 and 2015.

Assets and Liabilities Measured at Fair Value

Recurring Fair Value Measurements

The fair values of assets measured at estimated fair value on a recurring basis are estimated as described in the preceding section. These estimated fair values and their corresponding fair value hierarchy in accordance with ASC 820 are summarized as follows (in thousands):

1610-2104035 24 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2. Assets Limited as to Use and Related Fair Value Measurements and Disclosures (continued)

December 31, 2016 Fair Value Measurements at Reporting Date Using Quoted Prices in Significant Active Markets for Other Significant Identical Assets and Observable Unobservable Total Liabilities Inputs Inputs Estimated (Level 1) (Level 2) (Level 3) Fair Value

Money market funds(a) $ 31,621 $ – $ – $ 31,621 Fixed income investments(a) 270,900 – – 270,900 Marketable equity securities(a) 166,667 – – 166,667 Diversifiers(a) 69,344 – – 69,344 Natural resources and other(a) 31,345 – – 31,345 Total $ 569,877 $ – $ – $ 569,877

December 31, 2015 Fair Value Measurements at Reporting Date Using Quoted Prices in Significant Active Markets for Other Significant Identical Assets and Observable Unobservable Total Liabilities Inputs Inputs Estimated (Level 1) (Level 2) (Level 3) Fair Value

Money market funds(a) $ 49,100 $ – $ – $ 49,100 Fixed income investments(a) 171,089 – – 171,089 Marketable equity securities(a) 192,180 – – 192,180 Diversifiers(a) 162,012 – – 162,012 Natural resources and other(a) 22,880 – – 22,880 Total $ 597,261 $ – $ – $ 597,261

(a) Valuation of these securities classified as Level 1 is based on unadjusted quoted prices in active markets that are readily and regularly available. Investments classified as Level 1 include mutual funds that are publicly traded.

1610-2104035 25 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2. Assets Limited as to Use and Related Fair Value Measurements and Disclosures (continued)

Alternative investments and other investments of approximately $265.7 million and $133.0 million at December 31, 2016 and 2015, respectively, are not included in these tables since they are accounted for using the equity method of accounting and not measured at fair value. Real estate investments of approximately $5.7 million and $6.4 million at December 31, 2016 and 2015, respectively, are not included in these tables since they are accounted for at cost.

Investment income and other gains and losses are classified as non-operating and comprise interest and dividend income of approximately $11.7 million and $16.2 million (net of expenses of approximately $1.5 million and $1.0 million for the years ended December 31, 2016 and 2015, respectively) and realized net losses on sales of securities of approximately $4.1 million during 2016 and realized net gains on sales of securities of approximately $48,000 during 2015. Unrealized losses on alternative investments were approximately $10.2 million and $4.8 million for 2016 and 2015, respectively. Unrealized gains (losses) on investments other than alternative investments are recorded at fair value and are included in other changes in unrestricted net assets.

3. Net Patient Service Revenue

Net patient service revenue is recognized when services are provided. OHS has agreements with third-party payors that provide for payments to OHS at amounts different from its established rates. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered.

A summary of the significant payment arrangements with major third-party payors follows:

Medicare and Medicaid

Inpatient acute care services and defined capital costs related to Medicare program beneficiaries are paid at prospectively determined rates per discharge. These rates vary according to a patient classification system that is based on clinical, diagnostic, and other factors. Medicare inpatient rehabilitation services are also paid at prospectively determined rates per discharge, based on a patient classification system. Psychiatric services rendered to Medicare beneficiaries are reimbursed on a prospectively determined rate per day. Outpatient services to Medicare beneficiaries are paid on a prospectively determined amount per procedure. Medicare skilled nursing care is paid on a prospectively determined amount per diem based on a patient classification system. The Medicare program’s share of indirect medical education costs is reimbursed based on a stipulated formula.

1610-2104035 26 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

3. Net Patient Service Revenue (continued)

The Medicare program’s share of direct medical education costs is reimbursed based on a prospectively determined amount per resident. Inpatient services rendered to Medicaid program beneficiaries are paid at prospectively determined per diem rates. Outpatient services rendered to Medicaid program beneficiaries are reimbursed on a cost basis subject to certain limits.

OHS records retroactive Medicare and Medicaid settlements based upon estimates of amounts that are ultimately determined through annual cost reports filed with and audited by the fiscal intermediary. The difference between estimated and audited settlements is recorded as an adjustment to net patient service revenue in the year a determination is made. The favorable resolution of reimbursement issues under appeal by OHS is reported as an increase in net patient service revenue in the year the issue is resolved.

As a result of retroactive settlements of certain prior year cost reports, OHS recorded changes in estimates during the years ended December 31, 2016 and 2015. As a result of changes in prior year estimates, net patient service revenues increased approximately $1.6 million and $1.2 million in 2016 and 2015, respectively.

Medicaid Supplemental Payment Program

Since December 2010, Ochsner’s hospitals and eight other hospitals (Baton Rouge General Medical Center, CHRISTUS Schumpert Health System, CHRISTUS St. Frances Cabrini Hospital, CHRISTUS St. Patrick Hospital, Lakeview Regional Medical Center, The Regional Medical Center of Acadiana, Rapides Regional Medical Center, and Tulane University Hospital and Clinic) entered into collaborations with the State and several units of local government in Louisiana (Jefferson Parish Hospital Service District No. 1, Jefferson Parish Hospital Service District No. 2, Natchitoches Hospital District No. 1, Jefferson Parish Human Services Authority, Terrebonne Parish Hospital Service District #1, Southern Regional Medical Corporation, Hospital Service District No. 3 of the Parish of Allen, The Parish Hospital Service District for the Parish of Orleans – District A, Savoy Medical Center, Hospital Service District No. 1 of Iberia Parish, St. Tammany Parish Hospital Service District No. 1, St. Tammany Parish Hospital Service District No. 2, and Vermilion Parish Hospital Service District #2) to more fully fund the Medicaid program (the Program) to ensure services remain available to low-income and needy patients in the respective communities.

1610-2104035 27 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

3. Net Patient Service Revenue (continued)

These collaborations enable the governmental entities to increase support for the Uncompensated Care Cost (UCC) program for hospital services to the Medicaid and uninsured populations, the Medicaid Upper Payment Limits (UPL) programs for hospital and physician services to the

Medicaid fee-for-service population, and the Full Medicaid Payment (FMP) program for physician services to the Medicaid managed care population. Each State’s UCC and UPL methodology must comply with its State plan and be approved by the Centers for Medicare & Medicaid Services (CMS). Under the UCC and UPL programs, federal matching funds are not available for Medicaid payments that exceed a provider’s individual UPL or UCC entitlement.

Under the FMP program, Medicaid Managed Care Organizations contracted to pay increased reimbursement for physician services that more closely aligns the reimbursement rates for the Medicaid managed care population with the equivalent total reimbursement rates for the Medicaid fee-for-service population.

In 2016 and 2015, OHS recognized approximately $195.6 million and $164.6 million, respectively, in net patient service revenue related to the Program and recorded accounts receivable of approximately $15.1 million at December 31, 2016, and deferred revenue of approximately $4.1 million at December 31 2015. Such amounts are included in accounts receivable other and deferred revenue, respectively, in the accompanying consolidated balance sheets.

Humana Inc.

OHS entered into a provider contract with Humana Inc. to provide services for its commercial and senior members on a fee-for-service basis for physician services and at prospectively determined rates per discharge, discounts from established charges, and prospectively determined daily rates for hospital services. Also, OHS provided services to approximately 35,000 senior members under a capitation contract for both physician and hospital services. Premium revenue from Humana Inc. under the capitation contract approximated $286.2 million and $289.4 million in 2016 and 2015, respectively, and is included in premium revenue in the accompanying consolidated statements of operations. Expenses for medical services to outside providers under the capitation contract approximated $132.5 million and $142.3 million in 2016 and 2015, respectively, and are included in medical services to outside providers in the

1610-2104035 28 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

3. Net Patient Service Revenue (continued) accompanying consolidated statements of operations. Net revenue from Humana Inc. on a fee- for-service basis approximated $173.1 million and $181.6 million in 2016 and 2015, respectively, and is included in net patient service revenue in the accompanying consolidated statements of operations.

Managed Care

OHS has also entered into contractual arrangements with certain commercial insurance carriers, health maintenance organizations, and preferred provider organizations. Inpatient and outpatient services rendered to managed care subscribers are reimbursed at prospectively determined rates per discharge, discounts from established charges, and prospectively determined daily rates.

OHS recognizes net patient service revenue associated with services provided to patients who have third-party payor coverage on the basis of contractual rates for the services rendered. For uninsured patients who are not eligible for charity care, OHS recognizes revenue on the basis of its standard rates for services provided (or on the basis of discounted rates, if negotiated or provided by policy). Based on historical experience, a significant portion of OHS’ uninsured and underinsured patients will be incapable or reluctant to pay for the services provided. Therefore, OHS records a significant provision for bad debts in the period the services are provided related to patient receivables and deductibles, co-payments, or other amounts due from individual patients who have been deemed unwilling to pay.

The table below shows the sources of patient service revenue (net of contractual allowances and discounts), before the provision for bad debts, for the years ended December 31 (in thousands).

2016 2015

Government agencies $ 797,771 $ 722,364 Patients 29,405 49,501 Managed care/indemnity 1,458,307 1,345,143 Patient service revenue, net of contractual allowances and discounts $ 2,285,483 $ 2,117,008

1610-2104035 29 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

4. Patient Accounts Receivable

At December 31, OHS’ patient accounts receivable balances were due from the following sources (in thousands):

2016 2015

Managed care/indemnity $ 186,105 $ 145,830 Government agencies 87,735 93,073 Patients 25,330 39,538 Total 299,170 278,441 Less allowance for doubtful accounts (46,572) (52,914) Patient accounts receivable – net $ 252,598 $ 225,527

The allowance for doubtful accounts due from patients was 4.5% and 5.6% of the accounts receivable balance at December 31, 2016 and 2015, respectively. The allowance for doubtful accounts due from managed care/indemnity payors was 10.4% and 9.0% of the accounts receivable balance at December 31, 2016 and 2015, respectively.

A summary of activity in the allowance for doubtful accounts is as follows (in thousands):

Accounts Balance at Provision for Written Off, Beginning of Doubtful Net of Balance at Year Accounts Recoveries End of Year

Year Ended December 31, 2015 $ 51,589 $ 95,738 $ (94,413) $ 52,914 Year Ended December 31, 2016 52,914 88,454 (94,796) 46,572

1610-2104035 30 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

5. Property – Net

OHS’ investment in property at December 31 is as follows (in thousands):

2016 2015

Land and improvements $ 97,599 $ 94,552 Buildings and leasehold improvements 694,184 669,388 Equipment, furniture, and fixtures 1,058,700 1,083,683 Building and building improvements held for lease 51,396 45,875 Construction-in-progress 99,906 36,845 Total property – at cost 2,001,785 1,930,343 Less accumulated depreciation 1,180,093 1,175,500 Property – net $ 821,692 $ 754,843

Depreciation and amortization expense totaled approximately $115.8 million and $103.7 million for the years ended December 31, 2016 and 2015, respectively.

At December 31, 2016 and 2015, OHS has purchase commitments totaling approximately $87.0 million and $29.7 million, respectively, toward additional capital expenditures.

OHS leases certain software and equipment under capital leases. Capital lease assets are included in equipment, furniture, and fixtures in the accompanying consolidated balance sheets as of December 31 and are as follows (in thousands):

2016 2015

Software and equipment $ 23,668 $ 16,679 Accumulated amortization (7,675) (5,173) Net carrying value of capital lease assets $ 15,993 $ 11,506

Amortization expense applicable to the capital lease asset is included in depreciation and amortization in the accompanying consolidated statements of operations.

1610-2104035 31 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

6. Goodwill and Indefinite-Lived Intangible Assets

On August 31, 2001, Alton Ochsner Medical Foundation and Ochsner Clinic LLC effected a merger transaction resulting in the creation of OCF and the net assets of Ochsner Clinic LLC being acquired by Alton Ochsner Medical Foundation.

The cost to acquire Ochsner Clinic LLC was allocated to the assets acquired and liabilities assumed according to their estimated fair values. In addition, the carrying values of certain other assets and liabilities of Ochsner Clinic LLC were changed to reflect management’s estimate of fair value under purchase accounting.

On May 2, 2016, OCF acquired 100% of the equity interest in Sculpting Center of New Orleans, LLC. As part of this transaction, OCF recorded $0.5 million of goodwill related to the acquisition.

Amounts recorded as goodwill and indefinite-lived intangible assets as of December 31 are as follows (in thousands):

2016 2015

Goodwill $ 43,558 $ 43,077

Trade name – intangible assets $ 11,433 $ 11,433 Other – intangible assets 34 49 $ 11,467 $ 11,482

7. Notes Payable

OCF has a loan agreement with a bank that provides a credit line with maximum borrowings of $53.0 million. The line of credit currently expires on June 12, 2017. Borrowings under the arrangement are unsecured; however, OCF must meet certain financial covenants. Management believes OCF was in compliance with these covenants at December 31, 2016 and 2015. At December 31, 2016 and 2015, OCF had borrowings outstanding under this arrangement of approximately $52.4 million. The interest rate on outstanding borrowings is based on the London Interbank Offered Rate (LIBOR) and, consequently, fluctuates from month to month. The rate on outstanding indebtedness under this arrangement was 2.12% and 1.74% at December 31, 2016 and 2015, respectively. All amounts are classified as current at December 31, 2016 and 2015.

1610-2104035 32 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

8. Bonds Payable

At December 31, bonds payable consisted of the following tax-exempt and taxable bonds (in thousands). The tax-exempt revenue bonds were issued by the Louisiana Public Facilities Authority (LPFA) on behalf of OCF. The taxable bonds were issued by OCF.

2016 2015 Series 2007-A tax-exempt bonds issued by the LPFA September 2007, due serially 2009–2047, annual interest rates ranging from 5.00% to 5.50% $ 250,805 $ 255,345 Series 2007-B tax-exempt bonds issued by the LPFA September 2007, due serially 2009–2047 annual interest rates ranging from 5.00% to 5.50% 53,445 53,660 Series 2011 tax-exempt bonds issued by the LPFA May 2011, due serially 2017–2023, then on term in 2031, 2037, and 2041, at annual interest rates ranging from 4.00% to 6.75% – 150,000 Series 2015 taxable bonds issued June 2015, due in 2045, annual interest rate at 5.90% 252,820 252,820 Series 2015 tax-exempt bonds issued by the LPFA August 2015, due serially 2016–2035, then on term in 2040 and 2047, annual interest rates ranging from 2.00% to 5.00% 112,815 114,800 Series 2016 tax-exempt bonds issued by the LPFA May 2016, due serially 2023-2036, then on term in 2041 and 2047, annual interest rates ranging from 3.00% to 5.00% 155,660 –

Unamortized net bond premium (discount) 18,768 (638) Total 844,313 825,987 Less deferred financing costs 8,875 9,081 Less current portion 7,030 6,740 Non-current portion of bonds payable $ 828,408 $ 810,166

The Series 2007-A, Series 2011, Series 2015 taxable, and Series 2015 tax-exempt bonds are general obligations of OCF. Effective on December 31, 2016, the 2007-B bonds also became general obligations of OCF. The security includes a pledge of all present and future accounts receivable of OCF and a mortgage of certain property.

1610-2104035 33 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

8. Bonds Payable (continued)

Also, under the terms of the bond indenture, OCF and OCH are required to make certain deposits of principal and interest with a trustee. Such deposits are included with assets limited as to use in the consolidated financial statements. The bond indenture also places limits on the incurrence of additional borrowings by OCF and requires that OCF satisfy certain measures of financial performance as long as the bonds are outstanding. Management is not aware of any noncompliance with these requirements.

In June 2015, OCF issued taxable bonds in the amount of $252.8 million and in August 2015, the Louisiana Public Facilities Authority issued tax-exempt revenue bonds in the amount of $114.8 million under a loan agreement with OCF. OCF used a portion of the proceeds to pay the cost of partially refunding the Series 2007-A and 2007-B bonds in the amounts of approximately $96.9 million and $20.3 million, respectively, resulting in a loss on extinguishment of approximately $13.0 million.

In May 2016, the Louisiana Public Facilities Authority issued tax-exempt revenue bonds in the amount of $155.7 million under a loan agreement with OCF. OCF used the proceeds to pay the cost of refunding the Series 2011 bonds in the amount of $150.0 million resulting in a loss on extinguishment of approximately $39.1 million.

At December 31, 2016, scheduled repayments of principal and sinking fund installments to retire the bonds payable for the next five fiscal years are as follows (in thousands):

Years ending December 31: 2017 $ 7,030 2018 7,345 2019 7,695 2020 8,065 2021 8,465

The estimated fair value of the Series 2007-A tax-exempt bonds, Series 2007-B tax-exempt bonds, Series 2011 tax-exempt bonds, 2015 tax-exempt bonds, 2015 taxable bonds, and Series 2016 tax-exempt bonds as of December 31, 2016 and 2015, is approximately $875.9 million and $887.9 million, respectively. This fair value is based on quoted market prices for similarly rated health care revenue bond issues, a Level 2 input.

1610-2104035 34 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

9. Long-Term Debt

A summary of long-term debt at December 31 is as follows (in thousands):

2016 2015 Working capital note, due May 2026 (subject to six additional 5-year extensions), including accrued interest at rates varying from .88% to 1.85% during 2016 with a rate of 1.85% as of December 31, 2016 $ 8,604 $ 8,508 Note payable 4.61% Senior Secured Note, entered into March 2013, due March 2033 6,127 6,375 Note payable 5.26% Senior Secured Note, entered into December 2013, due December 2028 54,028 57,177 Promissory note entered into December 2013, due December 2020 with interest synthetically fixed at 3.97% 14,698 16,773 Note payable 5.09% Senior Secured Note, entered into July 2014, due August 2034 74,286 76,818 Promissory note entered into October 2014, due October 2021 with interest at 3.75% 19,067 20,533 Promissory note entered into September 2015, due September 2022 with interest synthetically fixed at 4.13% 27,000 30,000 Software and equipment loans, due varying dates in 2016–2019 3,131 8,664 Total long-term debt 206,941 224,848

Less deferred financing costs 2,658 2,847 Less unamortized discount 24 402 Less current portion 15,566 17,858 Non-current portion of long-term debt $ 188,693 $ 203,741

1610-2104035 35 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

9. Long-Term Debt (continued)

St. Anne

On May 1, 2006, OCF entered into lease and management services agreements with Lafourche Parish Hospital Service District No. 2 (Lafourche), which owns and operates St. Anne General Hospital and related facilities (St. Anne) of Raceland, Louisiana. Under the agreements, OCF leases the St. Anne buildings and facilities, purchased working capital and certain equipment of St. Anne, and operates the hospital for a specified period of time. As part of the agreement, OCF entered into an unsecured note payable with Lafourche for the purchase of its working capital and equipment for $7.1 million. On December 31, 2010, OCF and Lafourche executed an amendment in which the principal and all accrued and unpaid interest of approximately $8.0 million became the new principal amount of the note and the note was extended for five years to a maturity date of May 1, 2016. On June 1, 2015, OCF and Lafourche executed an amendment in which the aggregate principal and accrued interest amount of approximately $8.4 million was extended to 2026 with six 5-year renewal options, to concur with the lease agreement. The interest rate on the working capital note, based on the 5-Year Yield Tax Exempt Insured Revenue Bond Rate published by Bloomberg, was 1.85% and 1.31% at December 31, 2016 and 2015, respectively. All amounts are classified as non-current at December 31, 2016 and 2015, and are included in long-term debt on the consolidated balance sheets.

March 2013 Note Payable

Pursuant to OCF’s purchase of two Medical Office Buildings on November 15, 2012, OCF entered into a loan in the principal amount of $7.0 million on March 12, 2013. The loan is secured by first mortgage liens on medical office building properties at 1850 East Gause Boulevard (North Shore Medical Office Building 1) and 105 Medical Center Drive (North Shore Medical Office Building 2), both in Slidell, Louisiana, and both in close proximity to Ochsner Medical Center – North Shore. The loan is in the form of a Senior Secured Note bearing interest at the fixed annual rate of 4.61%. Principal and interest payments are due monthly based upon a 20-year (240-month) amortization period and actual/360-day interest period.

1610-2104035 36 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

9. Long-Term Debt (continued)

December 2013 Note Payable

OCF entered into a loan in the principal amount of $63.0 million on December 30, 2013. The loan is secured by first mortgage liens on OCF facilities at 2005 Veterans Memorial Boulevard, Metairie, Louisiana, and 1950 Gause Boulevard, Slidell, Louisiana. The loan is in the form of a Senior Secured Note bearing interest at the fixed annual rate of 5.26%. Principal and interest payments are due monthly based upon a 15-year (180-month) amortization period and actual/360-day interest period.

December 2013 Promissory Note

OCF entered into a loan with a financial institution (the 2013 Loan) in the principal amount of $20.8 million on December 31, 2013. The 2013 Loan is in the form of a promissory note bearing stated interest of 30-day LIBOR plus 2.00%. The security includes a pledge of all present and future accounts receivable of OCF and a mortgage of certain property. Principal and interest payments are due monthly based upon a 15-year (180-month) fixed principal payment amortization period with the balance of the outstanding principal due on a 7-year maturity date of December 30, 2020, and actual/360-day interest period. As part of a program to manage interest rate risk, OHS entered into an interest rate swap agreement on December 19, 2013, effective as of December 30, 2013. OCF pays a 1.97% fixed interest rate on the outstanding notional amount based on the outstanding principal balance of the 2013 Loan to the counterparty and receives the floating amount of 30-day LIBOR as of the date of rate-set. The effect of the swap agreement is to fix OCF’s interest rate on the 2013 Loan at 3.97%. At December 31, 2016 and 2015, the fair value of the interest rate swap agreement was a liability of $171,000 and $320,000, respectively, and is included in other long-term liabilities in the consolidated balance sheets.

July 2014 Note Payable

OCF entered into a loan in the principal amount of $80.0 million on July 31, 2014. The loan is secured by first mortgage liens on OCF facilities at 17000 Medical Center Drive, Baton Rouge, Louisiana, and 16777 Medical Center Drive, Baton Rouge, Louisiana. The loan is in the form of a Senior Secured Note bearing interest at the fixed annual rate of 5.09%. Principal and interest payments are due monthly based upon a 20-year (240-month) amortization period and actual/360-day interest period.

1610-2104035 37 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

9. Long-Term Debt (continued)

October 2014 Promissory Note

OCF entered into a loan with a financial institution (the 2014 Loan) in the principal amount of $22.0 million on October 30, 2014. The 2014 Loan is in the form of a promissory note bearing stated interest of 3.75%. The security includes a pledge of all present and future accounts receivable of OCF and a mortgage of certain property. Principal and interest payments are due quarterly with the first payment due on February 1, 2015, and based upon a 15-year fixed principal payment amortization period. The balance of the outstanding principal is due on a 7-year maturity date of October 31, 2021, and actual/360-day interest period.

September 2015 Promissory Note

OCF entered into a loan with a financial institution (the 2015 Loan) in the principal amount of $30.0 million on September 30, 2015. The 2015 Loan is in the form of a promissory note bearing stated interest of 3-month LIBOR plus 2.25%. The security includes a pledge of all present and future accounts receivable of OCF and a mortgage of certain property. Principal and interest payments are due quarterly beginning January 1, 2016, based upon a 10-year fixed quarterly principal payment amortization period, with the balance of the outstanding principal due on a 7-year maturity date of September 30, 2022, and actual/360-day interest period. As part of a program to manage interest rate risk, OHS entered into an interest rate swap agreement on September 1, 2015, effective as of September 30, 2015. OCF pays a 1.88% fixed interest rate on the outstanding notional amount based on the outstanding principal balance of the 2015 Loan to the counterparty and receives the floating amount of 3-month LIBOR as of the date of rate-set. The effect of the swap agreement is to fix OCF’s interest rate on the 2015 Loan at 4.13%. At December 31, 2016, the fair value of the interest rate swap agreement was an asset of $7,000 and is included within other assets in the consolidated balance sheet. At December 31, 2015, the fair value of the interest rate swap agreement was a liability of $190,000 and is included in other long-term liabilities in the consolidated balance sheets.

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Notes to Consolidated Financial Statements (continued)

9. Long-Term Debt (continued)

At December 31, 2016, scheduled repayments of long-term debt for the next five fiscal years are as follows (in thousands):

Years ending December 31: 2017 $ 15,566 2018 13,291 2019 13,616 2020 20,224 2021 23,870

10. Employee Benefit Plans

Defined Benefit Pension Plan

Certain employees of OCF and its subsidiaries are covered under a defined benefit pension plan (the Defined Benefit Plan). The Defined Benefit Plan is non-contributory and provides benefits that are based on the participants’ credited service and average compensation during the last five years of covered employment. As of December 31, 2006, benefit accruals ceased for all plan participants under age 40 and those over age 40 who elected to freeze their retirement plan benefits. OCF made an additional change to the Defined Benefit Plan, and as of December 31, 2009, benefit accruals ceased for all plan participants under age 55 with less than 10 years of service (rounded to the nearest 6 months). Physician/executive participants are frozen as of December 31, 2009, regardless of age and service. Participants who are not frozen as of December 31, 2009, can accrue benefits until the earlier of age 65 or December 31, 2015. No new participants are allowed to enter the Defined Benefit Plan. OCF makes contributions to its qualified plan that satisfy the minimum funding requirements under the Employee Retirement Income Security Act of 1974. These contributions are intended to provide not only for benefits attributed to services rendered to date but also those expected to be earned in the future.

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Notes to Consolidated Financial Statements (continued)

10. Employee Benefit Plans (continued)

The following table sets forth the changes in benefit obligations, changes in plan assets, and components of net periodic benefit cost (in thousands):

December 31, 2016 2015 Change in benefit obligation: Benefit obligation – beginning of year $ 542,801 $ 561,526 Service cost – – Interest cost 23,619 22,378 Actuarial loss (gain) 22,379 (18,678) Benefits paid (34,984) (22,425) Benefit obligation – end of year 553,815 542,801

Change in plan assets: Fair value of plan assets – beginning of year 406,618 420,066 Actual return on plan assets 22,165 372 Employer contributions 10,610 8,605 Benefits paid (34,984) (22,425) Fair value of plan assets – end of year 404,409 406,618 Funded status $ (149,406) $ (136,183)

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Notes to Consolidated Financial Statements (continued)

10. Employee Benefit Plans (continued)

December 31, 2016 2015 Amounts recognized in the consolidated balance sheets consist of: Pension and postretirement obligations – current portion $ – $ – Pension and postretirement obligations – non-current portion (149,406) (136,183) Unrestricted net assets N/A N/A

Amounts recognized in unrestricted net assets: Net actuarial loss 253,845 228,062 Prior service credit – – Total amounts recognized 253,845 228,062

Other changes in plan assets and benefit obligations recognized in unrestricted net assets: Net loss 32,623 14,469 Recognized loss (6,840) (5,857) Recognized prior service credit – – Total amounts recognized $ 25,783 $ 8,612

Weighted average assumptions used to determine projected benefit obligations at December 31 were as follows:

2016 2015

Weighted average discount rate 4.15% 4.35% Rate of compensation increase N/A N/A

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Notes to Consolidated Financial Statements (continued)

10. Employee Benefit Plans (continued)

Net periodic pension cost for the years ended December 31 includes the following components (in thousands):

2016 2015

Service cost $ – $ – Interest cost 23,619 22,378 Expected return on plan assets (32,409) (33,519) Amortization of net loss 6,840 5,857 Recognized prior service credit – – Net periodic pension benefit $ (1,950) $ (5,284)

Weighted average assumptions used to determine net periodic pension cost for the years ended December 31 were as follows:

2016 2015

Weighted-average discount rate 4.35% 4.06% Expected return on plan assets 7.70% 8.10% Rate of compensation increase N/A N/A

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Notes to Consolidated Financial Statements (continued)

10. Employee Benefit Plans (continued)

The fair values of the Defined Benefit Plan assets at December 31 are as follows (in thousands):

2016 Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Significant Observable Other Significant Identical Assets Observable Unobservable Total and Liabilities Inputs Inputs Estimated (Level 1) (Level 2) (Level 3) Fair Value

Money market funds(a) $ 28,126 $ – $ – $ 28,126 Fixed income investments(a)(b)(c) 16,994 48,662 – 65,656 Marketable equity securities(a)(b)(c) 71,874 42,869 46,541 161,284 Absolute return(b)(c) 10,807 10,647 79,996 101,450 Private equity/venture capital(c) – – 14,770 14,770 Natural resources(a)(c) 27,731 – 5,392 33,123 Total $ 155,532 $ 102,178 $ 146,699 $ 404,409

2015 Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Significant Observable Other Significant Identical Assets Observable Unobservable Total and Liabilities Inputs Inputs Estimated (Level 1) (Level 2) (Level 3) Fair Value

Money market funds(a) $ 8,499 $ – $ – $ 8,499 Fixed income investments(a)(b)(c) 15,292 46,135 – 61,427 Marketable equity securities(a)(b)(c) 77,168 37,567 42,503 157,238 Absolute return(b)(c) 10,847 – 121,636 132,483 Private equity/venture capital(c) – – 17,299 17,299 Natural resources(a)(c) 23,939 – 5,733 29,672 Total $ 135,745 $ 83,702 $ 187,171 $ 406,618

(a) Valuation of these securities classified as Level 1 is based on unadjusted quoted prices in active markets that are readily and regularly available.

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Notes to Consolidated Financial Statements (continued)

10. Employee Benefit Plans (continued)

(b) Represents funds invested in common/collective trust funds or other alternative investments. Investments classified as Level 1 represent a fund that is publicly traded. Valuation of this fund is based on unadjusted quoted prices in active markets that are readily and regularly available. Level 2 classification represents investments in common/collective trust funds or other alternative investment funds. The estimated fair value is based upon the reported Net Asset Value (NAV) provided by fund managers, and this value represents the amount at which transfers into and out of the fund are affected. This fund provides reasonable levels of price transparency and can be corroborated through observable market data.

(c) In general, investments classified within Level 3 are alternative investments and use many of the same valuation techniques and inputs as described above, including reported NAV. However, if key inputs are unobservable, or if the investments are less liquid and there is very limited trading activity, the investments are generally classified as Level 3. The use of independent non-binding broker quotations to value investments generally indicates there is a lack of liquidity or the general lack of transparency in the process to develop the valuation estimates generally causing these investments to be classified in Level 3. This category includes funds that are invested in hedge fund and private equity investments that provide little or no price transparency due to the infrequency with which the underlying assets trade and generally require additional time to liquidate in an orderly manner. Accordingly, the values of these alternative asset classes are based on inputs that cannot be readily derived from or corroborated by observable market data and are based on investment balances provided by fund managers and adjusted for contributions and distributions in the event such balances pertain to an interim date. The 2015 amounts reflected above include the reclassification of $19 million of investments from Level 3 to Level 2.

A rollforward of the fair value measurements for all assets measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs for the year ended December 31, 2016, is as follows (in thousands):

January 1, Gains December 31, 2016 (Losses) Purchases Sales 2016

Fixed income $ – $ – $ – $ – $ – Equity securities 42,503 4,038 – – 46,541 Absolute return 121,636 1,094 10,000 (52,734) 79,996 Private equity/venture capital 17,299 2,306 85 (4,920) 14,770 Natural resources 5,733 314 – (655) 5,392 Total $ 187,171 $ 7,752 $ 10,085 $ (58,309) 146,699

1610-2104035 44 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

10. Employee Benefit Plans (continued)

The Defined Benefit Plan asset allocation as of the measurement dates (December 31, 2016 and 2015) and the target asset allocation, presented as a percentage of total plan assets, were as follows:

2016 Target 2016 Allocation 2015

Debt securities 16% 15% 15% Equity securities 40 40 39 Private equity/venture capital 4 2 4 Hedge funds 25 33 33 Natural resources/REITs 8 10 7 Other 7 – 2

The primary financial objectives of the Defined Benefit Plan are to (1) provide a stream of relatively predictable, stable, and constant earnings in support of the Defined Benefit Plan’s annual benefit obligations and (2) preserve and enhance the real (inflation-adjusted) value of the assets of the Defined Benefit Plan. The long-term investment objectives of the Defined Benefit Plan are to (1) attain the average annual total return assumed in the Defined Benefit Plan’s most recent actuarial assumptions (net of investment management fees) over rolling five-year periods, (2) outperform the Defined Benefit Plan’s custom benchmark, and (3) outperform the median return of a pool of retirement funds to be identified in conjunction with OCF’s investment consultant.

The asset allocation is designed to provide a diversified mix of asset classes, including U.S. and foreign equity securities, fixed income securities, real estate investment trusts (REITs), natural resources, cash, and funds to hedge against deflation and inflation. Risk management practices include various criteria for each asset class, including measurement against several benchmarks, achievement of a positive risk-adjusted return, and investment guidelines for each class of assets that enumerate types of investment allowed in each category.

1610-2104035 45 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

10. Employee Benefit Plans (continued)

The OCF Retirement Plan Statement of Investment Policies and Objectives provides for a range of minimum and maximum investments in each asset class to allow flexibility in achieving the expected long-term rate of return. Historical return patterns and correlations, consensus return forecast, and other relevant financial factors are analyzed to check for reasonableness and appropriateness of the asset allocation to ensure that the probability of meeting actuarial assumptions is reasonable. OCF Treasury staff oversees the day-to-day activities involving assets of the Defined Benefit Plan and the implementation of any changes adopted by the Investment Committee.

OCF currently expects to make a contribution to the Defined Benefit Plan of approximately $15.1 million in 2017.

For 2016 and 2015, OCF’s Defined Benefit Plan had accumulated benefit obligations of approximately $553.8 million and $542.8 million, respectively.

The estimated net loss for the Defined Benefit Plan that will be amortized from accumulated unrestricted net assets into net periodic benefit cost over the next fiscal year is approximately $7.5 million.

Future benefit payments expected to be paid in each of the next five fiscal years and in the aggregate for the following five years as of December 31, 2016, are as follows (in thousands):

Years ending December 31: 2017 $ 26,356 2018 28,035 2019 29,479 2020 30,842 2021 32,153 2022–2026 175,200 $ 322,065

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Notes to Consolidated Financial Statements (continued)

10. Employee Benefit Plans (continued)

Defined Contribution Plans

All employees of OCF meeting eligibility requirements may participate in the Ochsner Clinic Foundation 401(k) Plan (the Plan). OCF may annually elect to make a retirement contribution on behalf of eligible employees in an amount up to 2% of the participant’s annual eligible compensation. In addition, OCF may annually elect to make a match for eligible employees of 50% of the first 4% the employees contribute into the Plan. At December 31, 2016 and 2015, OHS has accrued approximately $28.1 million and $24.6 million, respectively, for matching contributions to the Plan for the 2016 and 2015 fiscal years, respectively.

Certain OCF employees are also covered under a 457(f) plan. The 457(f) plan was created to replace 100% of the benefit target for employees under age 65 as of December 31, 2009, whose benefits in the Defined Benefit Plan were frozen. The participant pays taxes at vesting and payout occurs at the later of age 65 or retirement. Participants of the 457(f) plan also participate in the 401(k) contributions. OHS’ accompanying consolidated balance sheets reflect a liability of approximately $13.6 million and $12.6 million for the 457(f) plan at December 31, 2016 and 2015, respectively.

Other Postretirement Benefits

OCF also provides certain health care and life insurance benefits for retired employees. OCF funds these benefits on a pay-as-you-go basis. The obligations under the postretirement plan are approximately $2.0 million and $1.9 million at December 31, 2016 and 2015, respectively.

11. Endowment Funds and Temporarily and Permanently Restricted Net Assets

OHS has 776 temporarily restricted funds and 66 permanently restricted funds established for a variety of purposes. These funds are classified and reported based on the existence or absence of donor-imposed restrictions. Restricted net assets include funds dedicated to Medical Education, Nursing Education, Pastoral Care, Biomedical Research, Cancer Research, Cardiology Research, Transplant Research and Alzheimer’s Research.

1610-2104035 47 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

11. Endowment Funds and Temporarily and Permanently Restricted Net Assets (continued)

ASC 958-205, Not-for-Profit Entities – Presentation of Financial Statements, provides guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA), which the state of Louisiana enacted on July 1, 2010.

UPMIFA requires OHS to classify the portion of each donor-restricted endowment fund that is not classified as permanently restricted net assets as temporarily restricted net assets (time restricted) until appropriated for expenditure. Temporarily restricted net assets available for appropriations at December 31, 2016 and 2015, total approximately $6.8 million and $5.7 million, respectively. Management retroactively adopted UPMIFA as of January 1, 2009.

UPMIFA also requires that OHS preserve the historic dollar value of the donor restricted endowed funds. Therefore, permanently restricted net assets contain the aggregate fair market value of (1) an endowment fund at the time it became an endowment fund, (2) each subsequent donation to the fund at the time it is made, and (3) each accumulation made pursuant to a direction in the applicable gift instrument at the time the accumulation is added to the fund.

Restricted Net Assets as of December 31, 2016, by Purpose Temporarily Permanently Restricted Restricted Total (In Thousands)

Research $ 13,402 $ 17,671 $ 31,073 Education 5,685 3,488 9,173 Other 69,132 4,674 73,806 Total $ 88,219 $ 25,833 $ 114,052

Restricted Net Assets as of December 31, 2015, by Purpose Temporarily Permanently Restricted Restricted Total (In Thousands)

Research $ 11,707 $ 17,165 $ 28,872 Education 5,643 3,431 9,074 Other 49,335 3,167 52,502 Total $ 66,685 $ 23,763 $ 90,448

1610-2104035 48 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

11. Endowment Funds and Temporarily and Permanently Restricted Net Assets (continued)

Endowment Net Asset Composition by Type of Fund as of December 31, 2016 Temporarily Permanently Unrestricted Restricted Restricted Total (In Thousands)

Donor-restricted funds $ – $ 10,399 $ 25,833 $ 36,232 Board-designated funds 1,391 – – 1,391 Total $ 1,391 $ 10,399 $ 25,833 $ 37,623

Endowment Net Asset Composition by Type of Fund as of December 31, 2015 Temporarily Permanently Unrestricted Restricted Restricted Total (In Thousands)

Donor-restricted funds $ – $ 8,668 $ 23,763 $ 32,431 Board-designated funds 1,341 – – 1,341 Total $ 1,341 $ 8,668 $ 23,763 $ 33,772

Changes in Endowment Net Assets for the Year Ended December 31, 2016 Temporarily Permanently Unrestricted Restricted Restricted Total (In Thousands)

Beginning balance $ 1,341 $ 8,668 $ 23,763 $ 33,772 Investment gain 87 2,300 8 2,395 Contributions – 5 2,042 2,047 Appropriations for expenditures (37) (554) – (591) Transfers – (20) 20 – Ending balance $ 1,391 $ 10,399 $ 25,833 $ 37,623

1610-2104035 49 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

11. Endowment Funds and Temporarily and Permanently Restricted Net Assets (continued)

Changes in Endowment Net Assets for the Year Ended December 31, 2015 Temporarily Permanently Unrestricted Restricted Restricted Total (In Thousands)

Beginning balance $ 1,378 $ 8,859 $ 23,397 $ 33,634 Investment (loss) gain (10) 40 (2) 28 Contributions – 1 339 340 Appropriations for expenditures (27) (203) – (230) Transfers – (29) 29 – Ending balance $ 1,341 $ 8,668 $ 23,763 $ 33,772

Funds With Deficiencies

From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or current law requires OHS to retain as a fund of perpetual duration. In accordance with U.S. GAAP, deficiencies of this nature are reported in unrestricted net assets. There were no such deficiencies as of December 31, 2016. Such deficiencies totaled approximately $2,000 as of December 31, 2015. Any such deficiencies resulted from unfavorable market fluctuations.

Return Objectives and Risk Parameters

OHS has investment and spending practices for endowment assets that intend to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that OHS must hold in perpetuity or for a donor-specified period(s) as well as board-designated funds. The policy allows the endowment assets to be invested in a manner that is intended to produce results that exceed the price and yield results of the allocation index while assuming a moderate level of investment risk. OHS expects its endowment funds to provide a rate of return that preserves the gift and generates earnings to achieve the endowment purpose.

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Notes to Consolidated Financial Statements (continued)

11. Endowment Funds and Temporarily and Permanently Restricted Net Assets (continued)

Strategies Employed for Achieving Objectives

To satisfy its long-term rate-of-return objectives, OHS relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and interest and dividend income. OHS uses a diversified asset allocation to achieve its long-term return objectives within prudent risk constraints to preserve capital.

Spending Policy and How the Investment Objectives Relate to Spending Policy

It is OHS’ objective to establish a payout rate from endowment accounts that provides a stable, predictable level of spending for the endowed purposes that will increase with the rate of inflation, and to continue to invest in accordance with policy goals of providing for a rate of growth in the endowment earnings that meets or exceeds the rate of inflation. The annual spending appropriation will be subject to a minimum rate of 4% and a maximum rate of 7% of each endowment fund’s current market value. Temporarily restricted net assets, along with other donor-restricted funds, include the spending appropriation and investment income of the endowments and are pending appropriation for expenditure consistent with the specific purpose of the fund.

12. Business Combinations, Strategic Partnership, and Affiliation Agreements

Business Combinations

During 2016 and 2015, OCF completed several physician practice acquisitions, none of which were material to the results of operations. In 2016, OCF also purchased 100% of the equity interest of Sculpting Center of New Orleans, LLC for $0.7 million.

Subsequent Event

On January 9, 2017, OCF completed the acquisition of Millennium Healthcare Management, Inc. (MHM). MHM is a leading provider of urgent care and occupational medicine in Louisiana and consists of 12 urgent care and 4 occupational health clinics. Under the terms of the acquisition, OCF paid approximately $31.3 million in cash. Results of operations of MHM will be included in OHS’ consolidated financial statements from the date of acquisition.

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Notes to Consolidated Financial Statements (continued)

12. Business Combinations, Strategic Partnership, and Affiliation Agreements (continued)

Strategic Partnerships and Affiliation Agreements

In recent years, OHS has entered into several strategic partnership and affiliation agreements. While the direct financial impact of these agreements is not material, they are a component of OHS’ efforts to increase local access to care, improve quality, reduce the cost of healthcare, and share best practices and resources in order to improve the health of Louisiana communities. OHS now has strategic partnerships and clinical affiliations with Lafayette General Health, CHRISTUS Health Louisiana, IASIS Glenwood Regional Medical Center, and Southwest Mississippi Regional Medical Center.

OHS and OCF also have Joint Operating Agreements (JOA) with St. Tammany Parish Hospital (STPH), Terrebonne General Medical Center (TGMC), and Slidell Memorial Hospital (SMH). These JOAs are intended to coordinate resources with the goal of lowering costs, improving quality, and creating a seamless clinical environment for patients in each of their respective local regions. STPH, TGMC, and SMH all remain public hospitals governed by their respective Boards. OCF is financially integrated with these hospitals and recognizes other operating revenue or other operating expense related to the JOAs in its consolidated statements of operations.

OCF also provides management assistance and support for Chabert and SCPH. Under these management agreements, OCF receives management fees and any excess of revenues over expenses generated by each of the facilities annually, as well as reimbursement of purchased services incurred on behalf of the facilities. OCF also has management agreements with Hancock and an interim management agreement with SBPH. Under its management agreements with Hancock and SBPH, OCF receives management fees as well as reimbursement of expenses incurred for providing management assistance and support services.

In October 2016, OCF entered into a professional services agreement with Adeptus Health, Inc. (Adeptus) to enhance access to emergency medical care in Louisiana. Ochsner opened a freestanding emergency department in Marrero, Louisiana, and Adeptus managed the operations. On March 30, 2017, OCF and Adeptus terminated this agreement and the previously established joint venture for a payment to Adeptus of approximately $1.2 million.

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Notes to Consolidated Financial Statements (continued)

13. Equity Method Investments and Joint Ventures

Investment in Equity Investees

OHS’ investment in unconsolidated affiliates at December 31 and its income from equity investees for the years then ended are as follows (in thousands):

Investment Equity in Income Ownership in Equity of Equity 2016 Interest Investees Investees

Southeast Louisiana Homecare LLC 25% $ 3,176 $ 359 Louisiana Extended Care Hospital of Kenner, LLC 25% 82 123 OSR Louisiana, LLC 49% – (252) Ochsner-Acadia, LLC 25% 6,994 – $ 10,252 $ 230

Investment Equity in Income Ownership in Equity of Equity 2015 Interest Investees Investees

Southeast Louisiana Homecare LLC 25% $ 2,565 $ 309 Louisiana Extended Care Hospital of Kenner, LLC 25% 380 42 $ 2,945 $ 351

On June 15, 2015, OCF entered into a joint venture with Pennsylvania-based Select Medical Corporation to jointly open a new, 60-bed, acute inpatient rehabilitation hospital in 2016. Construction began in early 2016. The new partnership will initially focus on managing OCF’s current acute rehab services provided in a 29-bed unit, which is licensed separately as a hospital, within the Ochsner Medical Center-Elmwood Campus. This joint venture did not have material operations during the year ended December 31, 2016.

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Notes to Consolidated Financial Statements (continued)

13. Equity Method Investments and Joint Ventures (continued)

On May 17, 2016, OCF formed a joint venture with Acadia Healthcare (Acadia) to open and operate to an 82-bed behavioral health facility in Laplace, Louisiana. Ochsner contributed the facility and recorded a gain of $6,994 for a 25% interest in the joint venture and Acadia will contribute the facility build out, equipment and working capital. Construction began in 2016 and the facility is estimated to open in 2018. This joint venture did not have any operations during the year ended December 31, 2016.

14. Electronic Health Records Services Agreements

In order to develop a better clinical integration and provide cost savings for our JOA partners, OCF has entered into electronic health records services and hosting agreements to implement and support a common EHR system. During 2015, OCF implemented its EHR system at STPH and continues to host and maintain it. In December 2015, OCF entered into a similar agreement with TGMC and implemented its EHR system during 2016 and 2017. These agreements were not material to OCF’s operating income for 2016 or 2015.

15. Functional Expenses

OHS provides general health care services primarily to residents within its geographic location. Expenses related to providing these services for the years ended December 31 are as follows (in thousands):

2016 2015

Health care services $ 1,902,533 $ 1,714,394 General and administrative 790,743 743,479 Medical education 38,716 38,797 Research 13,999 13,423 Fitness center 12,310 11,894 Hotel 3,546 3,430 $ 2,761,847 $ 2,525,417

1610-2104035 54 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

16. Supplemental Disclosures of Cash Flow Information

Year Ended December 31, 2016 2015

Cash paid for interest (net of amounts capitalized) $ 52,567 $ 46,668

Supplemental non-cash investing and financing activities: Property purchases included in accounts payable $ 14,625 $ 5,598 Property purchases financed by capital leases and long-term debt $ 6,474 $ 8,051

17. Commitments and Contingencies

Professional and General Liability Insurance

Professional and general liability claims have been asserted against OHS by various claimants. The claims are in various stages of processing, and some may ultimately be brought to trial. Incidents occurring through December 31, 2016, may result in the assertion of additional claims.

OCF participates in a risk management program to provide for professional and general liability coverage.

Under this program, OCF carries professional and general liability insurance coverage for up to $65.0 million each of annual aggregate claims subject to certain deductible provisions. OCF is self-insured with respect to the first $3.0 million of each claim for professional liability with an annual aggregate exposure of $6.0 million. General liability claims are subject to a retention of $1.0 million per claim and $2.0 million annual aggregate. OHS also carries additional coverage on certain community hospitals that carry similar coverage with lower self-retention and aggregate levels.

Professional liability claims are limited by Louisiana statute to $500,000 per occurrence, the first $100,000 of which is payable by the health care provider and the remainder of which is payable by the Patient’s Compensation Fund (the Fund) for participants in the Fund. The Fund was established by the Medical Malpractice Act (the Act), which was enacted in 1975 by the State of Louisiana. The Act established the Fund and limited recovery in medical malpractice cases to $500,000. The limitation on recovery has been challenged and, to date, successfully defended in

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Notes to Consolidated Financial Statements (continued)

17. Commitments and Contingencies (continued) the courts. Expenditures recorded by OHS for participation in the Fund for the years ended December 31, 2016 and 2015, were approximately $17.9 million and $19.8 million, respectively, and are included in other operating expenses in the accompanying consolidated statements of operations.

OCF has an established trust fund held by a financial institution. Disbursements are made from the trust fund for self-insured professional and general liability claims, claims administration costs, and legal fees. The amounts to be contributed to the trust funds are determined annually by an independent actuary. The trust fund assets for OCF in the aggregate totaled approximately $9.1 million and $11.9 million at December 31, 2016 and 2015, respectively. The trust fund assets are included in assets limited as to use under self-insurance trust fund in the accompanying consolidated balance sheets. The estimated liability recorded by OCF in the aggregate for claims, based on the actuarial report, is approximately $13.8 million with no estimated reinsurance recoveries at December 31, 2016, and $14.0 million with no estimated reinsurance recoveries at December 31, 2015. The estimated liability is included in other current liabilities and other long- term liabilities in the accompanying consolidated balance sheets. The estimated liability for OCF was discounted at approximately 2.5% at both December 31, 2016 and 2015. If the risk management program is terminated, the trust fund balances, if any, revert to OCF after satisfaction of outstanding claims. Any proceeds from such a reversion would be used to reduce future costs for liability coverage.

Estimated Workers’ Compensation and Employee Health Claims

OHS is self-insured for workers’ compensation and employee health claims. The estimated liability for workers’ compensation and employee health claims totaled approximately $18.8 million at both December 31, 2016 and 2015, which is included in accrued salaries, wages, and benefits; other current liabilities; and other long-term liabilities in the accompanying consolidated balance sheets.

Property Insurance

OHS carries property insurance coverage through third-party insurers. The policy limit is $750.0 million and is subject to a deductible of $250,000 per occurrence for property damage and 24 hours for the time element. The Named Wind sublimit is $160.0 million. The Named Wind deductible is 3% for property damage and 72 hours for the time element, subject to a minimum of $500,000 and a maximum of $50.0 million. OHS also carried coverage on certain community hospitals with self-retention and aggregate levels.

1610-2104035 56 Ochsner Health System and Subsidiaries

Notes to Consolidated Financial Statements (continued)

17. Commitments and Contingencies (continued)

Lease Commitments

OHS leases certain software and equipment under capital leases. The capital lease obligations are included in other current liabilities and other non-current liabilities in the accompanying consolidated balance sheets.

Additionally, OHS leases assets under various rental agreements. OHS leases have varying terms, which may include renewal or purchase options and escalation clauses that are factored into determining minimum lease payments. The following schedule summarizes OHS’ future annual minimum rental commitments on outstanding leases as of December 31, 2016 (in thousands):

Lease Obligations Capital Operating

2017 $ 5,774 $ 34,905 2018 4,801 29,239 2019 2,624 22,626 2020 1,532 17,955 2021 180 16,150 Thereafter – 102,619 Total minimum lease payments 14,911 $ 223,494 Less amounts representing interest (845) 14,066 Less current maturities (5,400) Capital lease obligations – non-current $ 8,666

Rent expense, which relates primarily to cancelable or short-term operating leases for equipment and buildings, was approximately $53.5 million and $48.3 million for the years ended December 31, 2016 and 2015, respectively.

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Notes to Consolidated Financial Statements (continued)

17. Commitments and Contingencies (continued)

Operating Leases – Lessor

OHS leases office space to other businesses. Lease terms generally range from one to four years, with options of renewal for additional periods. All such property leases provide for minimum annual rentals, and all rental revenue has been recorded on a straight-line basis. Following is a schedule by years of future minimum rental payments under non-cancelable operating leases as of December 31, 2016 (in thousands):

Years ending December 31: 2017 $ 7,859 2018 5,927 2019 2,581 2020 1,097 2021 874 Thereafter 6,831 Total minimum lease payments to be received $ 25,169

Contingencies

The health care industry as a whole is subject to numerous complex laws and regulations of federal, state, and local governments. Compliance with these laws and regulations can be subject to future government review and interpretation as well as regulatory actions unknown or unasserted at this time. Such compliance with laws and regulations in the health care industry has come under increased government scrutiny. OHS and its subsidiaries are parties to various legal proceedings and potential claims arising in the ordinary course of their business. Management of OHS believes the reserves it has established for these issues are adequate and does not believe, based on current facts and circumstances and after review with counsel, that these matters will have a material adverse effect on OHS’ consolidated statements of financial position or results of operations.

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Notes to Consolidated Financial Statements (continued)

17. Commitments and Contingencies (continued)

The Tax Relief and Health Care Act of 2006 authorized a permanent program involving the use of third-party recovery audit contractors (RACs) to identify Medicare and Medicaid overpayments and underpayments made to providers. RACs are compensated based on the amount of both overpayments and underpayments they identify by reviewing claims submitted to Medicare for correct coding and medical necessity. Payment recoveries resulting from RAC reviews are appealable through administrative and judicial processes. Payment recoveries and denials resulting from RAC reviews can be appealed through administrative and judicial processes, and management intends to pursue the reversal of adverse determinations where appropriate. In addition to overpayments that are not reversed on appeal, OHS will incur additional costs to respond to requests for records and to pursue the reversal of payment denials. OHS expects the RACs will continue to seek CMS approval to review additional issues.

Management of OHS believes that the reserves it has established for RAC reviews, which are included in other long-term liabilities in the accompanying consolidated balance sheets, are adequate but cannot predict with certainty the impact of the Medicare and Medicaid RAC program on its future consolidated results of operations or cash flows.

18. Subsequent Events

OHS has evaluated subsequent events through April 24, 2017, the date the accompanying consolidated financial statements were available for issuance.

1610-2104035 59 EY | Assurance | Tax | Transactions | Advisory

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APPENDIX C

SUMMARY OF PRINCIPAL DOCUMENTS

The following are definitions of certain words and terms used in this Official Statement. Words and terms used in this Official Statement which are not defined below or elsewhere in this Official Statement have the meanings set forth in the Indenture and the Loan Agreement.

DEFINITIONS OF CERTAIN TERMS

“Act” means, collectively, the Public Trust Act and the Refunding Act.

“Administrative Expenses” means the necessary, reasonable and direct out-of-pocket expenses incurred by the Authority or the Trustee pursuant to the Loan Agreement and the Indenture, the compensation of the Trustee under the Indenture (including, but not limited to any annual administrative fee charged by the Trustee), and the necessary, reasonable and direct out-of-pocket expenses of the Trustee incurred by the Trustee in the performance of its duties under the Indenture.

“Authority” means the Louisiana Public Facilities Authority, a public trust and public corporation of the State of Louisiana, created pursuant to the provisions of the Public Trust Act and pursuant to its Indenture of Trust dated August 21, 1974, or any agency, board, body, commission, department or officer succeeding to the principal functions thereof or to whom the powers conferred upon the Authority by said provisions shall be given by law.

“Authorized Authority Representative” means the person(s) at the time designated to act under the Loan Agreement and the Indenture on behalf of the Authority by a written certificate furnished to the Foundation and the Trustee containing the specimen signature of such person(s) and signed on behalf of the Authority by the Chairman or Vice Chairman of the Authority. Such certificate may designate an alternate or alternates.

“Authorized Foundation Representative” means the person(s) at the time designated to act under the Loan Agreement, the Master Indenture and the Indenture on behalf of the Foundation by a written certificate furnished to the Authority and the Trustee containing the specimen signature of such person(s) and signed on behalf of the Foundation by certain officers of the Foundation. Such certificate may designate an alternate or alternates.

“Bond Counsel” means a firm of attorneys of nationally recognized standing in the field of law relating to municipal bond law and the excludability of interest on state or local bonds from gross income of the owners of the Bonds for purposes of federal income taxation, selected by the Authority and acceptable to the Foundation.

“Bonds” means Louisiana Public Facilities Authority Revenue and Refunding Revenue Bonds (Ochsner Clinic Foundation Project) Series 2017, authorized to be issued by the Authority in the aggregate principal amount of $______for the purpose of refunding [all or a portion] of the outstanding Series 2007 Bonds, financing costs of the Project and paying costs of issuance of the Bonds.

“Business Day” means any day other than (a) a Saturday, (b) a Sunday or (c) any other day on which banking institutions in New York, New York, or Baton Rouge, Louisiana, are authorized or required not to be open for the transaction of regular banking business.

“Closing Date” means the date on which the Bonds are delivered and payment therefor is received by the Authority.

“Code” means the United States Internal Revenue Code of 1986, as amended, and regulations promulgated or proposed thereunder or (to the extent applicable) under prior law, including temporary regulations.

“Construction Fund” means the fund of that name created under the Indenture.

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“Costs of the Project” means those costs incurred by the Foundation in connection with the Project, as more fully described in the Indenture.

“Debt Service Fund” means the fund of that name created under the Indenture.

“Escrow Agreement” means, the Escrow Deposit Agreement, dated as of May 1, 2017, among the Authority, the Foundation and the Escrow Trustee.

“Escrow Funds” means, collectively, the Escrow Funds established under the Escrow Agreement.

“Escrow Trustee” means The Bank of New York Mellon Trust Company, N.A., Baton Rouge, Texas.

“Fiscal Year” means any period of twelve consecutive months adopted by the Foundation as its fiscal year for financial reporting purposes, presently the period beginning on January 1 and ending on December 31.

“Fitch” means Fitch Ratings, a Delaware corporation, or any successor thereto maintaining a rating on the Bonds.

“Foundation” means Ochsner Clinic Foundation, a nonprofit corporation organized and existing under the laws of the State and an exempt organization as described and defined in Section 501(c)(3) of the Code and any successors or assigns as permitted under the Loan Agreement.

“Government Obligations” means (a) direct obligations of, or obligations the principal of and the interest on which are unconditionally guaranteed by, the United States of America or any instrumentality or agency of the United States of America, including without limitation the interest component of securities issued by Resolution Funding Corporation which have been stripped to the Federal Reserve Bank of New York in book-entry form, (b) evidences of a direct ownership interest in future interest or principal payments on obligations issued or guaranteed by the United States of America or any instrumentality or agency of the United States of America, which obligations are held in a custody account by a custodian satisfactory, in the case of the Bonds, to the Trustee or, if such Government Obligations are deposited to effect the refunding of the Bonds or any portion thereof, any bond trustee, pursuant to the terms of a custody agreement, and (c) obligations issued by any state of the United States of America or any political subdivision, public instrumentality or public authority of any state of the United States of America, which obligations are fully secured by and payable solely from direct obligations of, or obligations the principal of and interest on which are fully guaranteed by, the United States of America or any agency or instrumentality of the United States of America, which security is held pursuant to an agreement in form and substance acceptable to the Trustee, and which obligations or agreement or an escrow comprised thereof are rated in the highest rating category by Moody’s, S&P and Fitch.

“Indenture” means the Trust Indenture dated as of May 1, 2017 between the Authority and the Trustee, as it may be amended or supplemented from time to time by supplemental indentures in accordance with the provisions thereof.

“Loan Agreement” means the Loan Agreement dated as of May 1, 2017 between the Foundation and the Authority, as it may be amended or supplemented from time to time in accordance with the provisions thereof.

“Master Indenture” means the Master Indenture dated as of September 1, 2007 between the Foundation and the Master Trustee, as supplemented, and as further supplemented by the Supplemental Master Indenture, and as it may be amended or supplemented from time to time in accordance with the provisions thereof.

“Master Trustee” means The Bank of New York Mellon Trust Company, N.A., or any successor trustee under the Master Indenture.

“Moody’s” means Moody’s Investors Service, a Delaware corporation, or any successor thereto maintaining a rating on the Bonds.

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“Note” means the Foundation’s $______Obligation No. 17 being issued pursuant to the Supplemental Master Indenture, to secure the Foundation’s obligations under the Loan Agreement.

“Outstanding” or “outstanding”, when used with reference to Bonds, means all Bonds which have been authenticated and issued under the Indenture except:

(a) Bonds cancelled by the Trustee pursuant to the Indenture;

(b) Bonds for the payment of which moneys or Government Obligations shall be held in trust for their payment by the Trustee as provided in the defeasance provisions of the Indenture;

(d) Bonds in exchange for which other Bonds shall have been authenticated and delivered by the Trustee as provided in the Indenture; and

(e) For all purposes regarding consents and approvals or directions of Bondholders under the Loan Agreement or the Indenture, Bonds held by or for the Authority, the Foundation or any person controlling, controlled by or under common control with either of them.

“Payments” means the amounts of payments under the Loan Agreement with respect to the Bonds to be made by the Foundation as provided in Article V of the Loan Agreement.

“Permitted Investments” means any of the following which at the time are legal investments under the laws of the State of Louisiana for moneys held hereunder and then proposed to be invested therein:

(a) Government Obligations;

(b) obligations issued by any state of the United States of America, or any political subdivision thereof, rated by at least two nationally recognized rating agencies in one of the three highest rating categories, and obligations fully secured by and payable solely from an escrow fund held by a trustee consisting of cash or (a) above;

(c) (i) debt obligations of any United Stated corporation or trust, which obligations are rated by at least two nationally recognized rating agencies in one of the three highest rating categories, or (ii) 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);

(d) certificates of deposit or time deposits of any bank, trust company or savings and loan which deposits are fully insured by a federally sponsored deposit insurance program;

(e) bankers acceptances of any bank which bank or its parent holding company’s debt conforms to the rating requirements of (c) above;

(f) repurchase agreements, entered in conformance with prevailing industry standard guidelines, of obligations listed in (a) above, delivered versus payment to the trustee and continuously collateralized at 102% or greater, with counterparties having debt rated in conformance with the rating requirements of (c) above;

(g) investment agreements of any corporation which agreements or the corporation’s long term debt is rated by at least two nationally recognized rating agencies in one of the three highest rating categories; and

(h) shares of a money market fund or commingled trust which fund or trust’s investments are restricted to the Permitted Investments, including, without limitation any money market mutual fund for which the Trustee or an affiliate of the Trustee serves as investment manager, administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (i) the Trustee or an affiliate of the Trustee receives fees

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from funds for services rendered, (ii) the Trustee collects fees for services rendered pursuant to this Indenture, which fees are separate from the fees received from such funds, and (iii) services performed for such funds and pursuant to this Indenture may at times duplicate those provided to such funds by the Trustee or an affiliate of the Trustee.

“Plans and Specifications” means the plans and specifications prepared for the Project, implemented and detailed from time to time, as the same may be revised from time to time prior to the completion of construction of the Project in accordance with the Loan Agreement.

“Project” means the projects described in Exhibit B to the Loan Agreement, as may be amended and supplemented in accordance with the provisions of the Loan Agreement, which are to be funded in part from the proceeds of the Bonds.

“Project Documents” means, collectively, the Plans and Specifications, construction contracts and amendments thereto, other contract documents and agreements, and surety bonds and instruments pertaining to the Project.

“Public Trust Act” means the Louisiana Public Trust Act, constituting Chapter 2-A of Title 9, being Louisiana Revised Statutes 9:2341-2347, inclusive, of 1950, as amended and supplemented.

“Refunded Bonds” means that portion of the Series 2007 Bonds being refunded by the Bonds.

“Refunding Act” means Chapter 14-A of Title 39 of the Louisiana Revised Statutes of 1950, as amended.

“Refunded Projects” means the projects financed with the proceeds of the Series 2007 Bonds.

“S&P” means S&P Global Ratings, or any successor thereto maintaining a rating on the Bonds.

“Series 2007 Bonds” means, collectively, the $380,030,000 original principal amount Louisiana Public Facilities Authority Revenue Bonds (Ochsner Clinic Foundation Project) Series 2007A and the $83,910,000 original principal amount Louisiana Public Facilities Revenue Bonds (Ochsner Community Hospitals Project) Series 2007B.

“State” means the State of Louisiana.

“Supplemental Master Indenture” means the Supplemental Master Indenture for Obligation No. 17 dated as of May 1, 2017 between the Foundation and the Master Trustee, as it may be amended or supplemented from time to time in accordance with provisions thereof.

“Tax Regulatory Agreement” means the Tax Regulatory Agreement dated as of May 1, 2017, among the Authority, the Foundation and the Trustee.

“Trust Estate” means all the property assigned by the Authority to the Trustee pursuant to the Indenture as security for the Bonds.

“Trustee” means the state banking corporation or national banking association with corporate trust powers qualified to act as Trustee under the Indenture which may be designated (originally or as a successor) as Trustee for the owners of the Bonds issued and secured under the terms of the Indenture, initially The Bank of New York Mellon Trust Company, N.A.

SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

The following summarizes certain provisions of the Indenture.

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Pledge and Assignment

Under the Indenture, the Authority pledges and assigns (a) all right, title and interest of the Authority in, to and under the Loan Agreement, including the interest of the Authority in and to all payments, proceeds, revenues, income, receipts, issues, benefits and other moneys received or derived by the Authority under the Loan Agreement including, without limitation, the Payments (except the administrative payments) to be paid by the Foundation pursuant to the Note to the Trustee for the account of the Authority pursuant to the Loan Agreement, saving and excepting, however, the Authority’s rights to exculpation, indemnification and payment of expenses by the Foundation under the Loan Agreement, (b) all right, title and interest of the Authority in and to the Note and all sums payable in respect of the indebtedness evidenced thereby; (c) all cash, moneys, securities and investments which may at any time and from time to time, pursuant to the provisions of the Indenture, be paid to the Trustee or be in the hands of the Trustee, except with respect to arbitrage rebate payments made to the Trustee under the terms of the Tax Regulatory Agreement, by the Foundation, and except as the interest of said Trustee in such cash, moneys, securities and investments may otherwise appear in the Indenture; provided, however, that nothing in the Indenture shall be construed to affect any property held by The Bank of New York Mellon Trust Company, N.A., in any capacity other than as Trustee under the Indenture, including, without limitation, moneys held by said bank as Master Trustee under the Master Indenture; and (d) to the extent not covered in this paragraph, all proceeds of any and all of the foregoing.

Establishment of Funds and Accounts

Upon delivery of and payment for the Bonds, the following special trust funds and accounts shall be established and maintained with the Trustee so long as any Bonds issued under the Indenture are outstanding to be used for the following purposes:

Bond Fund. The Bond Fund shall be maintained with the Trustee and used to receive the proceeds of the Bonds; to transfer to the Escrow Funds created under the Escrow Agreement the sum specified in the request and authorization delivered pursuant to the Indenture; and to retain such sum in a special account called the Costs of Issuance Account as shall be specified in the request and authorization delivered pursuant to the Indenture for payment of the costs relating to the issuance of the Bonds. The proceeds of the Bonds shall be applied for the purposes set forth in the Indenture.

Construction Fund. A special fund is established with the Trustee under the Indenture and designated “Louisiana Public Facilities Authority Construction Fund - Ochsner Clinic Foundation Project, Series 2017” to the credit of which one or more deposits shall be made from the Bond Fund as required by the provisions of the Indenture. The Construction Fund shall be held by the Trustee in trust and, subject to the provisions of the Indenture described under this subheading and the provisions of the Indenture regarding the requisition of amounts from the Construction Fund, shall be applied to the payment of Costs of the Project and, pending such application, shall be subject to a lien and charge in favor of the Holders and for the further security of such Holders until paid out or transferred as provided in the Indenture. Payment of Costs of the Project shall be made from the Construction Fund. All payments from the Construction Fund shall be subject to the provisions and restrictions set forth in the Indenture regarding funds and accounts, flow of funds, investments, deposits and arbitrage, and the Authority covenants in the Indenture that it will not cause or permit to be paid from the Construction Fund any sums except in accordance with such provisions and restrictions.

Debt Service Fund. The Debt Service Fund and its corresponding Accounts shall be maintained with the Trustee and used for the following purposes: (a) the Interest Account shall be used to receive the portions of the Payments applicable to interest on the Bonds; to receive the investment income therefrom and to utilize such investment income to reduce the next required interest installment of the Payments; and to pay the interest on the Bonds as it becomes due and payable; and (b) the Principal Account shall be used to receive the portion of the Payments applicable to the principal requirements of the Bonds; to receive the investment income therefrom and to utilize such investment income to reduce the next required principal installment of the Payments; to pay the principal of the Bonds as it becomes due and payable whether at maturity or upon scheduled sinking fund redemption; and, if funds are available for such purpose and at the written direction of the Authority, to effect the redemption of the Bonds prior to their maturity in accordance with the redemption provisions thereof or the purchase

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of Bonds prior to their maturity in the open market at a price not in excess of the principal amount thereof plus accrued interest.

Investments

Moneys contained in the funds and accounts held by the Trustee shall be continuously invested and reinvested by the Trustee at the written direction of the Foundation in Permitted Investments, that shall mature (or be readily convertible to cash) not later than the respective dates when the moneys in said Funds and Accounts shall be required for the purposes intended, and (a) no such investment shall be required to be made unless the cash at the time available therefor is at least equal to $1,000; (b) any income derived from and any profit or loss on any such investment of moneys on deposit in any such fund or account shall be credited or debited, as the case may be, to the respective fund or account in which earned; (c) in no event shall Permitted Investments mature or be subject to redemption at the option of the holder thereof without premium later than six (6) months in the Interest Account or thirteen (13) months in the Principal Account; provided, however, that a Permitted Investment which is available to be drawn upon for the purpose for which such Funds are established on or before the date moneys are needed shall be deemed to comply with said maturity limits; (d) the Trustee shall be authorized, to the extent necessary to enable the Trustee to discharge or perform its obligations under the Indenture at any one time or from time to time to sell at market price all or any part of the investments whenever it may, for any reasons or purpose whatsoever, deem any such sale to be desirable; (e) the Trustee shall confirm the ratings for each investment for or in connection with which the definition of Permitted Investment requires a particular rating, once during each calendar month. In the event that the Trustee learns pursuant to such inquiry that any ratings have been downgraded, or in the event, at any other time, an officer of the Trustee having responsibility for the administration of the Bonds obtains actual notice that any ratings have been downgraded, it shall promptly notify an Authorized Foundation Representative and, if so directed in writing by an Authorized Foundation Representative, shall sell such investment.

Valuation

For the purpose of determining the amount on deposit in any fund or account, Permitted Investments shall be valued (a) at the lesser of cost or market value if such Permitted Investments mature within six months from the date of valuation thereof, and (b) if such Permitted Investments mature more than six months after the date of valuation thereof, at the price at which such Permitted Investments are redeemable by the holder at his option if so redeemable, or, if not so redeemable, at the market value of such obligations.

The Trustee shall, at the times provided in the Indenture, value the Permitted Investments in the funds and accounts established under the Indenture as of the preceding Interest Payment Date, and shall provide a report of such valuation to the Foundation within five Business Days of such valuation. In addition, the Permitted Investments shall be valued by the Trustee at any time requested by an Authorized Foundation Representative on reasonable notice to the Trustee (which period of notice may be waived or reduced by the Trustee).

Covenants of the Authority

Tax Covenant. The Authority covenants in the Indenture that it will not knowingly take any affirmative action or omit to take any action within its control, which act or omission will adversely affect the exclusion from gross income for federal income tax purposes of interest paid on the Bonds, and in the event it should unknowingly do so or omit to do so, will promptly upon having such brought to its attention take such reasonable actions as may rescind or otherwise negate its unknowing action or omission.

Payment of Principal, Premium and Interest. The Authority covenants in the Indenture that it will promptly pay, or cause to be paid, the principal of, premium, if any, and the interest on every Bond at the places, on the dates and in the manner provided in the Indenture and in said Bonds according to the true intent and meaning thereof but solely from the revenues of the Trust Estate and not from any other fund or source. The Authority further covenants that it will faithfully perform at all times all of its covenants, undertakings and agreements contained in the Indenture, the Loan Agreement or in any Bond executed, authenticated and delivered under the Indenture or in any proceedings of the Authority pertaining thereto.

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Additional Security. Whenever and so often as reasonably required to do so by the Trustee, the Authority will execute and deliver or cause to be delivered all such other and further instruments, documents or assurances, and to promptly do or cause to be done all such other further things, as may be necessary or reasonably required in order to further and more fully vest in the Trustee and the owners of the Bonds all rights, interest, powers, benefits, privileges and advantages conferred or intended to be conferred upon them by the Indenture.

Cure Title Defects. The Authority covenants to cooperate with the Trustee and the Foundation, from time to time, in the Foundation taking or causing to be taken such action by the Foundation as may be necessary or proper to remedy or cure any material defect in or cloud upon the title to the Trust Estate or any part thereof, whether now existing or hereafter developing, and (after being indemnified to its satisfaction) to prosecute all such suits, actions and other proceedings as may be appropriate for such purpose.

Defend Against Actions. The Authority (after being indemnified to its satisfaction) covenants to defend or cause to be defended every suit, action or proceeding at any time brought against the Trustee (except for actions against the Trustee arising from the negligence or willful misconduct of the Trustee) or any owner of Bonds upon any claim arising out of the receipt, application or disbursement of any of the revenues of the Trust Estate or involving the Authority’s, the Trustee’s or such Bondholders’ rights under the Indenture or the Loan Agreement and to indemnify and save harmless, solely from the Trust Estate, the Trustee and Bondholders against any and all liability claimed or asserted by any person whomsoever, arising out of such receipt, application or disbursement of any such revenues; provided, however, that the Trustee or any owner of Bonds at its or his election may appear in and defend against any such suit, action or proceeding; and notwithstanding any contrary provision of the Indenture, this covenant shall continue and remain in full force and effect until all indebtedness, liabilities, obligations and other sums secured by the Indenture have been fully paid and satisfied, and the Indenture has been released of record and the lien thereof discharged.

Non-Impairment of Security. The Authority covenants that so long as any of the Bonds issued pursuant to the Indenture are outstanding and unpaid, the Authority will not voluntarily consent to any amendment to the Loan Agreement or otherwise take any action which will reduce the amount of moneys made available thereunder to the Trustee, or which will in any manner impair or adversely affect the rights of the Authority or the Trustee or the security provided by the Indenture to the owners from time to time of the Bonds.

Supplements to Indenture

Supplemental Indentures Not Requiring Consent of Bondholders. The Authority and the Trustee may, without the consent of, or notice to, any of the Bondholders, enter into an indenture or indentures supplemental to the Indenture as shall not be inconsistent with the terms and provisions thereof for any one or more of the following purposes: (a) to cure any ambiguity or formal defect or omission in the Indenture; (b) to grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers or authority that may be lawfully granted to or conferred upon the Bondholders or the Trustee or either of them; (c) to subject to the lien and pledge of the Indenture additional revenues, properties or collateral; (d) to modify, amend or supplement the Indenture or any indenture supplemental hereto in such manner as to permit the qualification thereof under any Federal statute hereafter in effect or under any state Blue Sky Law, and, in connection therewith, if they so determine, to add to the Indenture or any indenture supplemental hereto such other terms, conditions and provisions as may be permitted or required by any said Federal statute or Blue Sky Law; provided, that any such indenture supplemental hereto referred to in this clause shall not, in the judgement of the Trustee, which may rely on an opinion of counsel, be to the prejudice of the owners of the Bonds; or (e) to provide any other modifications which, in the sole judgement of the Trustee, are not prejudicial to the interests of the Bondholders.

Supplemental Indentures Requiring Consent of Bondholders. Except for supplemental indentures outlined in the previous paragraph and subject to the terms and provisions described in this paragraph, and not otherwise, the owners of not less than a majority in aggregate principal amount of the Bonds then outstanding shall have the right from time to time, anything contained in the Indenture to the contrary notwithstanding, to consent to and approve the execution by the Authority and the Trustee of such other indenture or indentures supplemental hereto as shall be deemed necessary and desirable by the Authority for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Indenture or in any indenture supplemental hereto; provided, however, that nothing contained in the Indenture shall permit, or be

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construed as permitting, without the consent of the owners of all the Bonds then outstanding (a) an extension of the stated maturity or scheduled sinking fund redemption or reduction in the principal amount of, or reduction in the rate or extension of the time of payment of interest on, any Bonds, or (b) the creation of any lien on the Trust Estate or any part thereof pledged under the Indenture prior to or on a parity with the lien of the Indenture, or (c) a reduction in the aforesaid aggregate outstanding principal amount of Bonds the owners of which are required to consent to any such indenture supplemental thereto. No such amendment shall modify the rights, duties or immunities of the Trustee without the written consent of the Trustee.

Events of Default and Remedies

Notice of Defaults. Within 30 days after the receipt of notice of an Event of Default or the occurrence of an Event of Default of which the Trustee is deemed to have notice, the Trustee shall (unless the Event of Default has already been cured) give written notice of the Event of Default to the owners of all Bonds then outstanding in the manner provided in the Indenture, provided that, except in the case of a default in the payment of principal, redemption price, or interest on any of the Bonds, the Trustee may withhold the notice to the Bondholders if, in its sole judgment, it determines that the withholding of notice is in the best interest of the Bondholders; and

The Trustee shall immediately notify, in writing, the Authority, the Master Trustee and the Foundation of any Event of Default of which the Trustee has actual notice.

Opportunity of Foundation to Cure Certain Defaults. The Authority and the Trustee grant the Foundation full authority on the account of the Authority to perform any covenant or obligation and to otherwise fulfill any condition the failure or non-performance of which is or is alleged to be a default under the Indenture (after prior written notice of such action), and the Trustee agrees that performance by the Foundation shall be deemed to be performance by the Authority.

Events of Default. Each of the following events is declared an “Event of Default”: (a) the payment of any installment of interest on any of the Bonds shall not be made when the same shall become due and payable; (b) the payment of the principal of or premium, if any, on any of the Bonds shall not be made when the same shall become due and payable, whether at maturity or by proceedings for mandatory redemption or by acceleration or otherwise; (c) an “Event of Default” under Article X of the Loan Agreement shall have occurred and shall not have been cured within the applicable cure period, if any; (d) default by the Authority in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Bonds or in the Indenture on the part of the Authority to be performed, if such default shall continue for sixty (60) days after written notice specifying such default and requiring the same to be remedied shall have been given to the Authority and the Foundation by the Trustee, which may give such notice in its discretion and shall give such notice at the written request of the owners of not less than 25% in principal amount of the Bonds then outstanding. Such default shall not become an Event of Default if said default be of the nature that (i) it cannot be corrected within the sixty (60) day period after receipt of notice, but the Authority (or the Foundation pursuant to the provisions of the Indenture) promptly shall institute and diligently pursue corrective action until such default is cured, or (ii) the Trustee shall determine that such default is not curable but such default does not affect the validity or enforceability of the Bonds or the exclusion from gross income of interest on the Bonds for federal income tax purposes, the Indenture or the Loan Agreement, an event of nonperformance shall not have occurred under the Loan Agreement (other than as a result of the cross-default provisions), and such default does not impair the security or the obligations provided for or under the Bonds, the Indenture or the Loan Agreement; or (e) an Event of Default shall occur and be continuing under the Master Indenture or the Note.

Remedies. Upon the occurrence of an Event of Default, the Authority, the Trustee and, subject to provisions of the Indenture set forth below under “Bondholders Control Proceedings” the Bondholders shall have all the rights and remedies as may be allowed by law, the Indenture or pursuant to the provisions of the Loan Agreement, the Note and the Master Indenture by virtue of their assignment under the Indenture, including but not limited to, acceleration of the maturity of all Bonds, or suit at law or in equity to enforce or enjoin the action or inaction of parties under the provisions of the Indenture, the Loan Agreement, the Note and the Master Indenture.

Upon the occurrence of any Event of Default the Trustee may take whatever action at law or in equity it deems necessary or desirable (i) to collect any amounts then due under the Indenture, the Bonds, the Loan

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Agreement, the Master Indenture and the Note, (ii) to enforce performance of any obligation, agreement or covenant of the Authority under the Indenture or the Bonds, of the Foundation under the Loan Agreement, the Note or the Master Indenture, of a guarantor under any guaranty given with respect to any Bond or the Note or of the grantor of any other collateral given to secure the payment of the Bonds or the Note or (iii) to otherwise enforce any of its rights.

Acceleration; Annulment of Acceleration. Upon the occurrence of an Event of Default under the Indenture, the Trustee may, upon the written request of the owners of not less than a majority of the aggregate principal amount of Bonds outstanding shall, by notice in writing to the Authority and the Foundation, declare the Bonds then outstanding immediately due and payable, and such Bonds shall become and be immediately due and payable, anything in such Bonds or in the Loan Agreement or the Indenture to the contrary notwithstanding. In such event, there shall be due and payable on the Bonds an amount equal to the principal amount of all the Bonds then outstanding plus all interest accrued thereon and which will accrue thereon to the date of payment.

Under certain circumstances set forth in the Indenture, at any time after the principal of the Bonds 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, or before the completion of the enforcement of any other remedy under the Indenture, the Loan Agreement, the Note or the Master Indenture, the Trustee may annul such declaration and its consequences with respect to the Bonds.

Bondholders Control Proceedings. If an Event of Default shall have occurred and be continuing, notwithstanding anything in the Indenture to the contrary, the owners of at least 25% of the aggregate outstanding principal amount of Bonds then outstanding shall have the right, at any time by an instrument or instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting any proceeding to be taken in connection with the enforcement of the terms and conditions of the Indenture, the Loan Agreement, the Master Indenture or the Note, provided the direction is in accordance with law and the provisions of the Indenture and, in the sole judgment of the Trustee, is not unduly prejudicial to the interest of Bondholders not joining in such direction, and provided further, that nothing described in this paragraph shall impair the right of the Trustee in its discretion to take any other action under the Indenture which it may deem proper and which is not inconsistent with the direction by Bondholders; and provided further if the Trustee shall receive conflicting or inconsistent directions from two or more groups of Bondholders, the Trustee shall follow the directions of the group of Bondholders representing the largest percentage of outstanding Bonds (determined based on the principal amount thereof).

No owner of any Bond shall have any right to institute any suit, action or proceeding for the enforcement of the Indenture or for the execution of any trust thereunder or for any remedy under the Indenture unless (a) an Event of Default has occurred (other than under clauses (a) or (b) under the heading “Events of Default and Remedies” above) as to which the Trustee has actual notice, or as to which the Trustee has been notified in writing; and (b) the owners of at least 25% of the aggregate outstanding principal amount of Bonds outstanding shall have made written request to the Trustee to proceed to exercise the powers granted in the Indenture or to institute an action, suit or proceeding in its own name; and these Bondholders shall have offered the Trustee such indemnity as may be satisfactory to the Trustee, and the Trustee shall have failed or refused to exercise the powers granted in the Indenture or to institute an action, suit or proceeding in its own name for a period of 60 days after receipt of the request and offer of indemnity.

Resignation and Removal of Trustee

No resignation or removal of the Trustee and no appointment of a successor Trustee under the Indenture shall become effective until the acceptance of appointment by the successor Trustee.

The Trustee may resign at any time by giving written notice thereof to the Authority, the Foundation and the Bondholders. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the retiring Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

The Trustee may be removed for cause at any time by an instrument or instruments in writing to the Trustee, if no Event of Default shall have occurred and be continuing, by an instrument in writing signed by an

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Authorized Foundation Representative or by the owners of 25% in aggregate principal amount of the Bonds then outstanding or by their attorneys, legal representatives or agents and delivered to the Trustee, the Authority and the Foundation (such instruments to be effective only when received by the Trustee).

If at any time (i) the Trustee shall cease to be eligible under the Indenture hereof and shall fail to resign after written request therefor by the Foundation or by any Bondholder, or (ii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (a) the Authority, in its discretion and without obligation, may, or the Foundation may remove the Trustee, or (b) any Bondholder may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor.

Defeasance

When all of the Bonds shall have been paid and discharged, and there shall have been paid all fees and charges of the Trustee and the Authority due or to become due through the date on which the last of the Bonds is retired, then the Indenture shall cease, terminate and become null and void, and thereupon the Trustee shall release the Indenture including the cancellation and discharge of the lien thereof, and execute and deliver to the Authority such instruments in writing as shall be requisite to satisfy the lien thereof and to enter on the records such satisfaction and discharge and to re-convey to the Authority any property or interest therein or other rights conveyed and such other instruments to evidence such release and discharge as may be reasonably required by the Authority, and the Trustee shall assign and deliver to the Authority any property at the time subject to the lien of the Indenture which may then be in its possession, except amounts in any Fund created under the Indenture otherwise required to be paid by the Indenture and except such cash and investments as are held by the Trustee for the payment of interest and premium, if any, on and retirement of the Bonds. Notwithstanding the foregoing, the obligation of the Foundation to pay the fees and expenses of the Trustee in accordance with the terms of the Indenture and to maintain the exclusion from gross income of interest on the Bonds for federal income tax purposes shall survive the defeasance of the Bonds, the discharge of the Indenture and the termination of the Loan Agreement.

Any Bonds shall be deemed to have been paid and discharged within the meaning of the preceding paragraph if the Trustee shall hold, in trust for and irrevocably committed thereto, Government Obligations (which are not subject to redemption at the option of the obligor prior to their maturity) of such maturities and interest payment dates and bearing such interest as will, without further investment or reinvestment of either the principal amount thereof or the interest earnings therefrom (likewise to be held in trust and committed, except as provided in the Indenture), be sufficient for the payment of such Bonds, at their maturity or redemption date, of the principal thereof, together with the redemption premium, if any, and interest accrued to the date of maturity or redemption, as the case may be, or if default in such payment shall have occurred on such date then to the date of the tender of such payment; provided, that if any Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been duly given or provisions satisfactory to the Trustee shall have been duly made for the giving of such notice. Any moneys held in accordance with the provisions of the Indenture described in this paragraph shall be invested only in Government Obligations the maturities or redemption dates and interest payment dates of which, at the option of the owner, shall coincide as nearly as practicable with, but not later than, the time or times at which said moneys will be required for the aforesaid purposes. Any income or interest earned by the Government Obligations held under the Indenture described this paragraph shall, as determined by the Trustee, to the extent not required for the purposes described in this paragraph, be paid to the Foundation as overpayment of Payments.

SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENT

The following summarizes certain provisions of the Loan Agreement.

Representations of the Authority and the Foundation

The Authority represents and warrants as follows: (a) the Authority is a public trust and public corporation of the State; (b) under the provisions of the Act and the Code, the Authority is duly authorized to enter into, execute and deliver the Loan Agreement, to undertake the transactions contemplated by the Loan Agreement and to carry

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out its obligations under the Loan Agreement; (c) the Authority has duly authorized the execution and delivery of the Loan Agreement, the Indenture and the Bonds; and (d) the Authority agrees that it will do or cause to be done all things necessary to preserve and keep in full force and effect its existence.

The Foundation makes the following representations and warranties: (a) the Foundation (i) is a nonprofit corporation duly organized and existing in good standing under the laws of the State, is an organization described in Section 501(c)(3) of the Code, exempt from federal income taxes under Section 501(a) of the Code, and is not a private foundation as defined in Section 509 of the Code, (ii) is duly qualified to do business and is duly authorized and licensed to operate the properties as presently operated, and (iii) has power to execute and deliver the Loan Agreement, the Master Indenture, the Note, the Escrow Agreement, the Supplemental Master Indenture and the Tax Regulatory Agreement and by proper action has been duly authorized to execute and deliver the Loan Agreement, the Master Indenture, the Note, the Escrow Agreement, the Supplemental Master Indenture and the Tax Regulatory Agreement and; (b) each of the statements made with respect to the Foundation in the recitals of the Loan Agreement is true, correct and complete in all material respects; (c) the Foundation is not in breach of or in default under any of the provisions of (i) the Articles of Incorporation of the Foundation, as amended, or By-laws, as amended, (ii) any judgment, decree or order or any material provision of any statute, rule or regulation applicable to it or to its properties, or (iii) any material provision of any indenture, mortgage, loan agreement or other contract or instrument to which it is a party or by which it or any of its properties is bound; (d) the Foundation is not required in connection with the transactions contemplated by the Loan Agreement, the Master Indenture, the Note or the Supplemental Master Indenture to obtain any consent not already obtained; (e) the Foundation has or timely will obtain as required all authority, permits, licenses, consents and authorizations as are necessary to own, lease and operate its properties and to carry on its business and to carry out and consummate all the transactions contemplated by the Loan Agreement, the Master Indenture, the Note, the Escrow Agreement, the Supplemental Master Indenture, and the Tax Regulatory Agreement; (f) the Loan Agreement, the Master Indenture, the Note, the Escrow Agreement, the Supplemental Master Indenture and the Tax Regulatory Agreement, in accordance with their terms, are legal, valid and binding obligations of the Foundation, and the authorization, execution and delivery thereof and compliance with the provisions thereof and thereof does not conflict with or constitute on the part of the Foundation a violation of, breach of, or default under (i) any provision of any indenture, mortgage, deed of trust, loan agreement or other contract or instrument to which the Foundation is a party or by which it or any of its properties is bound, (ii) any order, injunction or decree of any court or governmental authority, or (iii) the provisions of its Articles of Incorporation, as amended, or By-laws, as amended; (g) there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending or threatened against the Foundation, wherein an unfavorable decision, ruling or finding would materially and adversely affect the properties, business, prospects, profits or condition of the Foundation, or which would adversely affect the validity or enforceability of the Loan Agreement, the Master Indenture, the Note, the Escrow Agreement, the Supplemental Master Indenture, the Tax Regulatory Agreement or any other agreement or instrument to which the Foundation is a party used in consummation of the transactions contemplated thereunder; and (h) the Foundation has obligated itself to acquire, construct, install and equip the Project pursuant to the Loan Agreement and the Foundation has the full power, right and authority to acquire, construct, install and equip the Project and has obtained or will obtain as required, all permits, licenses and approvals of governmental agencies necessary to undertake and complete such acquisition, construction and installation in accordance with the Loan Agreement.

Construction of the Project

The Foundation will acquire, construct, install and equip, or cause to be acquired, constructed, installed and equipped, the Project with all reasonable dispatch and in accordance with the Project Documents, and shall take all action necessary to enforce the provisions of the Project Documents.

Revision of Project Documents

The Foundation may revise the Project Documents and the description of the Project in Exhibit B to the Loan Agreement from time to time (including without limitation the deletion or revision of any facilities included in the Project and/or, the substitution therefor of other facilities) without the consent of the Authority, the Trustee or the holders of the Bonds, provided however, that no such revision shall adversely affect the exclusion from gross income for Federal income tax purposes of interest on the Bonds. In the case of any change that would render materially inaccurate the description of the Project in Exhibit B to the Loan Agreement, there shall be delivered to

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the Trustee and the Authority a revised Exhibit B containing a description of the Project that reflects the change in the Project Documents, the accuracy of which shall have been certified by an Authorized Foundation Representative, and an opinion of nationally recognized bond counsel to the effect that the revised Exhibit B does not adversely affect the exclusion from gross income of interest on the Bonds for Federal income tax purposes.

Completion of Payment of Costs of the Project

The Foundation shall complete the Project and pay that portion of the Costs of the Project as may be in excess of the money available therefor under the Indenture. The obligation of the Foundation to pay in full the Costs of the Project shall be a direct, general and unconditional obligation of the Foundation. If, after exhaustion of the money in the Construction Fund, the Foundation should pay any portion of the Costs of the Project, it shall not be entitled to any abatement, diminution or postponement of the Payments.

Establishment of Completion Date

The date upon which the Project is substantially complete shall be evidenced to the Authority and the Trustee by a certificate signed by an Authorized Foundation Representative. The certificate shall set forth the Costs of the Project and state that, except for amounts not then due and payable, or the liability for the payment of which is being contested or disputed in good faith by the Foundation, (a) the acquisition, construction, installation and equipping of the Project have been completed substantially in accordance with the Plans and Specifications and the Costs of the Project have been paid, and (b) all other facilities necessary in connection with the Project have been acquired, constructed and installed in accordance with the Plans and Specifications therefor and all costs and expenses incurred in connection therewith have been paid. Notwithstanding the foregoing, such certificate shall state that it is given without prejudice to any rights against third parties that exist at the date of such certificate or which may subsequently come into being.

Amounts Payable

The proceeds of the sale of the Bonds will be loaned by the Issuer to the Foundation and shall be deposited with the Trustee and applied for the benefit of the Foundation as provided in the Indenture. The Foundation’s obligation to repay the Loan shall be secured by the Loan Agreement and the Note. Under the Loan Agreement, the Foundation will further pledge, set over, and assign to the Authority in its interest in all amounts at any time on deposit in any of the Funds and Accounts established pursuant to the Indenture, to the extent of the Foundation’s interest therein, including all investments and reinvestments made with such Funds and Accounts and the proceeds thereof, and in all its rights to and interest in such Funds and Accounts, investments, reinvestments and proceeds.

The Foundation agrees that the Note assigned under the Indenture and the Loan Agreement and all of the rights, interests, powers, privileges and benefits accruing to or vested in the Authority under the Note and the Loan Agreement may be protected and enforced in conformity with the Indenture and may be thereby assigned by the Issuer to the Trustee as additional security for the Bonds and may be exercised, protected and enforced for or on behalf of the Bondholders in conformity with the provisions of the Loan Agreement, the Master Indenture and the Indenture.

On the Closing Date, the Foundation will deliver or cause to be delivered to the Trustee, as assignee of the Authority, the Note, fully authorized, executed and authenticated as permitted by the Master Indenture. The Note shall be in an original principal amount equal to the aggregate principal amount of the Bonds, shall be dated the date of the Bonds, shall bear interest on the outstanding principal amount thereof at the rate or rates borne by the Bonds, and shall be payable as to principal, premium and interest at the times and places and in the manner set out in the Bonds and the Loan Agreement. The Foundation and the Authority agree that the Note is a Note issued pursuant to the Master Indenture.

The Foundation, for and in consideration of the issuance of the Bonds under the Indenture by the Authority and the application of the proceeds thereof by the Authority as provided in the Indenture for the benefit of the Foundation, unconditionally promises to make the following Payments under the Note to or for the account of the Authority:

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(a) Payments being, in the aggregate, an amount sufficient for the payment in full of all Bonds as and when due from time to time issued under the Indenture and then outstanding, including (i) the total interest becoming due and payable on the Bonds to the date of payment thereof, and (ii) the total principal amount of and premium, if any, on the Bonds.

(b) Default or Delay Payments consisting of the amounts, fees and expenses which the Authority may incur or be or become legally obligated to pay under the terms of the Bonds or the Indenture by reason of any default under the Indenture or under the Loan Agreement by the Foundation or any default or delay in payment of the sums due thereunder, provided that such default or delay shall have resulted from the Foundation’s default or breach of covenant under the Loan Agreement; the amount expended by the Authority or the Trustee or indebtedness incurred by the Authority or the Trustee for the purpose of curing the Foundation’s defaults under the Loan Agreement or in connection with any defaults under the Bonds or the Indenture and all costs, expenses and charges, including reasonable attorneys’ fees, incurred by the Authority or the Trustee in collecting the Payments or in enforcing any covenant or agreement of the Foundation contained in the Loan Agreement or incurred in pursuing any remedy under the Loan Agreement or the Indenture.

(c) Costs of Issuance, Trustee Expense Payments consisting of (a) costs of issuance of the Bonds not paid from the Cost of Issuance Account to be paid directly to the party entitled thereto on demand and (b) the Trustee’s fees and expenses, to be paid directly to the Trustee upon demand, commencing on Closing Date and continuing until the principal of and interest on all Bonds outstanding under the Indenture shall have been fully paid, including (i) the annual fee, if any, of the Trustee for the ordinary services of the Trustee rendered and its ordinary expenses incurred under the Indenture during the twelve month period preceding that date, (ii) the reasonable fees and charges of the Trustee, and all costs relating to the exchanging of Bonds as provided in the Indenture, as and when the same become due, and (iii) the reasonable fees and charges of the Trustee for necessary extraordinary services rendered by it and extraordinary expenses incurred by it under the Indenture, including attorneys’ fees, as and when the same become due, provided that the Foundation may, without creating a default under the Loan Agreement, contest in good faith the necessity for any such extraordinary services and extraordinary expenses and the reasonableness of any such fees, charges or expenses.

(d) Administrative Payments to be paid directly to the Authority. The Foundation agrees there shall be paid (i) all of the Authority’s reasonable actual out-of-pocket expenses and costs of issuance in connection with the Bonds, (ii) on the date of delivery of the Bonds, a financing acceptance fee in the amount of 1/20th of 1% of the principal amount of the Bonds. The Foundation further agrees to make annual administrative payments directly to the Authority on June 1 of each year in an amount equal to 1/10th of 1% of the aggregate principal amount of the outstanding Bonds on January 1 of each year unless waived by the Authority. The administrative payments shall be used for the purpose of paying administrative and related costs of the Authority, but shall not include Trustee fees incurred by the Authority in enforcing the provisions of the Loan Agreement. The Authority agrees that it will notify the Foundation in writing prior to March 15 of each year thereafter whether it shall waive such administrative payments for such year. If these fees are not waived, such written notice shall advise the Foundation of the amount that is to be paid (not to exceed 1/10th of 1% per annum), the date on which payment is due, and where such payment is to be remitted. In the event the Foundation should fail to pay such administrative expenses then due, the payment shall continue as an obligation of the Foundation until the amount shall have been fully paid, and the Foundation agrees to pay the same with interest thereon (to the extent legally enforceable) at a rate per annum equal to the interest rate in effect from time to time on the Bonds, until paid.

Obligation to Make Payments Unconditional

The obligation of the Foundation to make the Payments shall be absolute and unconditional and shall not be subject to, nor shall the Foundation be entitled to assert, any rights of abatement, deduction, reduction, deferment, recoupment, setoff, offset or counterclaim by the Foundation or any other person, nor shall the same be abated, abrogated, waived, diminished, postponed, delayed or otherwise modified under or by reason of any circumstance or

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occurrence that may arise or take place, irrespective of what statutory rights the Foundation may have to the contrary.

Certain Covenants of the Foundation

Covenants as to Non-Arbitrage. The Foundation agrees in the Loan Agreement to prepare and provide written instructions to the Trustee as to the investment and reinvestment of moneys held as part of any fund or account relating to the Bonds. Any such moneys so held as part of any fund or account shall be invested or reinvested by the Trustee in Permitted Investments as specified in the Indenture. The Foundation also covenants that it will comply with the terms of the Tax Regulatory Agreement, and that it will direct the Trustee to make such use of the proceeds of the Bonds and all other funds held by the Trustee under the Indenture within its power, regulate the investment of such proceeds and other funds and take such other and further action as may be required so that the Bonds will not constitute arbitrage bonds under Section 148 of the Code and the regulations promulgated thereunder. The Foundation will comply with the terms of any letter of instructions provided to it by nationally recognized bond counsel relating to compliance with the provisions of Section 148 of the Code.

If the Foundation determines that it is necessary to restrict or limit the yield on the investment of any money paid to or held by the Trustee under the Loan Agreement or under the Indenture in order to avoid classification of the Bonds as arbitrage bonds within the meaning of the Code, the Foundation may issue to the Trustee an instrument to such effect (along with appropriate written instructions), in which event the Trustee is required by the provisions of the Tax Regulatory Agreement to take such action as is necessary to restrict or limit the yield on such moneys in accordance with such instrument and instructions.

General Covenants. The Foundation has expressly covenanted and agreed:

(a) Whenever and so often as requested so to do by the Trustee or the Authority, promptly to execute and deliver or cause to be executed and delivered all such other and further instruments and documents, and to promptly do or cause to be done all such other and further things, as may be necessary or reasonably required in order to further and more fully vest in the Authority, the Trustee and the owners of the Bonds all rights, interests, powers, benefits, privileges and advantages conferred upon them by the Loan Agreement and the Indenture;

(b) To defend against every suit, action or proceeding at any time brought against the Authority or the Trustee based on any claim arising out of the receipt, application or disbursement of any of the Trust Estate or involving the Authority’s or the Trustee’s rights under the Loan Agreement or under the Indenture and to indemnify and save harmless the Authority, its Board of Trustees, officers and agents, and the Trustee against any and all liability claimed or asserted by any person whomsoever, arising out of such receipt, application or disbursement excepting negligence and bad faith on the part of the Trustee provided, further, that the Trustee at its election and expense may appear in and defend against any such suit, action or proceeding and notwithstanding any contrary provision of the Loan Agreement, this covenant shall continue and remain in full force and effect until all indebtedness, liabilities, obligations and other sums secured shall have been satisfied and discharged;

(c) To pay, discharge, indemnify and save the Authority and the Trustee harmless of, from and against any and all costs, claims, damages, expenses, liabilities, liens, obligations, penalties and taxes of every character and nature, by or on behalf of any person, firm, corporation, entity or governmental authority regardless of by whom advanced, asserted, held, imposed or made, which may be imposed upon, incurred by or asserted against the Authority and the Trustee arising out of, resulting from or in any way connected with the Loan Agreement, the Bonds, the Note, the Master Indenture or the Indenture excepting gross negligence and bad faith on the part of the Trustee. The Foundation also covenants and agrees, at its expense, to pay and to indemnify and to save the Authority and the Trustee harmless of, from and against, all costs, reasonable counsel fees, expenses and liabilities incurred in any action or proceeding brought by reason of any such claim or demand;

(d) That (i) it shall not perform any act nor enter into any agreement which shall adversely affect the Federal income tax status of the Foundation as represented by the Foundation in the Loan Agreement or the Federal income tax status of the interest on the Bonds; (ii) it shall conduct its operations in a manner which will conform to the standards necessary to qualify the Foundation as an exempt organization within the meaning of Section 501(c)(3) of the Code or any successor provisions of Federal income tax law; (iii) it shall not perform any

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act or enter into any agreement which shall adversely affect such federal income tax status; (iv) it shall not perform any act, enter into any agreement or use or permit the Project or the Refunded Projects to be used in any manner (including any excessive unrelated trade or business) which could adversely affect the exclusion from gross income of interest on any of the Bonds pursuant to the Code; (v) it shall not carry on or permit to be carried on in the Project or the Refunded Projects or permit the Project or the Refunded Projects to be used in or for any trade or business the conduct of which is not substantially related to the exercise or performance by such institution of the purposes or functions constituting the basis for its exemption under Section 501 of the Code to the extent that such use of the Project or the Refunded Projects would adversely affect the exclusion from gross income of interest on the Bonds for federal income tax purposes; and (vi) it is duly organized and existing as a nonprofit corporation under the laws of the State and it will maintain, extend and renew its corporate existence under the laws of the State and will not do, suffer or permit any act or thing to be done whereby its right to transact its functions might or could be terminated or its activities restricted;

(e) Not to commit or permit the commission of any action within its control which would cause interest on the Bonds to become subject to Federal income taxes; and

(f) Not to fail to take any action within its control necessary to be taken in order that interest on the Bonds will continue to be exempt from Federal income taxes.

Source of Payments. The Foundation agrees to pay or cause to be paid the payments required by the Loan Agreement and the Note from its general fund or any other moneys legally available to it in the manner and at the times provided by the Loan Agreement, the Note and the Master Indenture. The Foundation further agrees that, subject to any applicable legal limitations upon its ability to fix, revise and collect fees, rentals or other charges for its facilities and services, it shall charge all persons using any facilities of the Foundation such fees, rentals or other charges as, together with its general funds and any other moneys legally available to it, will provide moneys sufficient at all times: (a) to make all payments required by the Loan Agreement; and (b) to pay all other obligations of the Foundation as the same become due and payable; provided, however, that the Foundation may provide health care services without or at reduced charge to the indigent.

Covenant as to Master Indenture. The Foundation will not enter into any contract or take any action which shall be inconsistent with the provisions of the Loan Agreement or the Master Indenture.

Assignment of the Loan Agreement

The rights of the Foundation under the Loan Agreement may be assigned as a whole or in part but no such assignment shall constitute a release of the Foundation from its obligations thereunder. Each transferee of the Foundation’s interest in the Loan Agreement shall assume the obligations of the Foundation thereunder to the extent of the interest assigned, sold or leased, and the Foundation shall, not more than 60 nor less than 30 days prior to the effective date of any such assignment or lease, furnish or cause to be furnished to the Authority and the Trustee a true and complete copy of each such assignment or lease.

Amendments to the Loan Agreement

Amendments Without Consent. The Authority and the Foundation with the consent of the Trustee with respect to clauses (d) and (e) of this paragraph, but without the consent of the owners of any of the Bonds outstanding under the Indenture, may enter into supplements to the Loan Agreement which shall not be inconsistent with the terms and provisions thereof for any of the purposes heretofore specifically authorized in the Loan Agreement or the Indenture, and in addition thereto for the following purposes: (a) to cure any ambiguity or formal defect, inconsistency or omission in the Loan Agreement or to clarify matters or questions arising under the Loan Agreement; (b) to add covenants and agreements for the purpose of further securing the obligations of the Foundation under the Loan Agreement; (c) to confirm as further assurance any mortgage or pledge of additional property, revenues, securities or funds; (d) to conform the provisions of the Loan Agreement in connection with the provisions of any supplements or amendments to the Indenture entered into pursuant to the provisions thereof; or (e) to provide any other modifications which, in the sole judgment of the Trustee, are not prejudicial to the interests of the Bondholders.

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Amendments Upon Approval of a Majority of Bondholders. The provisions of the Loan Agreement may be amended in any particular with the written consent of the owners of not less than a majority of the aggregate principal amount of Bonds then outstanding; provided, however, that no such amendment may be adopted which decreases the percentage of owners of Bonds required to approve an amendment, or which permits a change in the date of payment of the amounts due under the Loan Agreement.

Events of Default and Remedies

The following shall be Events of Default by the Foundation under the Loan Agreement: (a) failure of the Foundation to pay the full amount of any installment of the Payments on the Note as required by the Loan Agreement on or prior to the date on which such installment is due; (b) failure of the Foundation to pay any other payments required by the Loan Agreement, if required, and in the time and manner required by the Loan Agreement; (c) failure of the Foundation to perform, observe or comply with any other of the terms, covenants, conditions or provisions contained in the Loan Agreement binding upon the Foundation, if such failure shall continue for a period of 30 days after written notice thereof shall have been given to the Foundation by the Authority or the Trustee; or (d) the occurrence of an Event of Default under the terms of the Indenture or the Master Indenture.

The provisions of clause (c) above are subject to the following limitations: If by reason of acts of God, strikes, lockouts or other industrial disturbances, acts of public enemies, orders of any kind of the government of the United States of America or of the State or any of their departments, agencies, political subdivisions or officials, or any civil or military authority, insurrections, riots, acts of terrorists, epidemics, landslides, lightning, earthquakes, fires, hurricanes, storms, floods, washouts, droughts, arrests, restraint of government and people, civil disturbances, explosions, breakage or accident to machinery, transmission pipes or canals, partial or entire failure of utilities, or any other cause or event not reasonably within the control of the Foundation, the Foundation is unable in whole or in part to carry out its agreements on its part in the Loan Agreement contained, the Foundation shall not be deemed in default during the continuance of such inability, so long as Payments are paid in full timely as required.

Remedies. Whenever any event of default described above shall have occurred and be continuing, any one or more of the following remedial steps may be taken: (a) the Trustee may take whatever action at law or in equity may appear necessary or desirable to collect the payments then due and thereafter to become due, or to enforce performance and observance of any obligation, agreement or covenant of the Foundation under the Loan Agreement, the Note or the Master Indenture, including without limitation, acceleration of the Note to the extent permitted by the Master Indenture; (b) the Trustee may have access to and inspect, examine and make copies of any and all books, accounts and records of the Foundation; and/or (c) the Trustee (or the owners of the Bonds in the circumstances permitted by the Indenture) may exercise any option and pursue any remedy provided by the Indenture or the Master Indenture.

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APPENDIX D

SUMMARY OF THE MASTER INDENTURE

The following are summaries of certain provisions of the Master Indenture not described elsewhere in the Official Statement. These summaries do not purport to be complete or definitive and are qualified in their entireties by reference to the full terms of the Master Indenture. All capitalized terms used in this Summary of the Master Indenture and not defined herein have the same meaning as in the Master Indenture.

DEFINITIONS OF CERTAIN TERMS

The following is a summary of certain terms used in this Summary of the Master Indenture.

“Affiliated Entity” means any legal entity which, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with a Credit Group Member.

“Annual Debt Service” means for each Fiscal Year the sum (without duplication) of (1) the aggregate amount of principal and interest becoming due and payable in such Fiscal Year on all Long-Term Indebtedness of the Credit Group then Outstanding and (2) the aggregate amount of Obligation Payments becoming due and payable in such Fiscal Year (in either case by scheduled maturity, acceleration, mandatory redemption or otherwise), less any amounts of such principal, interest or Obligation Payments to be paid during such Fiscal Year from (a) the proceeds of Indebtedness or (b) moneys or Government Obligations deposited in trust for the purpose of paying such principal, interest or Obligation Payments; provided that if a Financial Products Agreement has been entered into by any Credit Group Member with respect to Long-Term Indebtedness, interest on such Long-Term Indebtedness shall be included in the calculation of Annual Debt Service by including for each Fiscal Year an amount equal to the amount of interest payable on such Long-Term Indebtedness in such Fiscal Year at the rate or rates stated in such Long-Term Indebtedness plus any Financial Product Payments payable in such Fiscal Year minus any Financial Product Receipts receivable in such Fiscal Year; provided that in no event shall any calculation made pursuant to the Master Indenture result in a number less than zero being included in the calculation of Annual Debt Service.

“Annual Debt Service Coverage Ratio” means, for any Fiscal Year, the ratio determined by dividing Income Available for Debt Service by Annual Debt Service for such Fiscal Year.

“Balloon Indebtedness” means Long-Term Indebtedness, other than Interim Indebtedness, 25% or more of the original principal of which matures or is subject to mandatory redemption or purchase within any period of 12 consecutive months, which original principal amount is not required by the documents governing such Indebtedness to be amortized prior to the commencement of such 12 month period in amounts such that, following such amortization, the principal amount maturing during such 12 month period will be less than 25% of such original principal amount.

“Book Value” means, when used in connection with Property, Plant and Equipment or other Property of any Credit Group Member, the value of such property, net of accumulated depreciation, as it is carried on the books of such Credit Group Member and in conformity with generally accepted accounting principles, and when used in connection with Property, Plant and Equipment or other Property of the Credit Group, means the aggregate of the values so determined with respect to such Property of each Credit Group Member determined in such a way that no portion of such value of Property of any Credit Group Member is included more than once.

“Brent House Assets” means all corporeal movable and immovable property owned by or leased to Brent House Corporation, less those portions that are leased by Brent House Corporation to the Foundation.

“Brent House Corporation” means the Louisiana nonprofit corporation, established in 1973 and exempt from federal income taxation as an organization described in Section 501(c)(3) of the Code that owns or leases the Brent House Assets.

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“Brent House Lease” means that certain lease granted by the Foundation, as lessor, to Brent House Corporation, as lessee, dated as of January 1, 2002.

“Completion Indebtedness” means any Long-Term Indebtedness incurred for the purpose of financing the completion of construction or equipping of any project for which Long-Term Indebtedness has theretofore been incurred in accordance with the provisions in the Master Indenture, to the extent necessary to provide a completed and fully equipped facility of the type and scope contemplated at the time said Long-Term Indebtedness was incurred, and in accordance with the general plans and specifications for such facility as originally prepared and approved in connection with the related financing, modified or amended only in conformance with the provisions of the documents pursuant to which the related financing was undertaken.

“Controlling Member” means the Obligated Group Member designated by the Credit Group Representative to establish and maintain control over a Designated Affiliate.

“Credit Group” or “Credit Group Members” means all Obligated Group Members and Designated Affiliates.

“Credit Group Financial Statements” means the financial statements of the Credit Group delivered to the Master Trustee pursuant to the Master Indenture.

“Credit Group Representative” means (i) initially, the Foundation and (ii) thereafter, OHS or any other Person (or Persons acting jointly) as may have been designated pursuant to written notice to the Master Trustee executed by the Person then serving as Credit Group Representative.

“Designated Affiliate” means (i) initially, the Persons listed in the Master Indenture, as described in Appendix A to the Official Statement and (ii) thereafter, any Person which has been so designated by the Credit Group Representative in accordance with the Master Indenture so long as such Person has not been further designated by the Credit Group Representative as no longer being a Designated Affiliate in accordance with the Master Indenture.

“Fair Market Value” when used in connection with Property, means the fair market value of such Property as determined by either:

(1) an appraisal of the portion of such Property which is real property made within five years of the date of determination by a “Member of the Appraisal Institute” and by an appraisal of the portion of such Property which is not real property made within five years of the date of determination by any expert qualified in relation to the subject matter, provided that any such appraisal shall be performed by an Independent Consultant, adjusted for the period, not in excess of five years, from the date of the last such appraisal for changes in the implicit price deflator for the gross national product as reported by the United States Department of Commerce or its successor agency, or if such index is no longer published, such other index certified to be comparable and appropriate in an Officer’s Certificate delivered to the Master Trustee;

(2) a bona fide offer for the purchase of such Property made on an arm’s-length basis within six months of the date of determination, as established by an Officer’s Certificate; or

(3) an officer of the Credit Group Representative (whose determination shall be made in good faith and set forth in an Officer’s Certificate filed with the Trustee) if the fair market value of such Property is less than or equal to $1,000,000.

“Financial Product Extraordinary Payments” means payments required to be paid to a counterparty by a Credit Group Member pursuant to a Financial Products Agreement in connection with the termination thereof and any other payments or indemnification obligations to be paid to a counterparty by a Credit Group Member under a Financial Products Agreement, which payments are not Financial Product Payments.

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“Financial Product Payments” means regularly scheduled payments required to be paid to a counterparty by a Credit Group Member pursuant to a Financial Products Agreement.

“Financial Product Receipts” means regularly scheduled payments required to be paid to a Credit Group Member by a counterparty pursuant to a Financial Products Agreement.

“Financial Products Agreement” means an interest rate swap, basis swap, yield curve swap, cap, collar, option, floor, forward or other hedging agreement, arrangement or security, however denominated, identified to the Master Trustee in a Certificate of the Credit Group Representative as having been entered into by a Credit Group Member with a Qualified Provider (a) for investment purposes or (b) with respect to Indebtedness for the purpose of (1) reducing or otherwise managing the Credit Group Member’s risk of interest rate changes or (2) hedging the Credit Group Member’s interest rate exposure, in whole or in part.

“Fiscal Year” means the period beginning on January 1 of each year and ending on the next succeeding December 31, or any other twelve-month period designated by the Credit Group Representative as the fiscal year of the Credit Group.

“Governing Body” means, when used with respect to any Credit Group Member, its board of directors, board of trustees or other board or group of individuals in which all of the powers of such Credit Group Member are vested, except for those powers reserved to the corporate membership of such Credit Group Member by the articles of incorporation or bylaws of such Credit Group Member.

“Government Obligations” means: (1) 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 of the United States of America) or obligations the timely payment of the principal of and interest on which are fully guaranteed by the United States of America; (2) obligations issued or guaranteed by any agency, department or instrumentality of the United States of America if the obligations issued or guaranteed by such entity are rated in one of the two highest rating categories of a Rating Agency (without regard to any gradation of such Rating Category); (3) certificates which evidence ownership of the right to the payment of the principal of and interest on obligations described in clauses (1) and/or (2), provided that such obligations are held in the custody of a bank or trust company in a special account separate from the general assets of such custodian; and (4) obligations the interest on which is excluded from gross income for purposes of federal income taxation pursuant to Section 103 of the Internal Revenue Code of 1986, and the timely payment of the principal of and interest on which is fully provided for by the deposit in trust of cash and/or obligations described in clauses (1), (2) and/or (3).

“Gross Revenues” means all revenues, income, moneys, fees, rates, receipts, rentals, charges, issues and income received by or on behalf of the Obligated Group Members from all sources, including without limitation gifts, bequests, grants, devises and contributions (exclusive of those gifts, bequests, grants, devises and contributions to the extent specifically restricted by the donor to a particular purpose inconsistent with their use for the payment of debt service or any Indebtedness or operating expenses of the Obligated Group Members), moneys received from the operation of the Obligated Group Members’ business or the possession of its properties, rentals received from the lease of office space, and proceeds derived from (i) insurance or condemnation awards (except to the extent such proceeds are required by the terms of the Master Indenture (or other agreements with respect to the Indebtedness which the Obligated Group Members are permitted to incur pursuant to the terms of the Master Indenture) to be used for purposes inconsistent with their use for the payment of Master Indenture Obligation Payments), (ii) accounts receivable, (iii) securities and other interests, (iv) inventory and other tangible and intangible property, (v) medical reimbursement/payment program and agreements (vi) insurance and (vii) contract rights and other rights and assets owned by the Obligated Group Members on the date the Master Indenture became effective or as of any date thereafter.

“Guaranty” means all loan commitments and all obligations of any Credit Group Member guaranteeing in any manner whatever, whether directly or indirectly, any obligation of any other Person (other than any guaranty of

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any Credit Group Member of Indebtedness of any other Credit Group Member) which would, if such other Person were a Credit Group Member, constitute Indebtedness.

“Income Available for Debt Service” means, as to any period of time, the combined excess of revenues over expenses (or, in the case of for-profit Credit Group Members, net income after taxes) of the Credit Group Members for such period, to which shall be added depreciation, amortization and interest expense (and Obligation Payments to the extent that such Obligation Payments are treated as an expense during such period of time in accordance with generally accepted accounting principles), provided that no such determination shall include (1) any gain or loss resulting from (a) the extinguishment of Indebtedness, (b) any disposition of capital assets not made in the ordinary course of business, (c) any discontinued operations or (d) adjustments to the value of assets or liabilities resulting from changes in generally accepted accounting principles, (2) unrealized gains or losses on marketable securities held by a Credit Group Member as of the last date of such period of time, (3) changes in values of Financial Product Agreements and other hedging or derivative instruments or (4) any nonrecurring items which do not involve the receipt, expenditure or transfer of assets.

“Indebtedness” means any Guaranty and any obligation of any Credit Group Member (1) for borrowed money, (2) with respect to leases which are considered capital leases or (3) under installment sale agreements, in each case as determined in accordance with generally accepted accounting principles; provided, however, that if more than one Credit Group Member shall have incurred or assumed a Guaranty of a Person other than a Credit Group Member, or if more than one Credit Group Member shall be obligated to pay any obligation, for purposes of any computations or calculations under the Master Indenture such Guaranty or obligation shall be included only one time. Financial Products Agreements shall not constitute Indebtedness.

“Independent Consultant” means a firm (but not an individual) which (1) is in fact independent, (2) does not have any direct financial interest or any material indirect financial interest in any Credit Group Member (other than the agreement pursuant to which such firm is retained), (3) is not connected with any Credit Group Member as an officer, employee, promoter, trustee, partner, director or person performing similar functions and (4) is qualified to pass upon questions relating to the financial affairs of organizations similar to the Credit Group or facilities of the type or types operated by the Credit Group and having the skill and experience necessary to render the particular opinion or report required by the provision in the Master Indenture in which such requirement appears.

“Insurance Consultant” means a person or firm (which may be an insurance broker or agent of a Credit Group Member) which (1) is in fact independent, (2) does not have any direct financial interest or any material indirect financial interest in any Credit Group Member (other than the agreement pursuant to which such person or firm is retained) and (3) is not connected with any Credit Group Member as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions, and designated by the Credit Group Representative, qualified to survey risks and to recommend insurance coverage for hospitals, health-related facilities and services and organizations engaged in such operations.

“Interim Indebtedness” means any Indebtedness which matures more than one (1) year and not more than ten (10) years from its date of issuance, which a Credit Group Member intends to refinance prior to maturity by the issuance of Long-Term Indebtedness.

“Lien” means any mortgage or pledge of, or security interest in, or lien or encumbrance on, any Property of a Credit Group Member (i) which secures any Indebtedness or any other obligation of such Credit Group Member or (ii) which secures any obligation of any Person other than a Credit Group Member, and excluding liens applicable to Property in which a Credit Group Member has only a leasehold interest unless the lien secures Indebtedness of that Credit Group Member.

“Long-Term Debt Service Coverage Ratio” means, for any period of time, the ratio determined by dividing Income Available for Debt Service by Maximum Annual Debt Service.

“Long-Term Indebtedness” means Indebtedness having an original maturity greater than one year or renewable at the option of a Credit Group Member for a period greater than one year from the date of original incurrence or issuance thereof unless, by the terms of such Indebtedness, no Indebtedness is permitted to be outstanding thereunder for a period of at least twenty (20) consecutive days during each calendar year.

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“Maximum Annual Debt Service” means the greatest amount of Annual Debt Service becoming due and payable in any Fiscal Year including the Fiscal Year in which the calculation is made or any subsequent Fiscal Year; provided, however that for the purposes of computing Maximum Annual Debt Service:

(a) with respect to a Guaranty, there shall be included in Maximum Annual Debt Service 100% of the maximum amount payable (absent acceleration) in any 12 month period pursuant to the terms of such Guaranty or note for the purpose of determining whether or not a Credit Group Member may enter into such Guaranty pursuant to the Master Indenture, but for all other purposes, 20% of the maximum amount payable (absent acceleration) in each 12 month period pursuant to the terms of such Guaranty or note shall be included in Maximum Annual Debt Service, and, in computing the debt service on the Indebtedness being guaranteed, it shall be assumed that (i) debt service on such Indebtedness is determined in the same manner as provided in the definition of “Annual Debt Service” (including giving effect to Financial Product Agreements with respect to such Indebtedness) and (ii), if such Indebtedness is Interim Indebtedness, Balloon Indebtedness or Variable Rate Indebtedness, the principal of such Indebtedness is amortized in the manner and bears interest at the interest rate specified in accordance with the provisions summarized in clauses (b) through (e) below; provided that, if the debt service coverage ratio (determined in a manner as nearly as practicable to the determination of the Debt Service Coverage Ratio under the Master Indenture) of the Person primarily obligated on the obligations effectively guaranteed by such Guaranty for the immediately preceding Fiscal Year, or any other 12-month period ending within 180 days prior to the date of calculation, shall be greater than 2.0:1.0, no amounts shall be included in Maximum Annual Debt Service with respect to such Guaranty; and provided further that if a Credit Group Member shall have made any payment pursuant to any such Guaranty or note during the twenty-four (24) month period immediately preceding the date of such calculation, 100% of such maximum amount payable as to such Guaranty or note shall be included in the computation of Maximum Annual Debt Service.

(b) for any Balloon Indebtedness or Interim Indebtedness, it shall be assumed, at the option of the Credit Group Representative, that the principal of such Indebtedness is amortized from the date of calculation thereof over a term of 30 years with level annual debt service payments and that the interest rate thereon equals at an interest rate equal to a fixed rate equal to the average Thirty-Year Revenue Bond Index published in The Bond Buyer for the six-month period immediately preceding the date of calculation;

(c) if interest on Long-Term Indebtedness or Financial Product Payments or Financial Product Receipts are payable pursuant to a variable interest rate formula, the interest rate on such Long-Term Indebtedness for periods when the actual interest rate cannot yet be determined shall be assumed to be equal to the average interest rate per annum which was in effect (or would have been in effect) throughout the twelve (12) calendar months immediately preceding the date of calculation, all as specified in either, at the election of the Credit Group Representative, a Certificate of the Credit Group Representative or an opinion letter from an investment banking or financial advisory firm;

(d) if moneys or Government Obligations have been deposited with a trustee or escrow agent in an amount, together with earnings thereon, sufficient to pay all or a portion of the principal of or interest on Long-Term Indebtedness as it comes due, such principal or interest, as the case may be, to the extent provided for, shall not be included in computations of Maximum Annual Debt Service; and

(e) debt service on Long-Term Indebtedness incurred to finance capital improvements shall be included in the calculation of Maximum Annual Debt Service only in proportion to the amount of interest on such Long-Term Indebtedness which is payable in the then-current Fiscal Year from sources other than the funds held by a trustee or escrow agent for such purpose.

“Medical Center LLCs” means Ochsner Baptist Medical Center, L.L.C., Ochsner Medical Center – Westbank, L.L.C. and Ochsner Medical Center – Kenner, L.L.C., each a Louisiana limited liability company.

“Net Revenues” means the sum of total revenues, as shown on the Credit Group Financial Statements plus any investment income and any investment income that is offset against interest expenses in accordance with generally accepted accounting principles consistently applied and as a result is not included in total operating or non-operating revenues.

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“Nonrecourse Indebtedness” means any Indebtedness which is not a general obligation and which is secured by a Lien, liability for which is effectively limited to the Property subject to such Lien with no recourse, directly or indirectly, to any other Property of any Credit Group Member; provided, that Nonrecourse Indebtedness may only be incurred to acquire or construct Property and may only be secured by a lien against the Property so acquired or constructed.

“Obligated Group Member” means the Foundation and each other Person which is obligated under the Master Indenture, from and after the date upon which such Person joins the Obligated Group, but excluding any Person which withdraws from the Obligated Group to the extent and in accordance with the provisions in the Master Indenture, from and after the date of such withdrawal.

“Obligation” means any obligation of the Obligated Group issued pursuant to the Master Indenture, as a joint and several obligation of each Obligated Group Member, which may be in any form set forth in a Related Supplement, including, but not limited to, bonds, notes, obligations, debentures, reimbursement agreements, loan agreements, Financial Products Agreements, other interest rate swap or hedging agreements, or leases. Reference to a Series of Obligations or to Obligations of a Series means Obligations or Series of Obligations issued pursuant to a single Related Supplement.

“Obligation Payments” means payments (however designated) required under any Obligation then Outstanding which does not constitute Indebtedness.

“Outstanding” when used with reference to Indebtedness or Obligations, means, as of any date of determination, all Indebtedness or Obligations theretofore issued or incurred and not paid and discharged other than (1) Obligations theretofore cancelled by the Master Trustee or delivered to the Master Trustee for cancellation or otherwise deemed paid in accordance with the terms, (2) Obligations in lieu of which other Obligations have been authenticated and delivered or which have been paid pursuant to the provisions in the Master Indenture of a Related Supplement regarding mutilated, destroyed, lost or stolen Obligations unless proof satisfactory to the Master Trustee has been received that any such Obligation is held by a bona fide purchaser, (3) any Obligation held by any Credit Group Member and (4) Indebtedness deemed paid and no longer outstanding pursuant to the terms thereof; provided, however, that if two or more obligations which constitute Indebtedness represent the same underlying obligation (as when an Obligation secures an issue of Related Bonds and another Obligation secures repayment obligations to a bank under a letter of credit which secures such Related Bonds) for purposes of the various financial covenants contained in the Master Indenture, but only for such purposes, only one of such Obligations shall be deemed Outstanding and the Obligation so deemed to be Outstanding shall be that Obligation which produces the greatest amount of Annual Debt Service to be included in the calculation of such covenants.

“Permitted Liens” means and includes:

(a) Any judgment lien or notice of pending action against any Credit Group Member so long as judgment or pending action being contested and execution thereon is stayed or while the period for responsive pleading has not lapsed;

(b) (i) Rights reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or provision of law, affecting any Property, to (A) terminate such right, power, franchise, grant, license or permit, provided that the exercise of such right would not materially impair the use of such Property or materially and adversely affect the value thereof, or (B) purchase, condemn, appropriate or recapture, or designate a purchase of, such Property; (ii) any liens on any Property for taxes, assessment, levies, fees, water and sewer charges, and other governmental and similar charges and any liens of mechanics, materialmen, laborers, suppliers or vendors for work or services performed or materials furnished in connection with such Property, which are not due and payable or which are not delinquent or which, or the amount or validity of which, are being contested and execution thereon is stayed or, with respect to liens of mechanics, materialmen and laborers, have been due and payable or which are not delinquent or which, or the amount or validity of which, are being contested and execution thereon is stayed or, with respect to liens of mechanics, materialmen and laborers, have been due for less than sixty (60) days; (iii) covenants, water, mineral, oil and gas rights, easements, rights-of-way, servitudes, restrictions and other minor defects, encumbrances, and irregularities in the title to any Property which do not materially impair the use of such Property or materially and adversely affect the value thereof; and (iv) rights

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reserved to or vested in any municipality or public authority to control or regulate any Property or to use such Property in any manner, which rights do not materially impair the use of such Property in any manner, or materially and adversely affect the value thereof;

(c) The Brent House Lease and leases whereunder a Credit Group Member is lessor which relate to property which is of a type that is customarily the subject of such leases, including without limitation, clinic, examining, and office space for physicians and educational institutions, food service facilities, parking facilities, barber shops, beauty shops, flower shops, gift shops, radiology, pathology, clinical laboratories or other hospital- based specialty services and pharmacy and similar departments;

(d) Any Lien described in the Master Indenture which is existing on the date of execution, provided that no such Lien (or the amount of Indebtedness secured thereby) may be increased, extended, renewed or modified to apply to any Property of any Credit Group Member not subject to such Lien on such date, unless such Lien as so extended, renewed or modified otherwise qualifies as a Permitted Lien;

(e) Any Lien in favor of the Master Trustee securing all Outstanding Obligations equally and ratably;

(f) Liens arising by reason of good faith deposits with any Credit Group Member in connection with leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by any Credit Group Member 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;

(g) 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 as a condition to the transaction of any business or the exercise of any privilege or license, or to enable any Credit Group Member 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 similar social security plans, or to share in the privileges or benefits required for companies participating in such arrangements;

(h) Any Lien on property due to rights of third party payors for recoupment of excess payment to any Credit Group Member;

(i) Any Lien arising by reason of any escrow established to pay debt service with respect to Indebtedness;

(j) Any Lien in favor of a trustee on the proceeds of Indebtedness prior to the application of such proceeds;

(k) Liens on moneys deposited by patients or others with any Credit Group Member as security for or as prepayment for the cost of patient care and any rights of residents of life care, elderly housing or similar facilities to entrance fees, endowment or similar funds deposited by or on behalf of such residents;

(l) Liens on Property received by any Credit Group Member through gifts, grants or bequests, such Liens being due to restrictions on such gifts, grants or bequests of Property or the income thereon, up to the Fair Market Value of such Property;

(m) Any Lien on or affecting Brent House Assets;

(n) Statutory rights of the United States of America by reason of federal funds made available under 42 U.S.C. Section 291 et seq. and similar rights under other federal and state statutes, regulations or programs, including rights of the United States of America (including, without limitation, the Federal Emergency Management Agency (“FEMA”)) or the State of Louisiana (including without limitation the Louisiana Governor’s Office of Homeland Security and Emergency Preparedness) by reason of FEMA and other federal and State funds made available to the Members under federal or State statutes;

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(o) Liens on Property securing Indebtedness incurred to refinance Indebtedness previously secured by a Lien on such Property provided that the aggregate principal amount of such new Indebtedness does not exceed the aggregate principal amount of such refinanced Indebtedness;

(p) Liens granted by a Credit Group Member to another Credit Group Member;

(q) Liens securing Nonrecourse Indebtedness incurred pursuant to the provisions in the Master Indenture;

(r) Liens consisting of purchase money security interests and lessors’ interest in capitalized leases;

(s) Liens on the Credit Group Members’ accounts receivable securing Indebtedness in an amount not to exceed 25% of the Credit Group Members’ net accounts receivables;

(t) Any Lien on the Property of a Person which is existing upon such Person becoming an Obligated Group Member pursuant to the Master Indenture or upon designation of such Person as a Designated Affiliate pursuant to the Master Indenture, provided that no such Lien (or the amount of Indebtedness secured thereby) may be increased, extended, renewed or modified to apply to any Property of any Credit Group Member not subject to such Lien on such date, unless such Lien as so extended, renewed or modified otherwise qualifies as a Permitted Lien;

(u) Liens securing Subordinate Indebtedness; and

(v) Any other Lien on Property provided that the Value of all Property encumbered by all Liens permitted as described in this clause (v) does not exceed 20% of the sum of the Value of all Property of the Credit Group Members, calculated at the time of creation of such Lien.

“Principal Amount” means, when used with respect to an Obligation, the principal amount of such Obligation specified in the Related Supplement authorizing the issuance of such Obligation for purposes of calculating the percentage of Holders of Obligations required to take actions or give consents pursuant to the Master Indenture (which, if such Obligation does not evidence or secure Indebtedness, shall be equal to zero). The designation of zero as a principal amount of an Obligation shall not in any manner affect the obligation of the Credit Group Members to make Required Payments with respect to such Obligation.

“Property” means any and all rights, titles and interests in and to any and all property of any Credit Group Member, whether real or personal, tangible or intangible and wherever situated.

“Property, Plant and Equipment” means all Property of any Credit Group Member which is considered property, plant and equipment of such Credit Group Member under generally accepted accounting principles.

“Qualified Provider” means any financial institution or insurance company which is a party to a Financial Products Agreement if the unsecured long-term debt obligations of such financial institution or insurance company (or of the parent or a subsidiary or a replacement counterparty or replacement counterparty guarantor of such financial institution or insurance company if such parent or subsidiary or replacement counterparty or replacement counterparty guarantor guarantees or otherwise assures the performance of such financial institution or insurance company under such Financial Products Agreement), or obligations secured or supported by a letter of credit, contract, guarantee, agreement, insurance policy or surety bond issued by such financial institution or insurance company (or such guarantor or assuring parent or subsidiary or replacement counterparty or replacement counterparty guarantor), in the case of Financial Products Agreements are rated in one of the three highest rating categories of a national rating agency (without regard to any gradation or such Rating Category) at the time of the execution and delivery of the Financial Products Agreement.

“Rating Category” means a generic securities rating category, without regard to any refinement or gradation of such rating category by a numerical modifier or otherwise.

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“Required Payment” means any payment, whether at maturity, by acceleration, upon proceeding for redemption or otherwise, including Financial Product Payments, Financial Product Extraordinary Payments, the purchase price of Related Bonds tendered or deemed tendered for purchase pursuant to the terms of a Related Bond Indenture, required to be made by any Obligated Group Member under the Master Indenture, any Related Supplement or any Obligation.

“Short-Term Indebtedness” means all Indebtedness having an original maturity less than or equal to one year and not renewable at the option of a Credit Group Member for a term greater than one year from the date of original incurrence or issuance unless, by the terms of such Indebtedness, no Indebtedness is permitted to be outstanding thereunder for a period of at least twenty (20) consecutive days during each calendar year.

“Subordinated Indebtedness” means Indebtedness specifically subordinated as to payment and security to the payment of all Required Payments and other obligations of the Credit Group Members under the Master Indenture.

“Value,” when used with respect to Property, means the aggregate value of all such Property, with each component of such Property valued, at the option of the Credit Group Representative, at either its Fair Market Value or its Book Value.

MASTER INDENTURE

The Master Indenture authorizes the issuance of Obligations by the Obligated Group. An Obligation is stated in the Master Indenture to be a joint and several obligation of OCF and any future Member of the Obligated Group. The following are summaries of certain provisions in the Master Indenture. Other provisions are summarized in this Official Statement under the caption “SECURITY FOR THE BONDS.” This summary does not purport to be complete or definitive and is qualified in its entirety by reference to the full terms of the Master Indenture.

Authorization of Obligations

Each Obligated Group Member authorizes to be issued from time to time Obligations or Series of Obligations, without limitation as to amount, except as provided in the Master Indenture or as may be limited by law, and subject to the terms, conditions and limitations established in the Master Indenture and in any Related Supplement.

Issuance of Obligations

From time to time when authorized by the Master Indenture and subject to the terms, limitations and conditions established in the Master Indenture or in a Related Supplement, the Credit Group Representative may authorize the issuance of an Obligation or a Series of Obligations by entering into a Related Supplement. The Obligation or the Obligations of any such Series may be issued and delivered to the Master Trustee for authentication upon compliance with the provisions in the Master Indenture and of any Related Supplement.

Payment of Required Payments

Each Obligated Group Member jointly and severally covenants, to pay or cause to be paid promptly all Required Payments at the place, on the dates and in the manner provided in the Master Indenture, or in any Related Supplement or Obligation. Each Obligated Group Member acknowledges that the time of such payment and performance is of the essence of the Obligations under the Master Indenture. Each Obligated Group Member further covenants to faithfully observe and perform all of the conditions, covenants and requirements of the Master Indenture, any Related Supplement and any Obligation.

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Transfers from Designated Affiliates

Each Controlling Member covenants and agrees that it shall cause each of its Designated Affiliates to pay, loan or otherwise transfer to the Credit Group Representative such amounts as are necessary to enable the Obligated Group Members to comply with the provisions in the Master Indenture including without limitation the provisions in the Master Indenture related to payment of Required Payments.

Designation of Designated Affiliates

The Credit Group Representative by resolution of its Governing Body may from time to time designate Persons as Designated Affiliates. In connection with such designation, the Credit Group Representative shall designate for each Designated Affiliate an Obligated Group Member to serve as the Controlling Member for such Designated Affiliate. The Credit Group Representative shall at all times maintain an accurate and complete list of all Persons designated as Designated Affiliates (and of the Controlling Members for such Designated Affiliates) and file such list with the Master Trustee and any Related Bond Issuer that shall request such list in writing annually on or before January 1 of each year.

Each Controlling Member shall cause each of its Designated Affiliates to provide to the Credit Group Representative a resolution of its Governing Body accepting such Person’s designation as a Designated Affiliate and acknowledging the provisions in the Master Indenture which affect the Designated Affiliates. So long as such Person is designated as a Designated Affiliate, the Controlling Member of such Designated Affiliate shall either (i) maintain, directly or indirectly, control of such Designated Affiliate to the extent necessary to cause such Designated Affiliate to comply with the terms of the Master Indenture, whether through the ownership of voting securities, by contract, corporate membership, reserved powers or the power to appoint corporate members, trustees or directors, or otherwise or (ii) execute and have in effect such contracts or other agreements which the Credit Group Representative and the Controlling Member, in the judgment of their respective Governing Bodies, deem sufficient for the Controlling Member to cause such Designated Affiliate to comply with the terms of the Master Indenture.

Each Controlling Member covenants and agrees that it will cause each of its Designated Affiliates to comply with any and all directives of the Controlling Member given pursuant to the provisions in the Master Indenture.

Any Person may cease to be a Designated Affiliate (and thus not subject to the terms of the Master Indenture) provided that prior to such Person ceasing to be a Designated Affiliate the Master Trustee receives:

(1) a resolution of the Governing Body of the Credit Group Representative declaring such Person no longer a Designated Affiliate; and

(2) an Officer’s Certificate to the effect that immediately following such Person ceasing to be a Designated Affiliate the Obligated Group Members would not be in default in the performance or observance of any term of the Master Indenture.

Maintenance of Properties, Payment of Indebtedness

Each Obligated Group Member covenants to, and each Controlling Member covenants to cause each of its Designated Affiliates to:

(a) maintain its Property, Plant and Equipment in accordance with all valid and applicable governmental laws, ordinances, approvals and regulations including, without limitation, such zoning, sanitary, pollution and safety ordinances and laws and such rules and regulations thereunder as may be binding upon it; provided, however, that no Credit Group Member shall be required to comply with any law, ordinance, approval or regulation as long as it shall in good faith contest the validity thereof;

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(b) maintain and operate its Property, Plant and Equipment in reasonably good working condition, and from time to time make or cause to be made all needful and proper replacements, repairs and improvements so that the operations of such Credit Group Member will not be materially impaired;

(c) pay and discharge all applicable taxes, assessments, governmental charges of any kind whatsoever, water rates, meter charges and other utility charges which may be or have been assessed or which may have become Liens upon the Property, Plant and Equipment, and will make such payments or cause such payments to be made in due time to prevent any delinquency thereon or any forfeiture or sale of any part of the Property, Plant and Equipment, and, upon request, will furnish to the Master Trustee receipts for all such payments, or other evidences satisfactory to the Master Trustee; provided, however, that no Credit Group Member shall be required to pay any tax, assessment, rate or charge as long as it shall in good faith contest the validity thereof as set out in clause (b)(ii) of the definition of Permitted Liens;

(d) pay or otherwise satisfy and discharge all of its obligations and Indebtedness and all demands and claims against it as and when the same become due and payable, other than obligations, Indebtedness, demands or claims (exclusive of the Obligations issued and Outstanding under the Master Indenture) the validity, amount or collectability of which is being contested in good faith;

(e) at all times comply with all terms, covenants and provisions in the Master Indenture of any Liens at such time existing upon its Property or any part thereof or securing any of its Indebtedness noncompliance with which would have a material adverse effect on the operations of the Credit Group or its Property; and

(f) use its best efforts to maintain (as long as it is in its best interests and will not materially adversely affect the interests of the Holders) all permits, licenses and other governmental approvals necessary for the operation of its Property.

Nothing in the Master Indenture shall be construed to require a Credit Group Member to maintain any permit, license or other governmental approval, or to continue to operate or maintain any Property, Plant or Equipment, if, in the reasonable good faith judgment of the Credit Group Member, such permit, license, governmental approval or Property, Plant or Equipment is, or within the next succeeding twelve (12) calendar months is reasonably expected to become, inadequate, obsolete, unsuitable, undesirable or unnecessary for the business of the Credit Group and failure to maintain or operate such permit, license, governmental approval or Property, Plant or Equipment will not materially adversely impair the operation of the Credit Group.

Insurance Required

Each Obligated Group Member, respectively, covenants and agrees that it will keep, and each Controlling Member covenants and agrees that it will cause the Designated Affiliates to keep, the Property, Plant and Equipment and all of its operations adequately insured at all times and carry and maintain such insurance in amounts which are customarily carried, subject to customary deductibles, and against such risks as are customarily insured against by other health care institutions in connection with the ownership and operation of health facilities of similar character and size in their geographic location.

The Credit Group Representative shall employ an Insurance Consultant at least once every two years to review the insurance requirements (including alternative risk management programs and self-insurance) of the Credit Group Members. If the Insurance Consultant makes recommendations for a change in the insurance coverage required by preceding paragraph, the Obligated Group Members shall change, and each Controlling Member shall cause the Designated Affiliates to change, such coverage in accordance with such recommendations, subject to a good faith determination of the Governing Body of the Credit Group Representative that such recommendations, in whole or in part, are not in the best interests of the Credit Group Members. In lieu of maintaining insurance coverage which the Governing Body of the Credit Group Representative deems necessary, the Credit Group Members shall have the right to adopt alternative risk management programs which the Governing Body of the Credit Group Representative determines to be reasonable and which shall not have a material adverse impact on reimbursement from third-party payers, including, without limitation, to self-insure in whole or in part individually or in connection with other institutions, to participate in programs of captive insurance companies, to participate with other health care institutions in mutual or other cooperative insurance or other risk management programs, to

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participate in state or federal insurance programs, to take advantage of state or federal laws in existence on the date the Master Indenture became effective or thereafter limiting medical and malpractice liability, or to establish or participate in other alternative risk management programs; all as may be approved, in writing, as reasonable and appropriate risk management by the Insurance Consultant.

Against Encumbrances; Pledge of Gross Revenues.

Each Obligated Group Member, respectively, covenants and agrees that it will not, and each Controlling Member covenants that it will not permit any of its Designated Affiliates to, create, assume or suffer to exist any Lien upon the Property of the Credit Group, provided, however, that notwithstanding the provisions in the Master Indenture, each Credit Group Member may create, assume or suffer to exist Permitted Liens.

To secure their obligation to make Required Payments under the Master Indenture and their other obligations, agreements and covenants to be performed and observed under the Master Indenture, each Obligated Group Member grants to the Master Trustee security interests in the Gross Revenues.

The Master Trustee’s security interest in the Gross Revenues shall be perfected, to the extent that such security interests may be so perfected, by the filing of financing statements which comply with the requirements of the UCC. Each Obligated Group Member shall execute and cause to be filed, in accordance with the requirements of the UCC, financing statements in form and substance satisfactory to the Master Trustee; and, from time to time thereafter, shall execute and deliver such other documents (including, but not limited to, continuation statements as required by the UCC) as may be necessary or reasonably requested by the Master Trustee in order to perfect or maintain perfected such security interests or give public notice thereof.

Each Obligated Group Member shall notify the Master Trustee of any change of name and change of address of its chief executive office to enable a new appropriate financing statement or an amendment to be filed in accordance with the requirements of the UCC, in order to maintain the perfected security interest granted.

The Master Indenture shall be deemed a “security agreement” for purposes of the UCC.

Upon written request of the Credit Group Representative, the Master Trustee shall execute and deliver such releases, subordinations, requests for reconveyance or other instruments as may be reasonably requested by the Credit Group Representative in connection with (1) the disposition of Property, Plant and Equipment in accordance with the provisions in the Master Indenture, (2) the withdrawal of a Member pursuant to the Master Indenture or (3) the granting by a Member of any Lien which constitutes a Permitted Lien under the Master Indenture.

Limitation on Indebtedness

Each Obligated Group Member covenants that it will not, and each Controlling Member covenants that it will not permit any of its Designated Affiliates to, incur any Indebtedness except that the Credit Group Members may incur Indebtedness by complying with any of the following provisions:

(1) Long-Term Indebtedness, if prior to the date of incurrence of the Long-Term Indebtedness there is delivered to the Master Trustee an Officer’s Certificate to the effect that:

(a) the Long-Term Debt Service Coverage Ratio for the most recent Fiscal Year with respect to all Long-Term Indebtedness then Outstanding at the time of such certification (including the additional Long-Term Indebtedness to be incurred, but excluding any Long-Term Indebtedness to be refunded with the proceeds of said additional Long-Term Indebtedness to be incurred) was not less than 1.25:1.00; or

(b)(i) The Long-Term Debt Service Coverage Ratio for the most recent Fiscal Year was not less than 1.20:1.0 and (ii) the Long-Term Debt Service Coverage Ratio for the Fiscal Year commencing after the estimated completion of the construction, acquisition or equipping of Property to be financed by such Indebtedness (or, if the proceeds of such Indebtedness are not to be used for the

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construction, acquisition or equipping of Property, the Fiscal Year commencing after the incurrence of such Indebtedness) with respect to all Long-Term Indebtedness projected to be outstanding (including the additional Long-Term Indebtedness to be incurred but excluding any Long-Term Indebtedness to be refunded with the proceeds of said additional Long-Term Indebtedness to be incurred), is not less than 1.25:1.0; or

(c) The aggregate principal amount of all Indebtedness of the Credit Group then Outstanding at the time of such certification (including the additional Long-Term Indebtedness to be incurred, but excluding any Long-Term Indebtedness to be refunded with the proceeds of said additional Long-Term Indebtedness to be incurred) will not exceed 25% of the Net Revenues of the Credit Group for the most recent Fiscal Year.

(2) Completion Indebtedness; provided that the aggregate principal amount of such Completion Indebtedness does not exceed 10% of the original Indebtedness incurred with respect to the project relating to such Completion Indebtedness and the Master Trustee receives an Officer’s Certificate stating (a) the estimated cost of completing the project related to the Completion Indebtedness to be incurred, (b) that such Completion Indebtedness and other funds then available or reasonably anticipated to be available will be sufficient to complete said project and (c) the reasons why the original Indebtedness incurred with respect to said project is not sufficient to complete said project.

(3) Short-Term Indebtedness provided that either the provisions described in subsection (1) above are satisfied calculated as if such Short-Term Indebtedness was Long-Term Indebtedness or:

(a) the total amount of Short-Term Indebtedness shall not exceed 25% of Net Revenues for the most recent Fiscal Year; and

(b) In every Fiscal Year, there shall be at least a consecutive ten (10) day period when the balances of such Short-Term Indebtedness is reduced to an amount which shall not exceed five percent (5%) of Net Revenues for such Fiscal Year.

(4) Nonrecourse Indebtedness provided that the total amount of Nonrecourse Indebtedness shall not exceed 25% of Net Revenues for the most recent Fiscal Year.

(5) Long-Term Indebtedness, if such Long-Term Indebtedness is issued to refund Long- Term Indebtedness and the Master Trustee receive an Officer’s Certificate to the effect that:

(a) Maximum Annual Debt Service of such proposed refunding Long-Term Indebtedness shall not exceed 110% of the Maximum Annual Debt Service of the Long-Term Indebtedness which is proposed to be refunded;

(b) the present value (calculated using the true interest cost on the refunding Long-Term Indebtedness as the discount rate) of the total debt service of such proposed refunding Long-Term Indebtedness shall not exceed present value of the total debt service of the Long-Term Indebtedness which is proposed to be refunded;

(c) Maximum Annual Debt Service on all Long-Term Indebtedness to be Outstanding following the issuance of such Long-Term Indebtedness (and the applicable of the proceeds of such Long- Term Indebtedness) shall not exceed 110% of Maximum Annual Debt Service on all Long-Term Indebtedness Outstanding immediately prior to the issuance of such Long-Term Indebtedness.

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(6) Liabilities (other than for borrowed money and other than rents payable under lease agreements) incurred in the regular course of operations.

(7) Reimbursement and other obligations arising under reimbursement agreements relating to letter of credit or similar credit facilities used to secure or provide liquidity in connection with Indebtedness.

(8) Liabilities for contributions to self-insurance programs.

(9) Subordinated Indebtedness, without limitation.

(10) Indebtedness incurred in connection with a sale or securitization of accounts receivable with recourse to a Credit Group Member consisting of an obligation to repurchase all or a portion of such accounts receivable upon certain conditions, or to make supplemental payments in respect thereof, provided that the principal amount of such Indebtedness shall not exceed the aggregate face amount of such accounts receivable from time to time outstanding and the principal amount of such Indebtedness at any time outstanding shall not exceed 25% of the net accounts receivable of the Credit Group.

(11) Any other Long-Term Indebtedness, provided that the aggregate principal amount of such Long-Term Indebtedness incurred and then Outstanding shall not exceed 15% of Net Revenues for the most recent Fiscal Year prior to the incurrence of such Long-Term Indebtedness.

Debt Coverage

Within one hundred thirty-five (135) days after the end of each Fiscal Year, the Credit Group Representative shall compute the Annual Debt Service Coverage Ratio for the Credit Group for such Fiscal Year and furnish to the Master Trustee an Officer’s Certificate setting forth the results of such computation. The Credit Group Representative covenants that if at the end of such Fiscal Year the Annual Debt Service Coverage Ratio shall have been less than 1.10:1.0, it will promptly employ an Independent Consultant to make recommendations as to a revision of the rates, fees and charges of the Credit Group or the methods of operation of the Credit Group to increase the Annual Debt Service Coverage Ratio to at least 1.10:1.0 for subsequent Fiscal Years (or, if in the opinion of the Independent Consultant, the attainment of such level is impracticable, to the highest practicable level). Copies of the recommendations of the Independent Consultant shall be filed with the Master Trustee and any Related Bond Issuer that shall request the same in writing within ninety (90) days of the retention of the Independent Consultant. Each Obligated Group Member to the extent feasible (as determined by the Governing Body of such Obligated Group Member) shall revise, and each Controlling Member to the extent feasible (as determined by the Governing Body of such Controlling Member) shall cause each of its Designated Affiliates to revise, promptly upon its receipt of such recommendations, subject to applicable requirements or restrictions imposed by law, revise its rates, fees and charges or its methods of operation or collections and shall take such other action as shall be in conformity with such recommendations.

If the Credit Group complies in all material respects with the reasonable recommendations of the Independent Consultant with respect to their rates, fees, charges and methods of operation or collection, the Credit Group will be deemed to have complied with the covenants set forth under this subheading for such Fiscal Year, notwithstanding that the Annual Debt Service Coverage Ratio shall be less than 1.10:1.0; provided, however, that an immediate Event of Default shall exist if the Annual Debt Service Coverage Ratio is less than 1.0:1.0 for any Fiscal Year. Nevertheless, neither the Obligated Group Members nor the Designated Affiliates shall be excused from taking any action or performing any duty required under the Master Indenture and no other Event of Default shall be waived by the operation of the provisions of this paragraph.

Limitation on Disposition of Assets

Each Obligated Group Member covenants that it will not, and each Controlling Member covenants that it will not permit any of its Designated Affiliates to, sell, lease or otherwise dispose of any part of its Property in any Fiscal Year (other than in the ordinary course of business (including, without limitation, the payment of debt service

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on Indebtedness incurred in accordance with the provisions in the Master Indenture) or as part of a disposition of all or substantially all of its assets as permitted by the Master Indenture), unless prior to said disposition:

(1) there shall have been delivered to the Master Trustee an Officer’s Certificate to the effect that such Property is or within the next two Fiscal Years shall become inadequate, obsolete, unsuitable, undesirable or unnecessary for the operation and functioning of the primary business of the Credit Group Members; or

(2) there shall have been delivered to the Master Trustee an Officer’s Certificate to the effect that the Value of the Property so disposed of by the Credit Group Members in any Fiscal Year pursuant to the provision of the Master Indenture described in this clause (2) does not exceed 10% of the Value of the Property of the Credit Group; or

(3) there shall have been delivered to the Master Trustee an Officer’s Certificate to the effect that the disposition is for Fair Market Value; or

(4) there shall have been delivered to the Master Trustee an Officer’s Certificate to the effect that the Credit Group would have been permitted to incur at least $1.00 of additional Long-Term Indebtedness pursuant to the Master Indenture immediately after giving effect to such disposition.

Notwithstanding the foregoing, nothing shall prohibit the Credit Group Members from: (1) making loans, provided that such loans are in writing and the Master Trustee receives an Officer’s Certificate to the effect that (a) the Credit Group Members reasonably expect such loans to be repaid; and (b) such loans bear interest at a reasonable rate of interest; or (2) transferring restricted gifts for the Credit Group Members to an Affiliated Entity which has the purpose to receive and disburse said restricted gifts.

Merger, Consolidation, Sale or Conveyance

Each Obligated Group Member covenants that it will not merge or consolidate with any other Person that is not an Obligated Group Member or sell or convey all or substantially all of its assets to any Person that is not an Obligated Group Member (a “Merger Transaction”) unless:

(a) After giving effect to the Merger Transaction,

(1) the successor or surviving corporation (hereinafter, the “Surviving Corporation”) is an Obligated Group Member,

(2) the Surviving Corporation shall

(A) be a corporation organized and existing under the laws of the United States of America or any state thereof

and

(B) become an Obligated Group Member pursuant to the Master Indenture and, pursuant to the Related Supplement required by the Master Indenture, shall expressly assume in writing the due and punctual payment of all Required Payments of the disappearing Obligated Group Member under the Master Indenture;

and

(b) The Master Trustee receives an Officer’s Certificate to the effect that no Obligated Group Member, immediately after the date of the proposed Merger Transaction, would be in

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default in the performance or observance of any covenant or condition of the Master Indenture or any Obligation issued under the Master Indenture;

and

(c) except in the case of a Merger Transaction with (1) OHS or (2) the Medical Center LLCs and, in either case and at the option of the Credit Group Representative, any entity controlled by OCF, an Officer’s Certificate to the effect that the Credit Group would have been permitted to incur at least $1.00 of additional Long-Term Indebtedness pursuant to the provision of the Master Indenture described in clause (1) of the section titled “Limitation on Indebtedness” in this Summary of the Master Indenture immediately after such Merger Transaction;

and

(d) So long as any Related Bonds are Outstanding, the Master Trustee receives an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, to the effect that, under then existing law, the consummation of the Merger Transaction, in and of itself, would not result in the inclusion of interest on such Related Bonds in gross income for purposes of federal income taxation;

and

(e) The Master Trustee receives an Opinion of Counsel, in form and substance satisfactory to the Master Trustee, to the effect that (i) all conditions in the Master Indenture relating to the Merger Transaction have been complied with and the Master Trustee is authorized to join in the execution of any instrument required to be executed and delivered; (ii) the Surviving Corporation meets the conditions set forth in the Master Indenture and is liable on all Obligations then Outstanding; and (iii) the Merger Transaction will not cause the Master Indenture or any Obligations to be subject to registration under federal or state securities laws or the Trust Indenture Act of 1939, as amended (or, that any such registration, if required, has occurred);

and

(f) The Surviving Corporation shall be substituted for its predecessor in interest in all Obligations and agreements then in effect which affect or relate to any Obligation, and the Surviving Corporation shall execute and deliver to the Master Trustee appropriate documents in order to effect the substitution.

From and after the effective date of such substitution (as set forth in the above-mentioned documents), the Surviving Corporation shall be treated as though it were an Obligated Group Member as of the date of the execution of the Master Indenture and shall thereafter have the right to participate in transactions under the Master Indenture relating to Obligations to the same extent as the other Obligated Group Members. All Obligations issued under the Master Indenture on behalf of a Surviving Corporation shall have the same legal rank and benefit under the Master Indenture as Obligations issued on behalf of any other Obligated Group Member.

Except as may be expressly provided in any Related Supplement, the ability of any Obligated Group Member to merge or consolidate with any Person that is an Obligated Group Member after such merger or consolidation or to sell or convey all or substantially all of its assets to any Person that is an Obligated Group Member after such sale or conveyance is not limited by the provisions in the Master Indenture. Except as may be expressly provided in any Related Supplement, the ability of any Designated Affiliate to merge or consolidate with any Person or to sell or convey all or substantially all of its assets to any Person is not limited by the provisions in the Master Indenture.

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Membership in Obligated Group

Additional Obligated Group Members may be added to the Obligated Group from time to time, provided that prior to such addition the Master Trustee receives:

(a) a copy of a resolution of the Governing Body of the proposed new Obligated Group Member which authorizes the execution and delivery of a Related Supplement and compliance with the terms of the Master Indenture;

and

(b) a Related Supplement executed by the Credit Group Representative, the new Obligated Group Member and the Master Trustee pursuant to which the proposed new Obligated Group Member

(1) agrees to become an Obligated Group Member,

and

(2) agrees to be bound by the terms of the Master Indenture, the Related Supplements and the Obligations,

and

(3) irrevocably appoints the Credit Group Representative as its agent and attorney- in-fact and grants to the Credit Group Representative full power to execute Related Supplements authorizing the issuance of Obligations or Series of Obligations and to execute and deliver Obligations,

and

(c) an Opinion of Counsel in form and substance satisfactory to the Master Trustee to the effect that (i) the proposed new Obligated Group Member has taken all necessary action to become an Obligated Group Member, and upon execution of the Related Supplement, such proposed new Obligated Group Member will be bound by the terms of the Master Indenture and (ii) the addition of such Obligated Group Member will not cause the Master Indenture or any Obligations to be subject to registration under federal or state securities laws or the Trust Indenture Act of 1939, as amended (or, that any such registration, if required, has occurred);

and

(d) an Officer’s Certificate to the effect that immediately after the addition of the proposed new Obligated Group Member, no Obligated Group Member would be in default in the performance or observance of any term of the Master Indenture;

and

(e) except in the case of the addition of (1) OHS or (2) the Medical Center LLCs and, in either case and at the option of the Credit Group Representative, any entity controlled by OCF, an Officer’s Certificate to the effect that the Credit Group would have been permitted to incur at least $1.00 of additional Long-Term Indebtedness pursuant to the provision of the Master Indenture described in clause (1) of the section titled “Limitation on Indebtedness” in this Summary of the Master Indenture immediately after the addition of the proposed new Obligated Group Member;

and

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(f) so long as any Related Bonds are Outstanding, an Opinion of Bond Counsel in form and substance satisfactory to the Master Trustee, to the effect that the addition of the proposed new Obligated Group Member (1) will not, in and of itself, result in the inclusion of interest on any Related Bonds in gross income for purposes of federal income taxation; and (2) will not cause the Master Indenture or any Obligations to be subject to registration under federal or state securities laws or the Trust Indenture Act of 1939, as amended (or, that any such registration, if required, has occurred).

Withdrawal from Obligated Group

Any Obligated Group Member (other than the Foundation, which may not withdraw from the Obligated Group while any Obligations are then Outstanding) may withdraw from the Obligated Group and be released from further liability or obligation under the provisions in the Master Indenture, and any Obligated Group Member may be redesignated as a Designated Affiliate, provided that prior to such withdrawal or redesignation the Master Trustee receives:

(a) an Officer’s Certificate to the effect that the Credit Group Representative has approved the withdrawal of such Obligated Group Member (and, if applicable, redesignation of such Obligated Group Member as a Designated Affiliate);

and

(b) an Officer’s Certificate to the effect that immediately following the withdrawal of such Obligated Group Member, no remaining Obligated Group Member would be in default in the performance or observance of any term of the Master Indenture;

and

(c) except in the case of a withdrawal or redesignation of (1) OHS or (2) the Medical Center LLCs and, in either case and at the option of the Credit Group Representative, any entity controlled by OCF, an Officer’s Certificate to the effect that the Credit Group would have been permitted to incur at least $1.00 of additional Long-Term Indebtedness pursuant to the provision of the Master Indenture described in clause (1) of the section titled “Limitation on Indebtedness” in this Summary of the Master Indenture immediately after the withdrawal or redesignation of such Obligated Group Member.

Upon compliance with the conditions contained in the Master Indenture, the Master Trustee shall execute any documents reasonably requested by the withdrawing Member to evidence the termination of such Member’s obligations under the Master Indenture (including without limitation termination of the pledge of such Member’s Gross Revenues) under any Related Supplements and under all Obligations.

Events of Default

Each of the following events shall be an Event of Default under the Master Indenture:

(a) Failure on the part of the Obligated Group Members to make due and punctual payment of the principal of, redemption premium, if any, interest on or any other Required Payment on any Obligation.

(b) Any Obligated Group Member shall fail to observe or perform any other covenant or agreement under the Master Indenture (including covenants or agreements contained in any Related Supplement or Obligation) for a period of thirty (30) days after the date on which written notice of such failure, requiring the failure to be remedied, shall have been given to the Credit Group Representative by the Master Trustee or to the Credit Group Representative and the Master Trustee by the Holders of twenty-five percent (25%) in aggregate Principal Amount of Outstanding Obligations (provided that if such failure can be remedied but not within such thirty (30) day period, such failure shall not become an Event

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of Default for so long as the Credit Group Representative shall diligently proceed to remedy the failure in accordance with and subject to any directions or limitations of time established by the Master Trustee).

(c) A court having jurisdiction shall enter a decree or order for relief in respect of any Obligated Group Member in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of any Obligated Group Member or for any substantial part of the Property of any Obligated Group Member, or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive days.

(d) Any Obligated Group Member shall commence a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law, or shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of any Obligated Group Member or for any substantial part of its Property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due or shall take any corporate action in furtherance of the foregoing.

(e) An event of default shall exist under any Related Bond Indenture.

(f) An event of default shall exist under any agreement with the insurer of any Related Bonds or Obligations.

The Credit Group Representative agrees that, as soon as practicable, and in any event within ten (10) days after such event, the Credit Group Representative shall notify the Master Trustee of any event which is an Event of Default under the Master Indenture which has occurred and is continuing, which notice shall state the nature of such event and the action which the Obligated Group Members propose to take with respect thereto.

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 a majority in aggregate Principal Amount of Outstanding Obligations shall, by notice to the Credit Group Representative, declare all Outstanding Obligations immediately due and payable. Upon such declaration of acceleration, all Outstanding Obligations shall be immediately due and payable. If the terms of any Related Supplement give a Person the right to consent to acceleration of the Obligations issued pursuant to such Related Supplement, the Obligations issued pursuant to such Related Supplement may not be accelerated by the Master Trustee unless such consent is properly obtained pursuant to the terms of such Related Supplement. In the event of acceleration, an amount equal to the aggregate Principal Amount of all Outstanding Obligations, plus all interest accrued thereon and, to the extent permitted by applicable law, which accrues on such principal and interest to the date of payment, shall be due and payable on the Obligations.

At any time after the Obligations have been declared to be due and payable, and before the entry of a final judgment or decree in any proceeding instituted with respect to the Event of Default that resulted in the declaration of acceleration, the Master Trustee may annul such declaration and its consequences if:

(1) the Obligated Group Members have paid (or caused to be paid or deposited with the Master Trustee moneys sufficient to pay) all payments then due on all Outstanding Obligations (other than payments then due only because of such declaration);

and

(2) the Obligated Group Members have paid (or caused to be paid or deposited with the Master Trustee moneys sufficient to pay) all fees and expenses of the Master Trustee then due;

and

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(3) the Obligated Group Members have paid (or caused to be paid or deposited with the Master Trustee moneys sufficient to pay) all other amounts then payable by the Obligated Group under the Master Indenture;

and

(4) every Event of Default (other than a default in the payment of the principal or other payments of such Obligations then due only because of such declaration) has been remedied.

No such annulment shall extend to or affect any subsequent Event of Default or impair any right with respect to any subsequent Event of Default.

Additional Remedies and Enforcement of 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 a majority in aggregate Principal Amount of the Outstanding Obligations (and upon indemnification of the Master Trustee to its satisfaction by the Credit Group for any such request), shall, proceed to protect and enforce its rights and the rights of the Holders under the Master Indenture by such proceedings as the Master Trustee may deem expedient, including but not limited to:

(1) Enforcement of the right of the Holders to collect amounts due or becoming due under the Obligations;

(2) Civil action upon all or any part of the Obligations;

(3) 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 of Obligations;

(4) Civil action to enjoin any acts which may be unlawful or in violation of the rights of the Holders of Obligations; and

(5) Enforcement of any other right or remedy of the Holders conferred by law.

Regardless of the occurrence of an Event of Default, if requested in writing by the Holders of not less than a majority in aggregate Principal Amount of the Outstanding Obligations (and upon indemnification of the Master Trustee to its satisfaction for such request), the Master Trustee shall institute and maintain such proceedings as it may be advised shall be necessary or expedient (1) to prevent any impairment of the security under the Master Indenture by any acts which may be unlawful or in violation, or (2) to preserve or protect the interests of the Holders. However, the Master Trustee shall not comply with any such request or institute and maintain any such proceeding that is in conflict with any applicable law or the provisions in the Master Indenture or (in the sole judgment of the Master Trustee) is unduly prejudicial to the interests of the Holders not making such request.

Application of Moneys After Default

During the continuance of an Event of Default, all moneys received by the Master Trustee pursuant to any right given or action taken under the provisions in the Master Indenture (after payment of the costs of the proceedings resulting in the collection of such moneys and payment of all fees, expenses and other amounts owed to the Master Trustee) shall be applied as follows:

(a) Unless all Outstanding Obligations have become or have been declared due and payable (or if any such declaration is annulled in accordance with the terms of the Master Indenture):

First: To the payment of all installments of interest then due on the Obligations, including Financial Product Payments, in the order of their due dates, and, if the amount

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available is not sufficient to pay in full all installments and Financial Product Payments due on the same date, then to the payment thereof ratably, according to the amounts of interest and Financial Product Payments due on such date, without any discrimination or preference; and

Second: To the payment of all installments of principal then due on the Obligations (whether at maturity or by call for redemption) and (unless such Financial Product Extraordinary Payments have been designated as subordinate to the payment of principal of Obligations in connection with the execution and delivery of the related Financial Products Agreement) Financial Product Extraordinary Payments in the order of their due dates, and, if the amount available is not sufficient to pay in full all installments and Financial Product Extraordinary Payments due on the same date, then to the payment thereof ratably, according to the amounts of principal due and Financial Product Extraordinary Payments on such date, without any discrimination or preference.

Third: To the payment of subordinate Financial Products Extraordinary Payments.

Fourth: To the payment of any amounts then payable to the insurer or other credit enhancer of any Obligations or Related Bonds.

(b) If all Outstanding Obligations have become or have been declared due and payable (and such declaration has not been annulled under the terms of the Master Indenture),

First: To the payment of the principal and interest and other payments (including Financial Product Payments and (unless such Financial Product Extraordinary Payments have been designated as subordinate to the payment of principal of Obligations in connection with the execution and delivery of the related Financial Products Agreement) Financial Product Extraordinary Payments) then due and unpaid on the Obligations, and, if the amount available is not sufficient to pay in full the whole amount then due and unpaid, then to the payment thereof ratably, without preference or priority of principal over interest, of interest over principal, of any installment or payment over any other installment or payment or of any Obligation over any other Obligation, according to the amounts due respectively, without any discrimination or preference.

Second: To the payment of subordinate Financial Products Extraordinary Payments.

Third: To the payment of any amounts then payable to the insurer or other credit enhancer of any Obligations or Related Bonds.

Such moneys shall be applied at such times as the Master Trustee shall determine, having due regard for the amount of moneys available and the likelihood of additional moneys becoming available in the future. Upon any date fixed by the Master Trustee for the application of such moneys to the payment of principal, interest on the amounts of principal to be paid on such date shall cease to accrue. The Master Trustee shall give such notices as it may deem appropriate of the deposit with it of such moneys or of the fixing of such dates. The Master Trustee shall not be required to make payment to the Holder of any unpaid Obligation until such Obligation (and all unmatured interest coupons, if any) is presented to the Master Trustee for appropriate endorsement of any partial payment or for cancellation if fully paid.

Whenever all Obligations have been paid under the terms of the Master Indenture and all fees and expenses of the Master Trustee have been paid, any balance remaining shall be paid to the Person entitled to receive such balance. If no other Person is entitled thereto, then the balance shall be paid to the Credit Group Representative, its successors or such Person as a court of competent jurisdiction may direct.

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Remedies Vested in the Master Trustee

All rights of action (including the right to file proof of claims) under the Master Indenture or under any of the Obligations may be enforced by the Master Trustee without the possession of any of the Obligations or the production thereof in any proceeding relating thereto. Any proceeding instituted by the Master Trustee may be brought in its name as the Master Trustee without the necessity of joining any Holders as plaintiffs or defendants. Subject to the provisions in the Master Indenture, any recovery or judgment shall be for the equal benefit of the Holders of the Outstanding Obligations.

Master Trustee to Represent Holders

The Master Trustee is irrevocably appointed pursuant to the Master Indenture as trustee and attorney in fact for the Holders for the purpose of exercising on their behalf the rights and remedies available to the Holders under the provisions of the Master Indenture, the Obligations, any Related Supplement and applicable provisions of law, in each case subject to the provisions of the Master Indenture described in the immediately succeeding section of this Summary of the Master Indenture. The Holders, by taking and holding the Obligations, are conclusively deemed to have so appointed the Master Trustee.

Holders’ Control of Proceedings

If an Event of Default has occurred and is continuing, notwithstanding anything in the Master Indenture to the contrary, the Holders of at least a majority in aggregate Principal Amount of Outstanding Obligations shall have the right (upon the indemnification of the Master Trustee to its satisfaction) to direct the method and/or place of conducting any proceeding to be taken in connection with the enforcement of the terms of the Master Indenture. Such direction must be in writing, signed by such Holders and delivered to the Master Trustee. However, the Master Trustee shall not follow any such direction that is in conflict with any applicable law or the provisions in the Master Indenture or (in the sole judgment of the Master Trustee) is unduly prejudicial to the interests of the Holders not joining in such direction. Nothing under this subheading shall impair the right of the Master Trustee to take any other action authorized by the Master Indenture which it may deem proper and which is not inconsistent with such direction by Holders.

Supplements Not Requiring Consent of Holders

The Credit Group Representative (acting for itself and as agent for each Obligated Group Member) and the Master Trustee may, without the consent of or notice to any of the Holders, enter into one or more Related Supplements for any of the following purposes:

(1) To correct any ambiguity or formal defect or omission in the Master Indenture which does not materially and adversely affect the interests of the Holders;

(2) To correct or supplement any provision in the Master Indenture which may be inconsistent with any other provision, or to make any other provision with respect to matters or questions arising under the Master Indenture and which does not materially and adversely affect the interests of the Holders;

(3) To grant or confer ratably upon all of the Holders any additional rights, remedies, powers or authority, or to add to the covenants of and restrictions on the Obligated Group Members;

(4) To qualify the Master Indenture under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal law from time to time in effect;

(5) To create and provide for the issuance of an Obligation or Series of Obligations as permitted under the Master Indenture;

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(6) To obligate a successor to any Obligated Group Member as provided in the Master Indenture; or

(7) To add a new Obligated Group Member as provided in the Master Indenture.

Supplements Requiring Consent of Holders

Other than Related Supplements referred to in the Master Indenture and subject to the terms contained in the Master Indenture, the Holders of not less than a majority in aggregate Principal Amount of the Outstanding Obligations shall have the right to consent to and approve the execution by the Credit Group Representative (acting for itself and as agent for each Obligated Group Member) and the Master Trustee of such Related Supplements as shall be deemed necessary or desirable for the purpose of modifying, altering, amending, adding to or rescinding any of the terms contained in the Master Indenture; provided, however, that nothing under this subheading shall permit or be construed as permitting a Related Supplement which would:

(1) Extend the stated maturity of or time for paying interest or any other Required Payment on any Obligation or reduce the principal amount of or the redemption premium or rate of interest or change the method of calculating interest or other Required Payments payable on or reduce any other Required Payment on any Obligation without the consent of the Holder of such Obligation;

(2) Modify, alter, amend, add to or rescind any of the terms or provisions contained in the Master Indenture so as to affect the right of the Holders of any Obligations in default to compel the Master Trustee to declare the principal of all Obligations to be due and payable, without the consent of the Holders of all Outstanding Obligations; or

(3) Reduce the aggregate Principal Amount of Outstanding Obligations the consent of the Holders of which is required to authorize such Related Supplement without the consent of the Holders of all Obligations then Outstanding.

The Master Trustee may execute a Related Supplement (in substantially the form delivered to it as described below) without liability or responsibility to any Holder (whether or not such Holder has consented to the execution of such Related Supplement) if the Master Trustee receives:

(1) a Request of the Credit Group Representative to enter into such Related Supplement;

and

(2) a certified copy of the resolution of the Governing Body of the Credit Group Representative approving the execution of such Related Supplement;

and

(3) the proposed Related Supplement;

and

(4) an instrument or instruments executed by the Holders of not less than the aggregate Principal Amount or number of Obligations specified in the first paragraph for the Related Supplement in question which instrument or instruments shall refer to the proposed Related Supplement and shall specifically consent to and approve the execution thereof in substantially the form of the copy thereof as on file with the Master Trustee.

Any such consent shall be binding upon the Holder of the Obligation giving such consent and upon any subsequent Holder of such Obligation and of any Obligation issued in exchange therefor (whether or not

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such subsequent Holder thereof has notice thereof), unless such consent is revoked in writing by the Holder of such Obligation giving such consent or by a subsequent Holder thereof by filing with the Master Trustee, prior to the execution by the Master Trustee of such Related Supplement, such revocation and, if such Obligation or Obligations are transferable by delivery, proof that such Obligations are held by the signer of such revocation. At any time after the Holders of the required Principal Amount or number of Obligations shall have filed their consents to the Related Supplement, the Master Trustee shall file a written statement to that effect with the Credit Group Representative. Such written statement shall be conclusive evidence that such consents have been so filed.

If the Holders of the required Principal Amount or number of the Outstanding Obligations have consented to the execution of such Related Supplement, no Holder shall have any right to object to the execution thereof, to object to any of the terms and provisions contained therein or the operation thereof, to question the propriety of the execution thereof or to enjoin or restrain the Master Trustee or the Credit Group Representative from executing such Related Supplement or from taking any action pursuant to the provisions thereof.

Amendment of Related Supplements

Any Related Supplement may provide that the provisions thereof may be amended without the consent of or notice to any of the Holders, or pursuant to such terms and conditions as may be specified in such Related Supplement. If a Related Supplement does not contain provisions relating to the amendment thereof, the amendment of such Related Supplement shall by governed by the provisions in the Master Indenture.

Satisfaction and Discharge of Master Indenture

The Master Indenture shall cease to be of further effect if:

(a) all Obligations previously authenticated (other than any Obligations which have been mutilated, destroyed, lost or stolen and which have been replaced or paid as provided in any Related Supplement) and not cancelled are delivered to the Master Trustee for cancellation; or (b) all Obligations not previously cancelled or delivered to the Master Trustee for cancellation are paid; or (c) a deposit is made in trust with the Master Trustee (or with a bank or trust company acceptable to the Master Trustee pursuant to an agreement between an Obligated Group Member and such bank or trust company in form acceptable to the Master Trustee) in cash or Government Obligations or both, sufficient to pay at maturity or upon redemption all Obligations not previously cancelled or delivered to the Master Trustee for cancellation, including principal and interest or other payments (including Financial Product Payments and Financial Product Extraordinary Payments) due or to become due to such date of maturity, redemption date or payment date, as the case may be;

and all other sums payable under the Master Indenture by the Obligated Group Members are also paid. The Master Trustee, on demand of the Credit Group Representative and at the cost and expense of the Obligated Group Members, shall execute proper instruments acknowledging satisfaction of and discharging the Master Indenture. The Credit Group Representative shall cause a report to be prepared by a firm nationally recognized for providing verification services regarding the sufficiency of funds for such discharge and satisfaction provided pursuant to the provision of the Master Indenture described in the immediately preceding clause (c) above, upon which report the Master Trustee may rely.

The Obligated Group Members shall pay and indemnify the Master Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to the Master Indenture or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of Outstanding Obligations.

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APPENDIX E

PROPOSED FORM OF OPINION OF BOND COUNSEL

Louisiana Public Facilities Authority Baton Rouge, Louisiana

$______LOUISIANA PUBLIC FACILITIES AUTHORITY REVENUE AND REFUNDING REVENUE BONDS (OCHSNER CLINIC FOUNDATION PROJECT) SERIES 2017

We have acted as bond counsel to the Louisiana Public Facilities Authority (the “Authority”), a public trust and public corporation of the State of Louisiana (the “State”), organized and existing under and pursuant to the Indenture of Trust executed August 21, 1974 creating the Authority and the provisions of the Louisiana Public Trust Act, being Chapter 2-A of Title 9 of the Louisiana Revised Statutes of 1950, as amended (the “Public Trust Act”), and other applicable law, in connection with the authorization and issuance by the Authority of the captioned bonds (the “Bonds”).

The Bonds have been issued by the Authority pursuant to the provisions of the Public Trust Act and Chapter 14-A of Title 39 of the Louisiana Revised Statutes of 1950, as amended (collectively, the “Act”), and other constitutional and statutory authority, and a Trust Indenture dated as of May 1, 2017 (the “Indenture”) between the Authority and The Bank of New York Mellon Trust Company, N. A., as trustee (the “Trustee”). Capitalized terms used herein which are not otherwise defined have the meanings given them in the Indenture.

The Bonds are issuable as fully registered bonds, bear interest from the date thereof until paid at the rates per annum, mature in the principal amounts and on the dates, and are subject to redemption all as set forth in the Indenture and in the Bonds.

The Bonds are issued under and are secured as to principal, redemption premium, if any, and interest by the Indenture which provides a description of the nature and extent of the security for the Bonds, a statement of the terms and conditions under which the Bonds are issued and secured, the rights, duties and obligations of the Authority, the rights, duties, obligations and immunities of the Trustee and the rights of the owners of the Bonds.

The Bonds are issued for the purpose of (i) refunding [all or a portion] of the Authority's outstanding Revenue Bonds (Ochsner Clinic Foundation Project) Series 2007A, (ii) refunding [all or a portion] of the Authority's outstanding Revenue Bonds (Ochsner Community Hospitals Project) Series 2007B, (iii) paying or reimbursing the Foundation for the cost of acquiring, constructing, equipping, maintaining, installing, and/or upgrading health care and related facilities of the Foundation, and (iii) paying the costs of issuance of the Bonds. The Authority and the Foundation have entered into a Loan Agreement dated as of May 1, 2017 (the “Loan Agreement”) pursuant to which the Authority will loan the proceeds from the sale of the Bonds to the Foundation for the foregoing purposes. Pursuant to the Loan Agreement, the Foundation has agreed to make loan repayments sufficient to pay the principal of, premium, if any, and interest on the Bonds. Also, the Foundation, as Credit Group Representative, will deliver its Obligation (the “Note”) under the Master Indenture dated as of September 1, 2007 (the “Master Indenture”), as supplemented by a Supplemental Master Indenture between the Foundation and The Bank of New York Mellon Trust Company, N.A., as master trustee, to secure its obligations to make said loan repayments.

The Authority, in and by the Indenture, has entered into certain covenants and agreements with the holders of the Bonds with respect to the security and payment of the Bonds, for the terms of which reference is made to the Indenture.

We have examined (i) the Constitution and statutes of the State, including the Act; (ii) a certified transcript of the proceedings of the Authority authorizing the issuance of the Bonds; (iii) the Indenture, the Loan Agreement, the Note and the Tax Regulatory Agreement dated as of May 1, 2017 among the Authority, the Foundation and the

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Trustee (the “Tax Regulatory Agreement”); and (iv) such other documents, instruments, proofs and matters of law as we have deemed relevant to the issuance of the Bonds and necessary for the purpose of this opinion.

As to questions of fact material to our opinion, we have relied upon representations of the Authority and the Foundation contained in the Loan Agreement and the Tax Regulatory Agreement, the certified proceedings and other certifications of public officials and others furnished to us, including certifications furnished to us by or on behalf of the Foundation, without undertaking to verify the same by independent investigation.

On the basis of the foregoing examinations, we are of the opinion, as of the date hereof and under existing law, that:

1. The Authority is a public trust and public corporation duly organized and existing under the Constitution and statutes of the State.

2. The Bonds are valid and binding special and limited obligations of the Authority secured by and entitled to the benefits of the Indenture and are payable solely from the payments made by the Foundation pursuant to the Loan Agreement and by the Obligated Group (as defined in the Master Indenture) pursuant to the Note, and any other funds held by the Trustee and available therefor under the Indenture.

3. The Loan Agreement and the Indenture have been duly authorized, executed and delivered by the Authority and constitute valid and binding agreements of the Authority, and all interest of the Authority under the Loan Agreement and the Note has been validly assigned, except with respect to certain rights of the Authority relating to exculpation, indemnification and payment of expenses, to the Trustee under the Indenture.

4. The Bonds do not constitute or create an obligation, general or special, debt, liability or moral obligation of the State, or any political subdivision thereof, and neither the faith and credit nor the taxing power of the State, or any political subdivision thereof, is pledged to the payment of the principal of, premium, if any, or interest on the Bonds.

5. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, for the purpose of computing the federal alternative minimum tax imposed on certain corporations, such interest is taken into account in determining adjusted current earnings.

6. Pursuant to the Public Trust Act, the Bonds and the income thereof are exempt from all taxation by the State or any political subdivision thereof.

In rendering the opinion expressed in paragraph 5 above, we have relied on representations of the Authority and the Foundation with respect to questions of fact material to our opinion without undertaking to verify the same by independent investigation, and have assumed continuing compliance with the covenants in the Indenture, the Loan Agreement and the Tax Regulatory Agreement pertaining to those sections of the Internal Revenue Code of 1986, as amended (the “Code”), which affect the exclusion from gross income of interest on the Bonds for federal income tax purposes. In the event that such representations are determined to be inaccurate or incomplete or the Authority or the Foundation fails to comply with the foregoing covenants, interest on the Bonds could be includable in gross income for federal income tax purposes from the date of their original delivery, regardless of the date on which the event causing such inclusion occurs.

It is to be understood that the rights of the owners of the Bonds and the enforceability of the Bonds, the Indenture, the Loan Agreement and the other documents enumerated above or the provisions thereof 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 the sovereign police powers of the State or its governmental bodies and the exercise of judicial discretion in appropriate cases.

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In rendering this opinion, we have relied upon the opinions of even date herewith of Liskow & Lewis, a Professional Law Corporation, counsel to the Foundation, with respect to (i) the due organization and good standing of the Foundation as a nonprofit corporation duly organized and existing under the laws of the State and the status of the Foundation as an organization described in Section 501(c)(3) of the Code, (ii) the corporate power of the Foundation to enter into and the due authorization, execution and delivery by the Foundation of the documents described above to which it is a party and that the same constitute legal, valid and binding obligations of the Foundation enforceable in accordance with their terms, and (iii) matters which might be disclosed as a result of an examination of the indentures, mortgages, deeds of trust and other agreements or instruments to which the Foundation is a party or by which their or their properties are bound. We have also relied on the opinion of Gregory A. Pletsch & Associates, A Professional Law Corporation, counsel to the Trustee, with respect to the corporate power of the Trustee to enter into and the due authorization, execution and delivery by the Trustee of the documents described above to which it is a party and the binding effect thereof on the Trustee.

For the purposes of this opinion, our services as bond counsel have not extended beyond the examinations and expressions of the conclusions referred to above. Except as stated above, no opinion is expressed as to any federal, state or local tax consequences resulting from the ownership of, receipt of interest on, or disposition of, the Bonds.

Respectfully submitted,

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APPENDIX F

FORM OF CONTINUING DISCLOSURE UNDERTAKING

This Continuing Disclosure Undertaking (the “Disclosure Undertaking”) is executed and delivered by Ochsner Clinic Foundation (“OCF”), as Credit Group Representative, in connection with the issuance of $______Louisiana Public Facilities Authority Revenue and Refunding Revenue Bonds (Ochsner Clinic Foundation Project), Series 2017 (the “Bonds”). The Bonds are being issued pursuant to a Trust Indenture, dated as of May 1, 2017 (the “Indenture”), between the Louisiana Public Facilities Authority (the “Authority”) and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The proceeds of the Bonds are being loaned by the Authority to OCF, pursuant to a Loan Agreement, dated as of May 1, 2017 (the “Loan Agreement”), between the Authority and OCF. The payments due from OCF under the Loan Agreement are secured by Obligation No. 17 issued under a Master Indenture, dated as of September 1, 2007 (the “Master Indenture”), between OCF, as Credit Group Representative, and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.), as master trustee (the “Master Trustee”), as supplemented by Supplemental Master Indenture for Obligation No. 17. OCF hereby covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Undertaking. This Disclosure Undertaking is being executed and delivered by OCF, as Credit Group Representative, for the benefit of the Holders and Beneficial Owners (defined below) of the Bonds and to assist the Participating Underwriter (defined below) in complying with the Rule (defined below). OCF acknowledges that the Authority has undertaken no responsibility with respect to any reports, notices or disclosures provided or required under this Disclosure Undertaking, and has no liability to any Person, including any Holder or Beneficial Owner of the Bonds, with respect to the Rule.

SECTION 2. Definitions. In addition to the definitions set forth above and in the Indenture and the Master Indenture, which, as applicable, apply to any capitalized term used in this Disclosure Undertaking unless otherwise defined in this Disclosure Undertaking, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by OCF pursuant to, and as described in, Sections 3 and 4 of this Disclosure Undertaking.

“Beneficial Owner” shall mean any Person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Bonds (including Persons holding Bonds through nominees, depositories or other intermediaries).

“Dissemination Agent” shall mean an agent of OCF that may be appointed by OCF from time to time to disseminate the reports and information required pursuant to this Undertaking, or any successor Dissemination Agent designated in writing by OCF, and which has filed with the Trustee a written acceptance of such designation. OCF may appoint the Trustee or any other designee as Dissemination Agent.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Undertaking.

“MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the SEC to receive reports or notices pursuant to the Rule.

“Obligated Person” shall mean OCF and any other members of the Credit Group.

“Official Statement” shall mean the Official Statement, dated May __, 2017, related to the Bonds.

“Participating Underwriter” shall mean, the original underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds.

“Rule” shall mean Rule15c2-12(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.

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SECTION 3. Provision of Quarterly and Annual Reports.

(a) OCF shall, or shall cause the Dissemination Agent to, not later than 120 days after the end of OCF’s fiscal year, commencing with the fiscal year ending December 31, 2017, provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Undertaking. In each case, the Annual Report must be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB and may cross-reference other information as provided in Section 4 of this Disclosure Undertaking; provided that the audited financial statements of the Members of the Obligated Group may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If OCF’s or any future Member of the Obligated Group’s fiscal year changes, it shall give, or shall cause to be given, notice of such change in the same manner as for a Listed Event under Section 5.

(b) OCF shall provide the Annual Report to any Dissemination Agent and the Trustee (if not the Dissemination Agent) prior to the date for filing of the Annual Report specified in Section 3(a). If OCF is unable to provide to the MSRB an Annual Report by the date required in Section 3(a), OCF shall, in a timely manner, send a notice to the MSRB in substantially the form attached as Exhibit A

(c) In addition to the Annual Report required to be filed pursuant to Section 3(a), OCF shall, or shall cause the Dissemination Agent to, provide to the MSRB, (1) not later than 45 days after the end of each quarter of the Obligated Group’s fiscal year (except for the fourth fiscal quarter), beginning with the second fiscal quarter of 2017, unaudited financial information for the Obligated Group for such fiscal quarter and unaudited financial information for Ochsner Health System and affiliates, including a balance sheet, a cash flow statement and a statement of operations.

(d) OCF shall, or shall cause the Dissemination Agent to:

(1) determine each year, within five (5) Business Days of the date for providing the Annual Report, if one or more entities other than the MSRB have been designated by the SEC to receive reports or notices pursuant to the Rule, and the name, address and method of filing of the Annual Report applicable to each such entity; and

(2) file a report with OCF (if not the Dissemination Agent), the Authority and the Trustee (if not the Dissemination Agent) certifying that the Annual Report has been provided pursuant to this Disclosure Undertaking, stating the date it was provided, and if one or more entities other than the MSRB have been designated by the SEC to receive reports pursuant to the Rule, specifying the name, address and method of filing applicable to each such entity.

(d) Neither the Dissemination Agent, if any, nor the Trustee shall have any duty or obligation to review an Annual Report or any quarterly financial information to verify the content or correctness of an Annual Report or quarterly financial information.

(e) Until otherwise designated by the MSRB or the SEC, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.

SECTION 4. Content of Annual Reports. The Annual Report shall contain or include by reference the following:

1. The audited consolidated financial statements of the Obligated Group and affiliates for the prior fiscal year and the audited consolidated financial statements of Ochsner Health System and affiliates, each prepared in accordance with generally accepted accounting principles as promulgated from time to time by the Financial Accounting Standards Board. If either the Obligated Group’s or Ochsner Health System’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained

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in the final Official Statement, and the audited consolidated financial statements shall be filed in the same manner as the Annual Report when they become available.

2. An update of the following information substantially similar in type and scope, to the extent not included in the financial statements (including notes thereto) described in the immediately preceding paragraph:

(a) The list of current Credit Group Members as of the end of the most recently completed fiscal year;

(b) The list of the major health facilities owned or operated by the Credit Group Members, including the total number of licensed beds (including the number of licensed beds or bed type) and staffed beds (if applicable) at each facility for the most recently completed fiscal year;

(c) The information contained in Appendix A to the Official Statement under the subheading “SERVICE AREA – System Utilization Statistics” for the major health facilities owned or operated by the Credit Group Members for the most recently completed fiscal year;

(d) The information contained in Appendix A to the Official Statement under the subheading “HISTORICAL FINANCIAL INFORMATION – Sources of Patient Revenues” for the Credit Group Members for the most recently completed fiscal year;

(e) The calculation of historical maximum annual debt service coverage ratio for the Credit Group, including any future Credit Group Member for the most recently completed fiscal year.

Any or all of the items listed in Section 2(a)-(e) above may be included by specific reference to other documents, including official statements of debt issues with respect to which OCF or the other Obligated Group Members are an “obligated person” (as defined by the Rule), which have been filed with the MSRB. If the document included by reference is a final official statement, it must be available from the MSRB. OCF shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.

(a) OCF shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds:

1. principal and interest payment delinquencies;

2. nonpayment related defaults, if material;

3. unscheduled draws on debt service reserves reflecting financial difficulties;

4. unscheduled draws on credit enhancements reflecting financial difficulties;

5. substitution of credit or liquidity provider or its failure to perform;

6. 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 Bonds, or other material events affecting the tax status of the Bonds;

7. modifications to rights of Bondholders, if material;

8. bond calls, if material, and tender offers;

9. defeasances;

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10. release, substitution or sale of property securing repayment of the Bonds, if material;

11. rating changes;

12. bankruptcy, insolvency, receivership, or similar event of an Obligated Person;

13. the consummation of a merger, consolidation or acquisition involving an Obligated Person or the sale of all or substantially all the assets of an Obligated Person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

14. the appointment of a successor or additional trustee, or the change in the name of the Trustee, if material.

Note: for the purposes of the event identified in subparagraph (12), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person;

(b) OCF shall file, or cause to be filed, notice of the occurrence of a Listed Event with the MSRB in an electronic format as prescribed by the MSRB, in a timely manner but not in excess of 10 Business Days after the occurrence of such Listed Event. Reference is hereby made to the Rule for a discussion of when certain events enumerated in this Section 5 are deemed to have “occurred.” Until otherwise designated by the MSRB or the SEC, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.

SECTION 6. Termination of Reporting Obligation. OCF’s obligations under this Disclosure Undertaking shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds or upon delivery to the Master Trustee of an opinion of counsel expert in federal securities laws selected by OCF to the effect that compliance with this Disclosure Undertaking is not required by the Rule. If OCF’s obligations under this Disclosure Undertaking are assumed in full by some other entity, such Person shall be responsible for compliance with this Disclosure Undertaking in the same manner as if it were OCF and OCF shall have no further responsibility hereunder. If such termination or substitution occurs prior to the final maturity of the Bonds, OCF shall give, or cause to be given, notice of such termination or substitution in the same manner as for a Listed Event under Section 5.

SECTION 7. Dissemination Agent. OCF may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Undertaking, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report provided by OCF pursuant to this Disclosure Undertaking. The Dissemination Agent (if other than OCF) may resign by providing thirty (30) days written notice to OCF. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by OCF in a timely manner and in a form suitable for filing. If at any time there is not any other designated Dissemination Agent, OCF shall be the Dissemination Agent.

SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Undertaking, OCF and the Dissemination Agent, if any, may amend this Disclosure Undertaking (and the Dissemination Agent, if any, shall agree to any amendment so requested by OCF which does not impose any greater duties, nor greater risk of liability, on the Dissemination Agent) and any provision of this Disclosure Undertaking may be waived, provided that the following conditions are satisfied:

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(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, 5, or 8 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 with respect to the Bonds or the type of business conducted (including, but not limited to, affiliations, mergers, acquisitions, divestitures or dispositions affecting the Obligated Group Members);

(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of counsel expert in federal securities laws selected by OCF, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) The amendment or waiver either (i) is approved by the Holders of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Holders, (ii) does not, in the opinion of counsel expert in federal securities laws selected by OCF and acceptable to the Trustee, materially impair the interests of the Holders or Beneficial Owners of the Bonds or (iii) is necessary to comply with a change in legal requirements or other change in law, including any change in the requirements of the Rule.

In the event of any amendment or waiver of a provision of this Disclosure Undertaking, OCF shall describe such amendment in the next Annual Report, 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 by OCF on behalf of the Obligated Group. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) OCF will file, or caused to be filed, notice of such change in the same manner as for a Listed Event under Section 5, 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 as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

SECTION 9. Additional Information. Nothing in this Disclosure Undertaking shall be deemed to prevent OCF or any other Obligated Group Member from disseminating any other information, using the means of dissemination set forth in this Disclosure Undertaking 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 this Disclosure Undertaking. If OCF 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 this Disclosure Undertaking, OCF shall have no obligation under this Disclosure Undertaking to update such information or include it in any future Annual Report, quarterly report or notice of occurrence of a Listed Event.

SECTION 10. Default. In the event of a failure of OCF or the Dissemination Agent, if any, to comply with any provision of this Disclosure Undertaking, the Trustee may (and, at the request of the Participating Underwriter or the Holders of at least twenty-five percent (25%) aggregate principal amount of Outstanding Bonds to which this Disclosure Undertaking then applies, shall, but only to the extent funds in an amount satisfactory to the Trustee have been provided to it or it has otherwise been indemnified to its satisfaction from any cost, liability, expense or additional charges of the Trustee, including attorney’s fees), or any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause OCF or the Dissemination Agent, if any and as the case may be, to comply with its respective obligations under this Disclosure Undertaking. A default under this Disclosure Undertaking shall not be deemed an Event of Default under the Indenture, the Loan Agreement or the Master Indenture and the sole remedy under this Disclosure Undertaking in the event of any failure of OCF or the Dissemination Agent, if any, to comply with this Disclosure Undertaking shall be an action to compel performance.

SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Undertaking, and OCF agrees to indemnify and save the Dissemination Agent and its respective 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 hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s own negligence or willful misconduct. The obligations of OCF under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

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OCF covenants that if ever it serves as Dissemination Agent, it shall take all actions required of the Dissemination Agent under this Disclosure Undertaking. The Dissemination Agent shall be paid compensation by OCF for its services provided hereunder as agreed by OCF and the Dissemination Agent and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided hereunder and is only responsible for the obligations set forth herein.

SECTION 12. Notices. Any notices or communications to OCF pursuant to this Disclosure Undertaking may be given as follows:

To OCF: Ochsner Clinic Foundation 1514 Jefferson Highway New Orleans, LA 70121 Attention: Executive Vice President and Treasurer

OCF may, by written notice to the Dissemination Agent, if any, and the Trustee, designate a different address or telephone number(s) to which subsequent notices or communications should be sent.

SECTION 13. Beneficiaries. This Disclosure Undertaking shall inure solely to the benefit of the Authority, OCF, the Dissemination Agent, if any, the Participating Underwriter, the Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

This Disclosure Undertaking may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Dated: May __, 2017.

OCHSNER CLINIC FOUNDATION, as Credit Group Representative

By: Executive Vice President and Chief Financial Officer

By: Executive Vice President and Treasurer

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EXHIBIT A

FORM OF NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Louisiana Public Facilities Authority

Name of Bond Issue: Louisiana Public Facilities Authority Revenue and Refunding Revenue Bonds (Ochsner Clinic Foundation Project) Series 2017

Name of the Obligated Person: Ochsner Clinic Foundation

Date of Issuance: May __, 2017

NOTICE IS HEREBY GIVEN that Ochsner Clinic Foundation (“OCF”), as Credit Group Representative, has not provided an Annual Report with respect to the above-referenced bonds as required by Section 7.02 of the Loan Agreement, dated as of May 1, 2017, between the Issuer and OCF. [OCF anticipates that the Annual Report will be filed by ______.]

Dated:

OCHSNER CLINIC FOUNDATION,

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Louisiana Public Facilities Authority • Revenue and Refunding Revenue Bonds (Ochsner Clinic Foundation Project), Series 2017