Northwell Health Inc., New York Dormitory Authority of the State of New York; System

Home , Lenox Hill Hospital, Northwell Health

Primary Credit Analyst: Stephen Infranco, New York + 1 (212) 438 2025; [email protected]

Secondary Contact: Anne E Cosgrove, New York + 1 (212) 438 8202; [email protected]

Table Of Contents

Rating Action

Stable Outlook

Credit Opinion

Enterprise Profile: Very Strong

Financial Profile: Adequate

Related Research

Credit Snapshot

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT NOVEMBER 25, 2020 1 Northwell Health Inc., New York Dormitory Authority of the State of New York; System

Credit Profile

Northwell Hlth, Inc. Long Term Rating A-/Stable Current Dorm Auth of the St of New York, New York Northwell Hlth, Inc., New York New York State Dormitory Authority (Northwell Hlth, Inc.) Long Term Rating A-/Stable Current

Rating Action

S&P Global Ratings' long-term rating on various series of health care revenue bonds issued for Northwell Health Inc., N.Y. is 'A-'. The outlook is stable.

Credit overview The rating on Northwell reflects its favorable enterprise profile, highlighted by an expansive footprint with broad geographic coverage in New York State, including 19 controlled hospitals (six tertiary) and a comprehensive and full continuum of care through its ambulatory, post-acute, and large physician network. Northwell is also anchored by its leading and growing market position in a sizable and diverse service area spanning six counties, with a population base of approximately 8.2 million. It maintains a good financial profile, despite an expected weak fiscal 2020, with a sizable operating deficit at the six-month interim period ended June 30, primarily reflecting the disruption and challenges of operating during the COVID-19 pandemic. Historical and pre-pandemic results are highlighted by typically modest operational performance that fluctuates from relatively break-even to a slight operating profit, with increasing investments in population health and other long-term growth strategies.

We believe management responded well in its planning and response to the pandemic-related operating stress, although Northwell was unique in how hard its service area was hit during the very early months of the initial wave of COVID-19 cases in the U.S. Therefore, senior leadership did not have the benefit of leveraging best practices from other hospitals and health systems, as it needed to navigate a very heavy case load, secure critical resources, and expand capacity to provide much-needed access to care, while also preserving the financial stability of the organization.

In the early stages of the crisis, management implemented operations and systemwide planning measures to ensure care coordination for its patients and associates. To help offset the sharp decline in revenues and increased expenses from the pandemic, Northwell obtained grant funds available through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, recognizing approximately $755 million through June 30, 2020 (Northwell received approximately $1.27 billion to date), and quickly bolstered its liquidity through accessing Medicare Advanced and

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Accelerated Payments (MAP) of approximately $1 billion and drawing on short-term liquidity sources, including a line of credit that was quickly paid back in full in April. Key operating and other financial metrics were at or above budgeted expectations through February, and while CARES Act funding was substantial, it was not sufficient to fully offset revenue losses and expense growth resulting from the pandemic, which resulted in Northwell's six-month interim period operating loss ended June 30, 2020.

We expect that the lingering effects of the pandemic and recession will continue to affect Northwell's earnings in the near term as volumes, while on the path to recovery, are conservatively projected to remain below pre-pandemic levels. Payor mix shifts and increased expenses for labor, supplies, and testing could cause some added stress. However, Northwell has additional unrecognized CARES Act funding, combined with increased revenue from higher-acuity cases and steady month-over-month increasing volume, which may help partially close the gap. We also expect Northwell to continue to execute on its operating enhancement and core strategic initiatives, which over time, should allow for sustained improvement to the financial profile. While the duration, timing, and severity of the effects of COVID-19 are unclear and may vary by type of hospital and region, the pandemic and the associated economic and social challenges have pressured volume, earnings, and unrestricted reserves. We believe Northwell has some capacity to absorb a strain on its financial metrics, but a prolonged or severe stress could cause us to revise that view.

The long-term rating further reflects our view of Northwell's:

• Continued success and growth as a system through various acquisitions over the past decade, expanding to a 19-hospital system with favorable geographic diversity and $12.5 billion in operating revenues in fiscal 2019;

• Dominant market presence in core markets of Manhattan, Staten Island, Queens, Westchester, Nassau, and Suffolk, with a growing 30.9% market share, more than double that of the system's nearest competitors, New York Presbyterian (not rated by S&P Global Ratings) and Mount Sinai Health System;

• A very low average age of plant, which reflects many years of above-average capital spending and investment to grow and expand the system; and

• Experienced management team that has demonstrated leadership on many fronts, including the successful integration process in the system's early years, to more recently guiding the organization through a pandemic, while also maintaining a focus on quality, stable performance, and long-term growth.

Credit factors that we believe partially mitigate these strengths include Northwell's:

• Generally modest operating performance over the last several years, with an expected COVID-19-driven operating loss in fiscal 2020, although we also recognize that Northwell made significant investments in the last few years to support the system's long-term strategies, including, but not limited to, the creation of a large ambulatory and physician network, IT initiatives, expansion of services, and funding for its now-closed insurance business CareConnect;

• The likelihood for continued elevated capital spending to support strategic growth and expansion initiatives, although management indicates that capital projects have been reprioritized with an emphasis on ongoing strategic projects, life/safety, critical infrastructure, inpatient acute-care capacity, and projects with a return on investment; and

• Balance-sheet metrics such as days' cash on hand and leverage, which, although adequate for the rating given

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Northwell's favorable enterprise profile, are relatively light compared with S&P Global Ratings' health system median ratios and those of similarly rated health systems.

The stable outlook reflects our expectation that Northwell will generate modest operating income at or near 1% and sufficient cash flow in fiscal 2021, supported by a further rebound in patient volumes and continued execution of its core strategies, which in turn should support the multiyear capital plan without stressing key balance-sheet metrics. A portion of the capital spend will likely be funded by additional debt issuance as early as fiscal 2021, and while we believe Northwell has some additional debt capacity at the current rating, it will hinge on future operating results and the overall financial profile at the time of issuance. The stable outlook reflects Northwell's expansive footprint in the New York metropolitan and Long Island service areas and our expectation that it will maintain or gradually improve on its dominant market position despite an increasingly competitive and consolidating landscape.

Environmental, social, and governance factors We view Northwell's environmental risk as elevated relative to those of industry peers, given its coastal location that may be prone to severe weather-related events, including hurricanes. In our view, Northwell has systemwide policies and procedures in place to implement in the event of a pending emergency, including an ability to use its diversity of facilities to execute strategies that effectively offset some of these environmental challenges, thereby minimizing disruption to its overall operations.

We view Northwell's social risk as lower than industry peers, given its large and broad service area, with a diverse economic base and generally favorable demographic trends. That said, COVID-19 has exposed Northwell and all health care providers to additional social risks that could result in financial pressure, including significant cash-flow challenges in the short term.

Additionally, we view the system's management and governance risks as being in line with our view of the industry as a whole.

Stable Outlook

Downside scenario Credit factors that we believe could result in a negative outlook or lower rating include an inability to achieve near break-even or better operating results (as measured by S&P Global Ratings) following the COVID-19-related disruption and pressure in fiscal 2020. Cash flow and maximum annual debt service (MADS) coverage sustained at levels inconsistent with the rating could also contribute to a negative rating action. We would also view negatively any material pressure to the system's balance sheet, through either a sizable debt issuance or a steady decline in unrestricted reserves. Finally, any significant changes in Northwell's favorable enterprise profile, including shifts in market position, or any significant merger or acquisition activity that is dilutive to the system would be viewed as negative factors that could affect the outlook or rating.

Upside scenario Although we would view an improvement in the financial profile as a positive rating factor, we believe COVID-19-related challenges, including weaker business volumes and softer operating margins, as well as the

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT NOVEMBER 25, 2020 4 Northwell Health Inc., New York Dormitory Authority of the State of New York; System potential for additional debt and key balance-sheet metrics that remain below median levels for the rating, as limiting factors for an upgrade over the outlook period. Furthermore, the need to successfully implement the system's strategic and capital plan and navigate the challenges posed under health reform could constrain cash growth and limit upward rating action over the next one-to-two years. However, we would consider a positive outlook or higher rating over time if Northwell maintains its very strong enterprise profile, generates improving operating margin and cash flow over a sustained period with coverage near or above 3.5x, and key balance-sheet metrics trend favorably toward median levels while balancing future capital needs and additional debt.

Credit Opinion

Enterprise Profile: Very Strong

Market leader in an increasingly competitive and consolidating region Northwell's core service area consists of Nassau and Suffolk counties on Long Island and New York, Queens, and Richmond counties in New York City, as well as Westchester County. Within the core service area, Northwell has a dominant and improving market position at 30.9% in 2019, up from 29.9% in 2018, and still more than double that of the next-largest regional competitors, New York Presbyterian and Mount Sinai Health System. Competition also comes from Long Island-based providers, including Catholic Health Services of Long Island, NYU Langone Hospital – Long Island, Mount Sinai South Nassau, Stony Brook University Hospital, and Nassau University Medical Center.

Northwell's major competitors include several health care systems in Manhattan and the New York metropolitan area, such as New York Presbyterian Health System, which has the next-leading market share at 12.4%, as well as Mount Sinai Health System, the New York City Health & Hospitals Corp. (HHC), and NYU Langone Health.

When expanding the service area to include all of New York City, Westchester, and Long Island, Northwell still competes very effectively. Given the size of the service area and overlapping markets, its leading market share indicates it is more than a Long Island-based health system, with a strong presence throughout the region. The acquisitions of Phelps Memorial Hospital and Northern Westchester Hospital in January 2015 further enhance Northwell's regional presence by giving it greater access to the Westchester market, while further strengthening its core service area. In 2010, Northwell followed a similar strategy when it acquired Lenox Hill Hospital and in July 2014 opened a comprehensive 24-hour free-standing emergency care and outpatient center in Manhattan's West Village, allowing it additional access to the Manhattan market and successfully integrating those facilities into the larger health system. Northwell has indicated a desire to invest capital and resources around its Lenox Hill/Manhattan campus strategy, which, among other things, would include strengthening and/or developing comprehensive care programs, recruiting physician leadership, and building out the primary care network, and establishing a presence in growth markets for easier access to care.

COVID-19 pandemic and response The system experienced the stress of the COVID-19 pandemic and related recessionary pressures beginning in March 2020. In our view, management has navigated the challenges well to date, quickly establishing an emergency operations center (EOC) and standing up an EOC Incident Command structure around all core components of the

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT NOVEMBER 25, 2020 5 Northwell Health Inc., New York Dormitory Authority of the State of New York; System system, with an ability to track cases across the system and coordinate the Northwell response to direct resources as needed based on demand. Northwell's size and scale proved beneficial during the pandemic-related challenges, leveraging many of its established resources, both clinical and nonclinical, to provide facilities assessment and support, including hot-spot load balancing; establishing testing capacity and protocols; sourcing, procuring, and distributing equipment and supplies; and hiring and deploying staffing across the system. While the pandemic slowed some strategic initiatives, Northwell is using its extensive resources and information platform to better understand the post-pandemic health care landscape and incorporate those changes into its future health care delivery.

Northwell also enhanced and expanded existing service offerings to better meet patient demand during the pandemic. Examples include acceleration in growth of virtual care or telemedicine visits, up over 2,000% in just two months (March-May); leveraging the Northwell Lab for fully automated testing of upward of 2,000 COVID-19 tests daily in mid-March, with further growth since then; deploying a Home Pulse Oxygen Device program, and implementing patient tracking/analytics as well as predictive modeling. The system also has extensive involvement in COVID-19 clinical trials and research, including the first large-scale study on acute kidney injury and COVID-19 hospitalization and treatment, and study of the largest pediatric cohort of COVID-19-related inflammatory disorder.

Broad regional coverage and system diversity Northwell's size and geographic diversity are one of its main credit strengths. Utilization exhibited generally stable to slightly positive trends through February 2020, as Northwell continued to manage core operations and drive improved performance across the system. However, given the pandemic-related challenges and need to pause elective and nonemergent procedures, business volume declined significantly in March through May, but began to rebound due to pent-up demand and easing of restrictions, though still remainedS below pre-pandemic levels. As business volume returns, Northwell is implementing an operational recovery strategy, including integrating 12 interrelated recovery work streams into normal day-to-day operations, to ensure optimal care delivery and a return to meet or exceed historic levels of operating performance. Northwell is also implementing the changes needed across the system to incorporate the lessons learned from COVID-19. Management is taking a measured approach toward reviewing future capital projects and making the necessary adjustments based on the needs of the system, with investments in its tertiary hospitals and ambulatory network as key components of its strategic capital vision, with an emphasis on advancing the mission and driving accretive volume and positive margin.

System growth through acquisition Northwell expands through acquisition when it is strategically beneficial to the long-term growth of the system. Effective Jan. 1, 2018, it completed its acquisition of John T. Mather Memorial Hospital (Mather) in Port Jefferson, N.Y. Mather is an accredited 248-bed, nonprofit community hospital dedicated to providing a wide spectrum of health care services to Suffolk County residents. Also effective Jan. 1, 2018, Northwell acquired the assets of Orlin & Cohen, a medical group that has grown from 80 to 184 providers in ten specialties (orthopedics, physical medicine and rehabilitation, neurology, neurosurgery, radiology, primary care, podiatry, pediatric orthopedics, pediatric neurology, and pain management) now operating across 22 locations in Nassau and Suffolk counties.

On Jan. 15, 2016, Northwell acquired Peconic Bay Medical Center, a not-for-profit corporation that operates an acute-care hospital and a skilled nursing/rehabilitation center in eastern Suffolk County (Riverhead), N.Y. The acquisition of Peconic and Mather, while strategic in that it further expands Northwell's footprint in its stronghold of

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Long Island, is immaterial from a financial perspective, as it represents approximately 5% of total revenues combined and is not dilutive to the overall system.

The Peconic acquisition came on the heels of the Phelps Memorial and Northern Westchester hospital additions (both acquired Jan. 1, 2015), giving Northwell a presence in Westchester County, further solidifying its market reach in the New York City metropolitan area.

We believe Northwell is committed to a long-term strategy built around growth and expansion, with several strategic initiatives and capital projects occurring over the next several years. Furthermore, management continues to assess the health care landscape and will consider additional partnerships that would further Northwell's mission as long as it coincides with the strategic framework of the organization, both operationally and culturally.

One example would be the strategic partnership, announced August 2015, with Maimonides Medical Center in Brooklyn, N.Y. According to management, Northwell and Maimonides plan to pursue a full integration in a phased approach under a comprehensive strategic partnership, with both institutions maintaining their independence and separate governance structures. In the meantime, Maimonides continues to operate as a full-service, tertiary, and teaching hospital and be a critical component of a growing network of services that Northwell and Maimonides will establish in Brooklyn. The strategic partnership will be composed of joint ventures and other activities that will strengthen Maimonides and expand its leadership role in the region.

While we view the strategic relationship favorably, especially due to the continued population growth and demographic shift in Brooklyn, it has not progressed beyond its initial phase, and cannot fully assess the financial effects because the potential timeline for full integration has not been clearly defined. However, management has been diligent and deliberate with past acquisitions, and we expect a similar process with respect to continued expansion into Brooklyn.

In our opinion, the strategic initiatives outlined, including expanding and integrating the full continuum of services, should position the organization to succeed as the health reform delivery model evolves. Furthermore, while Northwell began the wind down of its insurance business in 2017, we still believe management has continued to strengthen population health initiatives through further physician and clinical integration efforts, coordinated care management, and expansion of services across the full continuum of care.

Senior leadership drives strategic growth initiatives Northwell has demonstrated a solid record of accomplishment in a rapidly changing environment, through economic downturns, periods of rapid expansion and, more recently, through the pandemic. At the core of that success has been an experienced senior management team, with a commitment to both increasing and diversifying business across the continuum of care in as cost-effective--and clinically efficient--manner as possible while maintaining and strengthening Northwell's position as a leading health system in the New York metropolitan region. Northwell also maintains strong management practices, with a culture of developing senior leaders throughout the organization, some of whom have risen to key leadership positions.

Over time, various mergers and acquisitions have added to Northwell's geographic diversification and increasing size and scale, further contributing to its leading market position. Furthermore, while expansion and acquisitions can

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT NOVEMBER 25, 2020 7 Northwell Health Inc., New York Dormitory Authority of the State of New York; System present near-term challenges, management has been successful in identifying and pursuing growth opportunities while maintaining financial stability. We expect that trend will continue as management pursues new opportunities and continues its strategic partnership with Maimonides. Given Northwell's significant presence on Long Island and the overall New York metropolitan region, its leadership has been--and is expected to continue to be--an important influence in the state (and national level) health care debate, and its experience as an integrated health system will continue to serve it well as population health initiatives continue to expand both regionally and nationwide.

Table 1 Northwell Health Inc., NY -- Enterprise Profile --Six months ended June 30-- --Fiscal year ended Dec. 31--

2020 2019 2018 2017 PSA population 8,200,000 8,200,000 8,200,000 8,300,000 PSA market share (%) 30.9 30.2 29.9 29.5 Inpatient admissions 116,499 276,012 273,308 259,923 Equivalent inpatient admissions 224,319 581,718 571,527 537,752 Emergency visits 245,864 651,453 658,006 621,695 Inpatient surgeries 25,823 71,204 71,923 65,082 Outpatient surgeries 64,278 221,580 220,095 195,100 Medicare case mix index 1.8800 1.7400 1.7000 1.6700 FTE employees 62,077 60,698 57,290 53,524 Active physicians 13,252 13,082 12,684 12,336 Based on net/gross revenues Net Net Net Net Medicare (%) 32.0 32.6 33.9 30.4 Medicaid (%) 14.8 13.9 14.6 15.0 Commercial/Blues (%) 48.7 48.7 46.8 50.1

N.A.--Not available. Inpatient admissions exclude normal newborn, psychiatric, rehabilitation, and long-term care facility admissions.

Financial Profile: Adequate

Trend of improving operations cut short by pandemic Northwell's operational performance in the past several years has been relatively modest, in part because of continued investment in core strategies and expansion to prepare for the changing health care landscape and shift to population health. While fiscal 2019 operations improved over the previous year and performance through the first two months of fiscal 2020 was at, or ahead of, planned expectations, the six-month interim results ended June 30 were weakened by the pandemic, including the need to pause nonemergent procedures across the system, as well as increased expenses associated with COVID-19 preparedness, such as staffing, surge capacity, and securing supplies. Northwell took some early steps to manage expenses as best as possible, but given the surge in volume and being at the epicenter of the pandemic early on, it was limited in what could realistically be accomplished. Given the pandemic-related challenges, Northwell experienced much weaker operating results at the six-month interim period ended June 30 (as calculated by S&P Global Ratings; see Table 2), with an operating deficit of $258 million, or a negative 4.1% operating margin. Northwell did recognize approximately $755 million of CARES Act funding through June 30, 2020, but it was not enough to offset the slightly more than $1.1 billion COVID-19 impact, primarily due to lost revenue from the canceling

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When including nonoperating income for the interim period, excess income (excluding unrealized investment gains) only marginally improved to negative $237 million, resulting in weak coverage of MADS at less than 1x. However, we note that the coverage calculation is based on the deflated revenue base and inflated expense base at June 30 as a result of the effects of COVID-19, and if we were to use a 12-month rolling average, coverage levels would be stronger. Management expects volume to continue to rebound with steady growth each month, and is projecting an operating loss at a more manageable negative 1% for the full fiscal 2020 year, while MADS coverage would improve to over 2x. Management is confident it will not trip any covenant violations in fiscal 2020. Prior to the pandemic, Northwell was still experiencing operating expense growth in its continued journey toward a more efficient care delivery system, including quality initiatives, physician practice acquisitions, ambulatory care expansion, and investments in clinical initiatives to better manage the health care needs of a population. In our view, Northwell's modest operating performance, with a 1% operating margin projected for fiscal 2021, is both a reflection of the journey of transitioning the system to the changing business environment and more recently, incremental pressure associated with the COVID-19 pandemic.

While Northwell has been committed to a 2% operating income goal for some time, the recent challenges will make that difficult to achieve as management projects a gradual improvement leading to a 2% operating margin by 2023. In addition to absorbing the COVID-19-related expenses, the next several years will require continued investments in infrastructure and ambulatory service expansion, clinical initiatives and program growth, and costs associated with transitioning to value- and risk-based payment models from the traditional fee-for-service model, all of which have the potential to keep operating margins in the low-1% range. While 1%-2% margins are generally modest, we believe Northwell's investments will better prepare it to succeed over the long term and should allow for incremental revenue and margin growth over time.

Northwell maintains stable liquidity throughout the pandemic As of fiscal 2019, unrestricted reserves totaled $3.32 billion, equal to a limited 103 days' cash on hand and 82% of long-term debt, compared with $3.05 billion, or 102 days' cash, in fiscal 2018. While the aggregate level of unrestricted reserves improved slightly to $3.35 billion, as of the June 30, 2020, period, days' cash on hand declined slightly to 97 days' cash, due to the growth in the expense base. However, unrestricted reserves-to-debt ticked up to 84.1%. S&P Global Ratings recognizes the potential for variability in days' cash on hand in fiscal 2020, given the COVID-19-related expenses, and volatility in the investment markets; however, we believe Northwell has managed its liquidity well during a difficult period. Furthermore, while we believe there has been relative stability in unrestricted reserve levels over the past several years, some balance-sheet metrics have remained light when compared with those of similarly rated health systems. Leverage, as measured by debt-to-capitalization, was high at 52% on June 30, 2020, while the debt burden remains manageable, at 2.2%.

Northwell is reassessing its projected overall capital spend after pulling back in fiscal 2020 to preserve liquidity. While a revised total is not yet available, we know previous two-year projections called for up to $1.7 billion in capital spending through 2020. Given some delayed capital in fiscal 2020, and the expectation that Northwell will continue to move forward on its strategic priorities, we expect an above-average capital spending phase will likely ramp up again over the next several years. In our opinion, while there is the potential for a somewhat aggressive capital spend, we

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT NOVEMBER 25, 2020 9 Northwell Health Inc., New York Dormitory Authority of the State of New York; System believe management will be measured in its approach to tie it to improved operations and sufficient cash flow. Furthermore, we believe an above-average capital spend phase could be manageable if the system can return to positive operating margins at or above 1%, as projected.

Debt and contingent liabilities Northwell's total system debt (including short-term debt and capital leases) is approximately $4.0 billion.

As of June 30, 2020, Northwell had approximately $485 million of contingent liabilities (as defined by S&P Global Ratings), including:

• Series 2014 private-placement notes totaling $241 million, with a final maturity in May 2030;

• Short-term revolving credit draws of $95 million under committed bank revolving credits, with staggered renewal dates over a range of years and several with term-loan period for repayment if a bank does not renew the revolving credit;

• A Staten Island University Hospital term loan totaling $12 million, with a final maturity in 2023;

• A Lenox Hill mortgage totaling $17.4 million, with a final maturity in 2029;

• Peconic Bay Medical Center series A, B, and D variable-rate direct-purchase bonds totaling $24.25 million (synthetically fixed with fixed-rate swaps);

• Northern Westchester Hospital series 2004 and 2009 letter of credit-backed variable-rate demand bonds (VRDBs; series 2004 is synthetically fixed with a fixed-rate swap) and series 2014 fixed-rate direct-purchase bonds totaling $43.8 million;

• Phelps fixed-rate direct-purchase bonds series 2005 A and B and series 2013 totaling $25.36 million; and

• John T. Mather Memorial Hospital series 2012A and 2013B VRDBs (synthetically fixed with fixed-rate swaps) totaling $26.1 million.

We consider event risk related to the contingent liabilities as moderate, as a result of good banking relationships allowing consistent access to committed revolving credit borrowings, and limited direct-purchase or private-placement debt as a percentage of the overall debt profile subject, which is subject to acceleration under certain events of default.

In 2014, Northwell issued $250 million in taxable private-placement notes which are secured by obligations issued under the master trust indenture (these notes are not rated by S&P Global Ratings). The financial covenants with which Northwell needs to comply include the obligated group's maintenance of debt service coverage not less than 1.25x, and days' cash on hand of not less than 30. If a violation were to occur, the remedies call for the hiring of a consultant. However, under certain events of default, acceleration can be demanded by the holders of a majority of notes outstanding.

S&P Global Ratings has factored in the risk associated with the contingent liability debt into its rating analysis and determined that there is no credit impact at the current rating level, due in part to Northwell's sound management practices and conservative investment allocation, with a very strong 691% unrestricted reserves-to-contingent liability debt as of June 30, 2020.

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Table 2 Northwell Health Inc. -- Financial Profile --Six months ended Medians for 'A-' rated June 30-- --Fiscal year ended Dec. 31-- health care systems

2020 2019 2018 2019

Financial performance Net patient revenue ($000s) 5,073,567 11,593,335 10,616,983 2,089,994 Total operating revenue ($000s) 6,295,861 12,467,274 11,470,605 2,450,143 Total operating expenses ($000s) 6,554,158 12,306,980 11,352,483 MNR Operating income ($000s) (258,297) 160,294 118,122 MNR Operating margin (%) (4.10) 1.29 1.03 1.70 Net nonoperating income ($000s) 21,635 97,877 158,535 MNR Excess income ($000s) (236,662) 258,171 276,657 MNR Excess margin (%) (3.75) 2.05 2.38 3.90 Operating EBIDA margin (%) 1.48 6.60 6.45 6.70 EBIDA margin (%) 1.82 7.33 7.72 9.30 Net available for debt service ($000s) 114,738 921,268 897,826 236,171 Maximum annual debt service ($000s) 281,848 281,848 281,848 MNR Maximum annual debt service coverage (x) 0.81 3.27 3.19 3.40 Operating lease-adjusted coverage (x) 0.90 2.27 2.44 2.70

Liquidity and financial flexibility Unrestricted reserves ($000s) 3,350,981 3,321,822 3,051,073 1,059,182 Unrestricted days' cash on hand 97.3 102.8 102.4 138.30 Unrestricted reserves/total long-term debt (%) 84.1 82.2 87.7 100.90 Unrestricted reserves/contingent liabilities (%) 691.4 670.9 584.0 444.90 Average age of plant (years) 5.1 5.0 4.9 11.50 Capital expenditures/depreciation and 148.9 146.5 173.9 133.50 amortization (%)

Debt and liabilities Total long-term debt ($000s) 3,985,898 4,038,753 3,479,988 MNR Long-term debt/capitalization (%) 51.6 49.8 51.0 46.70 Contingent liabilities ($000s) 484,637 495,125 522,428 MNR Contingent liabilities/total long-term debt (%) 12.2 12.3 15.0 19.70 Debt burden (%) 2.23 2.24 2.42 2.50 Defined-benefit plan funded status (%) N.A. 87.59 69.31 74.80

Miscellaneous Medicare advance payments ($000s)* 1,008,071 N/A N/A MNR Short-term borrowings ($000s)* 95,000 95,000 103,500 MNR CARES Act grants 754,969 N/A N/A MNR Total net special funding ($000s) 51,200 163,100 161,000 MNR

N/A--Not applicable. N.A.--Not available. MNR--Median not reported. Note: Medicare Advance Payments are excluded from unrestricted reserves and are not considered in S&P Global Ratings' liquidity calculations. In addition, we include Northwell Health's short-term borrowings in long-term debt as these funds are primarily used to provide interim financing for capital improvement projects, with repayment to be provided from bond proceeds and/or the receipt of fundraising proceeds from capital. campaigns.

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Credit Snapshot

• Northwell is an integrated delivery system, with 19 controlled hospitals, more than 6,000 hospital and long-term care beds, and approximately 276,000 inpatient admissions (as per S&P Global Ratings' definition, which excludes newborns, psychiatric, and rehabilitation admissions). Six of the hospitals are tertiary facilities--North Shore University Hospital in Manhasset; Long Island Jewish Hospital and the Cohen Children's Medical Center, on the Queens-Nassau border; Staten Island University Hospital; South Shore University Hospital (formerly Southside Hospital) in Bay Shore; and Lenox Hill Hospital in Manhattan (acquired in 2010). The remaining hospitals are smaller, community-based facilities and specialty hospitals. Northwell expanded its footprint again with the January 2016 acquisition of Peconic in Riverhead and the January 2018 acquisition of Mather in Port Jefferson. In addition to the hospitals, Northwell operates three long-term-care facilities, a hospice program, and a research institute that ranks in the nation's top 10% of all research institutions receiving National Institutes of Health funding, as well as a residency program with more than 1,800 residents in more than 125 programs and affiliations with a number of medical schools. • The rated bonds and the secured notes are all parity debt obligations, which are a joint and several general obligation of each member of the obligated group, and a pledge of the gross receipts of the members and mortgages on principal health care facilities of the obligated group secure the debt. • The Northwell obligated group accounts for 83% of total system assets and 84% of total revenue in 2019. The obligated group consists of Long Island Jewish Medical Center (which, due to a January 2016 merger, also includes Forest Hills Hospital and Franklin Hospital, now known as Long Island Jewish Forest Hills and Long Island Jewish Valley Stream), North Shore University Hospital, Glen Cove Hospital, Plainview Hospital, Northwell Health Stern Family Center for Rehabilitation, Huntington Hospital, Lenox Hill Hospital, South Shore University Hospital, Staten Island University Hospital, and Northwell Health Care Inc. The recently acquired hospitals--Mather, Peconic, Phelps, and Northern Westchester--are not part of the obligated group. This analysis reflects the entirety of Northwell, and the 'A-' rating is based on our view of Northwell's group credit profile and the obligated group's core status. Total system debt is approximately $4.0 billion. Unless otherwise noted, all financial data and ratios in this analysis refer to the fiscal 2019 audited period. The June 30, 2020, interim financial results are not audited.

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