INOVA HEALTH SYSTEM

Audited Consolidated Financial Statements and Other Supplementary Information Relating to the IHS Obligated Group, and Management’s Discussion and Analysis of Results of Operations and Financial Position

Fiscal Year Ended December 31, 2020 Inova Health System Management’s Discussion and Analysis of Results of Operations and Financial Position As of and for the Year Ended December 31, 2020

Introduction

Inova Health System (“IHS”) is an integrated, not-for-profit health care delivery system that owns, operates and manages clinical, educational, research, and hospital facilities located in northern Virginia, serving northern Virginia, the Washington, D.C. metropolitan area, and contiguous counties in Virginia and Maryland. The principal line of business for IHS is the delivery of acute care hospital services at locations in northern Virginia. IHS also operates an integrated network of health services including ambulatory care, home health care, senior services, assisted living, and other health related services. IHS maintains a group of primary care and specialty physicians, including Signature Partners, a clinically integrated physician network, and Innovation Health (“Innovation”), a joint venture with Aetna offering commercial health insurance plans.

The following discussion and analysis provides information that IHS management believes is relevant to an assessment and understanding of IHS’ results of operations and financial position. This analysis should be read in conjunction with IHS’ financial statements for the years ended December 31, 2020 and 2019. The discussion and analysis focuses on the consolidated results of IHS, which management believes provides a fair description and analysis, in all material respects, of the Obligated Group’s results of operations and financial condition, insofar as the Obligated Group represents approximately 92.9% of total operating revenues and 100% of unrestricted net assets of IHS as of and for the year ended December 31, 2020.

The information included herein is being provided solely to comply with contractual commitments. This filing does not purport to contain all information that may be material to an investor’s decision to buy, sell, or hold bonds issued by or for the benefit of IHS (“Related Bonds”), and does not constitute or imply any representation that no other information exists that may have a bearing on the financial condition of IHS, the security for any Related Bonds or an investor’s decision to buy, sell or hold any Related Bonds. This report includes information only as of and for the year ended December 31, 2020 and 2019 and such information should not be relied upon as indicative of future financial performance. The COVID-19 pandemic (the “pandemic”) described herein may adversely affect IHS’ future financial performance to an extent that could be material.

Results of Operations as of and for the year ended December 31, 2020 and 2019

Operating Revenues. Total operating revenues for IHS for the year ended December 31, 2020 were $4.2 billion, an increase of 10.4% from prior year. Included in total operating revenues is $211.1 million in revenue from the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) Relief Funds (the “Relief Fund”) (See Other COVID-19 Public Health Emergency Disclosure).

Net patient service revenue totaled $3.7 billion, an increase of 2.4%, or $88 million compared with prior year. Approximately 50% of this increase is due to acquisition activity during the year related to ambulatory imaging and primary care services. Revenue cycle centralization and standardization initiatives have also contributed to top line yield in both hospital and ambulatory settings offsetting volume declines in late March as a result of the pandemic and related governmental restrictions. There was an improvement in volumes starting on May 1, 2020 when IHS began to restart elective health procedures.

A summary of patient ac