The New York and Presbyterian Hospital and References to “Bonds”, “Securities” Or Notes Mean the Series 2016 Bonds Offered Hereby

This Preliminary Offering Memorandum and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Offering Memorandum constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, qualification or exemption under the securities laws of such jurisdiction. NEW ISSUE–BOOK-ENTRYONLY † June __,2016 custodial agentonoraboutJune __,2016. New York,York.Itisexpected thattheBondswillbeavailablefordeliveryto DTC inNewYork,Yorkortoits New York.Inaddition,certainlegalmatterswillbepassed uponfortheUnderwriterbyitscounsel,Winston&StrawnLLP, by Hospital’scounsel,DennettLawOffices,P.C.,Great Neck, NewYorkandStroock&LavanLLP,York, withdrawal ormodificationoftheofferwithoutnoticeand subjecttotheapprovaloftheirlegalityandcertainothermatters Bonds” and“–CompliancewithBondIndenture”attached hereto. Indebtedness”, “Bondholders’Risks”andAPPENDIX D–“FORMOFBONDINDENTUREAuthorizationof and mortgagesoncertainofthe “FORMS OF T (the “SupplementalIndenture”),byandbetweenthe “Master Trustee”),andtheSupplementalMasterIndentureforObligationNo.2,datedasofJune 1,2016 dated asofJanuary1,2015,between by an obligation (“Obligation No. 2”) issued under a Master Trust Indenture (the “Master Indenture”), described herein.See“T as morefullydescribedin“BOOK-ENTRYONLYSYSTEM”herein. Redemption PriceandinteresttotheDTCParticipantsforsubsequentdisbursementBeneficialOwnersof Bonds, on theBondswillbepayablebywiretransfertoDTC,whichinturnisrequiredremitsuchprincipalorMake-Whole So long as the Bondsare held by DTC, the principal or Make-Whole Redemption Price(as defined herein)of and interest in theBondspurchased. certificates (exceptundercertaincircumstancesdescribedintheBondIndenture)representingtheirownership interests only, inprincipalamountsof$1,000andanyintegralmultiplethereof.PurchaserstheBondswillnotreceivephysical York (“DTC”).DTCwillactassecuritiesdepositoryfortheBonds.Individualpurchasesbemadeinbook-entryform when issued,willberegisteredinthenameofCede&Co.,asnomineeTheDepositoryTrustCompany,NewYork, pay thecostsofissuanceBonds. proceeds of theBonds will beusedbytheHospitalfor eligible corporate purposes of the Hospital and itsaffiliatesto The NewYorkandPresbyterianHospital(the“Hospital”)TDBank,N.A.,asbondtrustee“BondTrustee”). be issuedpursuanttothetermsofanIndentureTrust,datedasJune1,2016(the“BondIndenture”),byandbetween Dated: DateofDelivery Interest PayableFebruary1andAugust Indebtedness, which issecuredby,amongotherassets,apledge ofrevenuesandaccountsthe Indenture. The may grantliensonitspropertysubjecttothelimitations containedintheBondIndentureandMaster is notrestrictedbytheBondIndentureorMaster Indenturefromincurringadditionalindebtednessand other Obligationsissuedthereunder.See“SOURCESOFPAYMENTFORT will beanObligationoftheObligatedGrouppayableunderMasterIndentureonaparitybasis withall herein. or localincometaxpurposes.See“CERTAINUNITEDSTATESFEDERALINCOMETAXCONSIDERATIONS”

Trustee nor theUnderwriter assumesany responsibility fortheaccuracy ofsuchnumbers. The McGraw-Hill Companies,Inc.CUSIPnumbers areprovidedforconvenience ofreferenceonly.Neither the Hospital, theBond CUSIP Copyright, AmericanBankersAssociation. CUSIPdataisprovidedbyStandard &Poor’sCUSIPService Bureau,adivisionof The Bondsareofferedwhen,asandifissuedbytheHospital andreceivedbytheUnderwriter,subjectpriorsale, The Bondsaresubjecttooptionalredemptioninwholeorpartpriortheirstatedmaturity as Interest ontheBondswillbepayableFebruary1andAugustofeachyear,commencing1,2017. The Bondswillbeissuedinfullyregisteredformdenominationsof$1,000andanyintegralmultiplethereofand, The NewYorkandPresbyterianHospitalTaxableBonds,Series2016(the“Bonds”orthe“SeriesBonds”)will The obligationsof Interest onandgain,ifany,thesaleofBondsarenotexcludablefromgrossincomeforfederal,state H H E MASTER INDENTURE AND SUPPLEMENTAL INDENTURE” attached hereto. The ospital hasexistingdebt,includingtheF _____% Bondsdue______,20__Issueprice:_____%,CUSIP†______PRELIMINARY OFFERING MEMORANDUM DATED JUNE 16, 2016 H Th ospital tomakepaymentstheBondTrusteeunderIndentureareevidenced H E BONDS–Redemption”herein. e N ew H ospital’s property.See“SourcesofPaymentforthe Bonds—Outstanding Y ork H Taxable Bonds,Series2016 ospital andTDBank,N.A.,asmastertrustee(insuchcapacity,the Goldman, Sachs&Co.

and $______P resbyterian H ospital andtheMasterTrustee.ObligationNo.2 H A-Insured IndebtednessandtheLowerManhattan

Hospital H E BONDS”andAPPENDIX– H H ospital ospital

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TABLE OF CONTENTS Page

GENERAL INFORMATION ...... i SUMMARY OF THE OFFERING...... vi INTRODUCTION ...... 1 Purpose of the Bonds and the Plan of Finance ...... 1 The Hospital ...... 1 The Bonds ...... 3 Redemption ...... 5 Book-Entry Only System ...... 5 Certain Information Related to this Offering Memorandum ...... 5 SOURCES OF PAYMENT FOR THE BONDS ...... 6 Bond Indenture ...... 6 Master Indenture, Supplemental Indenture and Obligation No. 2 ...... 7 Outstanding Indebtedness ...... 8 ESTIMATED DEBT SERVICE REQUIREMENTS ON THE SERIES 2016 BONDS AND CERTAIN OTHER INDEBTEDNESS ...... 11 THE BONDS ...... 12 Description of the Bonds ...... 12 Redemption ...... 12 Transfer of Bonds ...... 15 Exchange of Bonds ...... 15 Bond Register ...... 16 Acceleration ...... 16 BOOK-ENTRY ONLY SYSTEM ...... 16 BONDHOLDERS’ RISKS ...... 19 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS ...... 50 ERISA CONSIDERATIONS ...... 55 FINANCIAL ADVISOR ...... 55 UNDERWRITING ...... 55 CONTINUING DISCLOSURE ...... 56 APPROVAL OF LEGALITY ...... 57 ABSENCE OF MATERIAL LITIGATION ...... 57 INDEPENDENT AUDITORS ...... 58 RATINGS ...... 58 MISCELLANEOUS ...... 58

THE HOSPITAL...... APPENDIX A SELECT INFORMATION REGARDING THE HOSPITAL SUBSIDIARIES ...... APPENDIX B CONSOLIDATED FINANCIAL STATEMENTS OF THE HOSPITAL AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 AND DECEMBER 31, 2014 AND 2013 WITH REPORTS OF INDEPENDENT AUDITORS ...... …APPENDIX C-1

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2016 ...... APPENDIX C-2 FORM OF BOND INDENTURE ...... APPENDIX D FORMS OF THE MASTER INDENTURE AND SUPPLEMENTAL INDENTURE ...... APPENDIX E

GENERAL INFORMATION

This Offering Memorandum does not constitute an offer to sell the Bonds in any jurisdiction in which or to any person to whom it is unlawful to make such an offer. No dealer, salesperson or other person has been authorized by Goldman, Sachs & Co. (the “Underwriter”) or the Hospital to give any information or to make any representations, other than those contained herein, in connection with the offering of the Bonds and, if given or made, such information or representations must not be relied upon.

THE SERIES 2016 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), IN RELIANCE ON THE PROVISIONS OF SECTION (3)(a)(4) THEREOF. NO OTHER SECURITY RELATING TO THE BONDS HAS BEEN REGISTERED UNDER THE 1933 ACT, AND NEITHER THE BOND INDENTURE NOR THE MASTER INDENTURE NOR THE SUPPLEMENTAL INDENTURE HAS BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS IN SUCH ACTS. FURTHER, THE BONDS HAVE NOT BEEN REGISTERED UNDER THE LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THE BONDS MAY NOT BE EXEMPT IN EVERY JURISDICTION IN THE UNITED STATES. THE SECURITIES LAWS (THE “BLUE SKY LAWS”) OF SOME JURISDICTIONS MAY REQUIRE A FILING AND A FEE TO SECURE THE BONDS’ EXEMPTION FROM REGISTRATION. THE EXEMPTIONS FROM REGISTRATION AND FROM QUALIFICATION IN ACCORDANCE WITH APPLICABLE PROVISIONS OF FEDERAL OR STATE LAWS CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE BONDS OR ANY RELATED SECURITY, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

All information set forth herein has been obtained from the Hospital, DTC and other sources that are believed to be reliable. Estimates and opinions are included and should not be interpreted as statements of fact. Summaries of documents do not purport to be complete statements of the provisions of such summarized documents. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Offering Memorandum nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the Hospital since the date hereof.

The distribution of this Offering Memorandum and the offer or sale of Series 2016 Bonds may be restricted by law in certain jurisdictions. Neither the Hospital nor the Underwriter represent that this Offering Memorandum may be lawfully distributed, or that any Series 2016 Bonds may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Hospital or the Underwriters which would permit a public offering of any of the Series 2016 Bonds or distribution of this Offering Memorandum in any jurisdiction where action for that purpose is required. To be clear, action may be required to secure exemptions from the blue sky registration requirements either for the primary distributions or any secondary sales that may occur. Accordingly, none of the Series 2016 Bonds may be offered or sold, directly or indirectly, and neither this Offering Memorandum nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations.

Certain statements included or incorporated by reference in this Offering Memorandum constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation

Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act. Such statements are generally identifiable by the terminology used such as “pro-forma,” “may,” “believe,” “plan,” “expect,” “estimate,” “budget,” “intend,” “projection” or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information in APPENDIX A – “THE HOSPITAL” and APPENDIX B – “SELECT INFORMATION REGARDING THE HOSPITAL SUBSIDIARIES”, attached hereto. A number of important factors, including factors affecting the Hospital’s financial condition and factors which are otherwise unrelated thereto, could cause actual results to differ materially from those stated in such forward-looking statements. THE HOSPITAL DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS CHANGE, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.

The Underwriter has provided the following sentence for inclusion in this Offering Memorandum. The Underwriter has reviewed the information in this Offering Memorandum in accordance with, and as part of, their responsibility 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.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

TD Bank, N.A., as Bond Trustee and Master Trustee, has not reviewed, provided or undertaken to determine the accuracy of any of the information contained in this Offering Memorandum and makes no representation or warranty, express or implied, as to any matters contained in this Offering Memorandum, including, but not limited to, (i) the accuracy or completeness of such information, or (ii) the validity of the Bonds.

Statements in this Offering Memorandum are made as of the date hereof unless stated otherwise and neither delivery of this Offering Memorandum at any time, nor any sales thereunder, shall under any circumstances create an implication that the information contained herein is correct as of any time subsequent to the date hereof.

Any references to internet websites in this Offering Memorandum are shown for reference and convenience only; unless explicitly stated to the contrary, the information contained within the websites and any links contained within those websites are not incorporated herein by reference and do not constitute part of this Offering Memorandum.

In making an investment decision, investors must rely on their own examination of the Hospital and the terms of the offering, including the merits and risks involved. Prospective investors should not construe the contents of this Offering Memorandum as legal, tax or investment advice.

______

INFORMATION CONCERNING OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS OUTSIDE THE UNITED STATES

REFERENCES HEREIN TO THE “ISSUER” MEAN THE NEW YORK AND PRESBYTERIAN HOSPITAL AND REFERENCES TO “BONDS”, “SECURITIES” OR NOTES MEAN THE SERIES 2016 BONDS OFFERED HEREBY. NEITHER THE NEW YORK AND PRESBYTERIAN HOSPITAL NOR THE UNDERWRITER ASSUMES ANY RESPONSIBILITY FOR THIS SECTION.

EUROPEAN ECONOMIC AREA

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each Initial Purchaser has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of notes which are the subject of the offering contemplated by this offering circular to the public in that Relevant Member State except that, with effect from and including the Relevant Implementation Date, an offer of such notes may be made to the public in that Relevant Member State: (a) at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive; (b) at any time to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the issuer for any such offer; or (c) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of notes shall require the issuer or any Initial Purchaser to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of notes to the public” in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe the notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

UNITED KINGDOM

Each Initial Purchaser has represented and agreed that:

(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (FSMA)) received by it in connection with the issue or sale of the notes in circumstances in which Section 21(1) of the FSMA does not apply to the issuer; and

iii

(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the notes in, from or otherwise involving the United Kingdom.

HONG KONG

The notes may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (“Companies (Winding Up and Miscellaneous Provisions) Ordinance”) or which do not constitute an invitation to the public within the meaning of the Securities and Futures Ordinance Ordinance (Cap. 571 of the Laws of Hong Kong) (“Securities and Futures Ordinance”), or (ii) to "professional investors" as defined in the Securities and Futures Ordinance and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to the notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to notes which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.

SINGAPORE

This offering circular has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this offering circular and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the notes may not be circulated or distributed, nor may the notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA")) under Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA ) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to conditions set forth in the SFA.

Where the notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for 6 months after that corporation has acquired the notes under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporation’s securities pursuant to Section 275(1A) of the SFA, (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore (“Regulation 32”).

Where the notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferable for 6 months

after that trust has acquired the notes under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.

JAPAN

The securities have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended), or the FIEA. The securities may not be offered or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan (including any person resident in Japan or any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to or for the benefit of any resident of Japan, except pursuant to an exemption from the registration requirements of the FIEA and otherwise in compliance with any relevant laws and regulations of Japan.

CANADA

The notes may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the notes must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this offering memorandum (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the initial purchasers are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

SUMMARY OF THE OFFERING

Issuer The New York and Presbyterian Hospital

Securities Offered $______% Taxable Bonds, Series 2016 due ______, 20__

Interest Accrual Date Interest will accrue from the Settlement Date

Interest Payment Dates February 1 and August 1 of each year, commencing February 1, 2017

Redemption The Bonds are subject to optional redemption in whole or in part by the Hospital prior to maturity, on any Business Day, in such order of maturity as directed by the Hospital, at the Make-Whole Redemption Price, together with accrued interest to the date fixed for redemption, as further described herein. The Bonds are also subject to purchase in lieu of redemption. See “THE BONDS – Redemption” herein.

Settlement Date June __, 2016

Authorized $1,000 and any integral multiple thereof Denominations

Form and Depository The Bonds will be delivered solely in book-entry form through the facilities of DTC.

Use of Proceeds The Hospital will use proceeds of the Bonds for eligible corporate purposes of the Hospital and its affiliates and to pay costs of issuance of the Bonds. See “INTRODUCTION – Purpose of the Bonds and the Plan of Finance” herein.

Ratings Moody’s: ______Fitch: ______

OFFERING MEMORANDUM

RELATING TO

$______

THE NEW YORK AND PRESBYTERIAN HOSPITAL

TAXABLE BONDS, SERIES 2016

INTRODUCTION

The purpose of this Offering Memorandum, which includes the cover page, the table of contents and appendices, is to provide certain information concerning the sale and delivery by The New York and Presbyterian Hospital (the “Hospital”) of its $______aggregate principal amount of The New York and Presbyterian Hospital Taxable Bonds, Series 2016 (the “Bonds” or the “Series 2016 Bonds”). This Introduction contains only a brief summary of certain terms of the Bonds being offered and a brief description of the Offering Memorandum. All statements contained in this Introduction are qualified in their entirety by reference to the entire Offering Memorandum. Certain capitalized terms used herein are defined in Appendices A, C and D to this Offering Memorandum.

Purpose of the Bonds and the Plan of Finance

The proceeds of the Series 2016 Bonds will be used (i) for eligible corporate purposes of the Hospital and its affiliates, which may include, without limitation, any or all of the following: (a) making a loan to Hudson Valley Hospital Center to refinance its outstanding 2007 FHA-insured mortgage loan, (b) making a loan to New York-Presbyterian/Queens to refinance its outstanding 2007 FHA-insured mortgage loan, (c) making a loan to Lawrence Hospital Center to refinance its outstanding Westchester County IDA debt, (d) refinancing of outstanding debt of the Hospital and other outstanding debt of certain Hospital affiliates, and (e) financing of one or more projects of the Hospital and certain Hospital affiliates, and (ii) to pay costs of issuance of the Series 2016 Bonds.

The Hospital

The Hospital, a New York not-for-profit corporation, created as a result of the January 1998 merger of The Society of The New York Hospital (“New York Hospital”) and The Presbyterian Hospital in the City of New York (“Presbyterian Hospital”), operates at six campuses in Manhattan and Westchester County, New York. The Hospital serves as the academic and quaternary care hub of a network of health care providers (the “Health Care System”), which, as of June 1, 2016, included 10 acute care hospitals, 3 long-term care facilities, 2 ambulatory sites, and 2 specialty institutions, located in New York and Connecticut. Over the years the Hospital has developed its relationships with the other members of the Health Care System as part of its strategic goal of providing high quality, integrated care throughout the tri-state New York metropolitan area (the “Metropolitan Area”). One of the country’s largest academic medical centers, the Hospital ranked #7 in the 2015-16 U.S. News & World Report annual ranking of the best hospitals in the United States, and was the top-ranked hospital in the Metropolitan Area. The Hospital has developed highly specific, patient-centered models of care to treat its diverse patient populations.

The Hospital is the primary clinical teaching facility for two of the country’s leading medical colleges: The Joan and Sanford I. Weill Medical College of Cornell University (“Weill Cornell Medical School”) and the Columbia University College of Physicians & Surgeons (“Columbia University Medical School” and, together with Weill Cornell Medical School, the “Medical Schools”). All members of the Attending Medical Staff of the Hospital hold faculty appointments at one of the Medical Schools.

New York Presbyterian Foundation, Inc. (“NYPFI”) is a an affiliate that is linked to the Hospital through the Hospital’s Board of Trustees. The Hospital also has several affiliated entities that support the Hospital through fundraising and real estate holdings. These affiliated entities (“Supporting Corporations”) include: (i) New York-Presbyterian Fund, Inc. (“Fund, Inc.”), which solicits, receives, invests and administers philanthropic funds for the Hospital and other charitable organizations approved by the board of directors of Fund, Inc. and (ii) three real estate holding companies: Royal Charter Properties, Inc., Royal Charter Properties – East, Inc., and Royal Charter Properties – Westchester, Inc. (collectively, the “RCP Corporations”). Another affiliated entity, the New York-Presbyterian Healthcare System, Inc. (“NYPHSI”), serves as the corporate member of a number of the hospitals and other entities that are referred to as “Corporate Members” (as further defined below) of the Health Care System. NYP Community Programs, Inc. (“Community Programs”), a subsidiary of the Hospital, serves as the corporate member of two of the Hospital’s indirect hospital subsidiaries, and NYP Community Services, Inc. (“Community Services” and together with Community Programs, the “NYP Active Parent Corporations”), also a subsidiary of the Hospital, serves as the corporate member of a third indirect hospital subsidiary. These indirect hospital subsidiaries are referred to as the “Regional Hospitals.” Plans are underway for Community Programs to become the corporate member NYP/Lawrence Hospital, replacing Community Services. Subject to regulatory and other approvals, this is expected to occur by the end of 2016. The Hospital owns and operates one of the oldest hospitals in the nation. It has a history of over 200 years of providing medical care in the Metropolitan Area, with five of the Hospital’s six campuses having roots dating back more than 120 years.

Weill Cornell Campus

Inspired by the commencement address delivered in 1769 to the first medical doctors to graduate from King’s College (now Columbia University) by Dr. Samuel Bard, George Washington’s personal physician, city leaders pledged funds for the establishment of a public hospital. This led to the creation of New York Hospital by Royal Charter granted by King George III on June 13, 1771. The first hospital facility was opened in 1791 in lower Manhattan. After relocating several times, New York Hospital began operations at its current location in the Upper East Side of Manhattan (the “Weill Cornell Campus”) in 1932.

The Weill Cornell Campus now occupies the city blocks bounded by East 68th Street to East 71st Street and from York Avenue to the East River, together with various buildings in the area. Portions of the buildings that comprise the Weil Cornell Campus are owned and/or occupied by Weill Cornell Medical School. The Hospital has 862 certified inpatient beds at its facilities on the Weill Cornell Campus. The attending physicians at this campus hold faculty appointments at the Weill Cornell Medical School.

Westchester Division

In 1821, New York Hospital opened a hospital for the mentally ill in the Morningside Heights section of Manhattan on land now occupied by Columbia University. This facility moved to White Plains, New York in the 1890s, and is now the Hospital’s Westchester Division. The Westchester Division, which has 270 certified beds, provides inpatient and outpatient psychiatric and behavioral health

services. The attending physicians at this campus hold faculty appointments at the Weill Cornell Medical School.

Lower Manhattan Hospital

The Hospital’s newest campus, NewYork-Presbyterian Lower Manhattan Hospital (“Lower Manhattan Hospital”), traces its history to 1853, when Dr. Elizabeth Blackwell, America’s first licensed female physician, opened a free dispensary to provide outpatient care for poor women and children. This dispensary became the New York Infirmary for Indigent Women and Children, which opened in 1857. After several relocations and name changes, Lower Manhattan Hospital is now located at 170 William Street, Manhattan, and is the only acute care facility in Manhattan below 14th Street. It has 180 certified beds. Lower Manhattan Hospital became part of the Hospital in July 2013 when New York Downtown Hospital, then a separate member of the Health Care System, was merged into the Hospital. The attending physicians at this campus hold faculty appointments at the Weill Cornell Medical School.

Columbia Campus

Presbyterian Hospital was founded in 1868 by James Lenox, a New York philanthropist, and began operations in 1872 at its initial site on the Upper East Side of Manhattan. Presbyterian Hospital moved to its present location in the Washington Heights section of Manhattan (the “Columbia Campus”) in 1928.

The Columbia Campus now occupies the city blocks bounded by West 165th Street to West 168th Street and from Broadway to Riverside Drive, together with various other buildings in the area. Portions of the buildings that comprise the Columbia Campus are owned and/or occupied by Columbia University Medical School. The Hospital has 738 certified beds at its facilities on this campus. The attending physicians at this campus hold faculty appointments at the Columbia University Medical School.

Morgan Stanley Children’s Hospital In the late 1880s, a group of women led by Sara and Julie McNutt, sisters and physicians, established Babies Hospital in a brownstone on 55th Street and Lexington Avenue in Manhattan. That building was replaced in 1902 by an eight-story, 80-bed modern hospital. In 1929, Babies Hospital moved uptown to become part of Presbyterian Hospital, and with the opening of a new facility in November 2003 was renamed The Morgan Stanley Children’s Hospital of NewYork-Presbyterian (“MS- CHONY”). MS-CHONY is a pediatric acute care and ancillary services facility with 269 certified beds, and is located on a site contiguous with the Columbia Campus. The attending physicians at this campus hold faculty appointments at the Columbia University Medical School.

Allen Hospital The Allen Hospital, which has 196 certified beds and is located at Broadway and the Harlem River in the Inwood section of Manhattan, opened in 1988 under the sponsorship of Presbyterian Hospital and offers acute care to residents of its service area in a community-based setting. The attending physicians at this campus hold faculty appointments at the Columbia University Medical School. See map under caption “Location of Campuses of the Hospital and the Health Care Entities” in APPENDIX A hereto. The Bonds

The Bonds are being issued pursuant to an Indenture of Trust, dated as of June 1, 2016 (the “Bond Indenture”), by and between the Hospital and TD Bank, N.A., as bond trustee (the “Bond

Trustee”). Pursuant to the Bond Indenture, on each Payment Date, until the principal of and interest on the Bonds shall have been paid or provision for such payment shall have been made as provided in the Bond Indenture, the Hospital will pay the Bond Trustee a sum equal to the amount payable on such Payment Date as principal of or interest on the Bonds. See “THE BONDS” herein.

The Series 2016 Bonds and any Additional Bonds that may be issued under the Bond Indenture are general obligations of the Hospital. The Series 2016 Bonds are not secured by a pledge of or lien on any revenue of the Obligated Group nor has any mortgage on any property of the Obligated Group been pledged to secure the Series 2016 Bonds. (See “SOURCES OF PAYMENT FOR THE BONDS” herein).

Master Indenture

In February 2015, the Hospital issued its $750,000,000 Taxable Bonds, Series 2015 (the “Series 2015 Bonds”). In connection with the issuance of the Series 2015 Bonds, the Hospital entered into a Master Trust Indenture, dated as of January 1, 2015 (the “Master Trust Indenture”), between the Hospital and TD Bank, N.A., as master trustee (the “Master Trustee”), and formed an Obligated Group under and as defined in the Master Trust Indenture. The Hospital was, and continues to be, the sole Member of the Obligated Group under the Master Trust Indenture. To evidence and secure the payment obligations of the Hospital with respect to the Series 2015 Bonds, the Hospital issued its Obligation No. 1, dated the date of issuance of the Series 2015 Bonds, under and pursuant to the Master Trust Indenture and the Supplemental Master Indenture for Obligation No. 1, dated as of January 1, 2015, between the Hospital and the Master Trustee.

To evidence and secure the obligation of the Hospital with respect to the Series 2016 Bonds, the Hospital will issue its Obligation No. 2, to be dated the date of the issuance of the Series 2016 Bonds, under and pursuant to the Master Trust Indenture and a Supplemental Master Indenture for Obligation No. 2, to be dated as of June 1, 2016 (“Supplemental Indenture No. 2”), between the Hospital and the Master Trustee. Obligation No. 2 is being issued by the Hospital and will constitute an “Obligation” within the meaning of the Master Indenture. Obligation No. 2 will be an Obligation of the Obligated Group payable on a parity basis under the Master Indenture with all other Obligations that may be issued thereunder, including Obligation No. 1 issued in connection with the Series 2015 Bonds described above. Obligation No. 2 will contain payment provisions corresponding to those of the Series 2016 Bonds and will be issued pursuant to the Supplemental Master Indenture for Obligation No. 2, dated as of June 1, 2016 (the “Supplemental Indenture”) by and between the Hospital and the Master Trustee. Obligations issued under the Master Indenture are not secured by a pledge of any property of the Hospital or a lien on any revenues of the Hospital. Obligation No. 2 and the Series 2016 Bonds are unsecured obligations.

Currently, the Hospital is the sole Member of the Obligated Group under the Master Indenture. However, additional entities may become Obligated Members under the Master Indenture if certain financial and other tests are satisfied. The Master Indenture creates a joint and several obligation of each Member of the Obligated Group for the timely payment of all sums due under all Obligations issued under the Master Indenture (including Obligation No. 2), and for the performance and observance of all Master Indenture covenants and agreements by all Members of the Obligated Group. Management of the Hospital is considering the possibility of adding one or more of the Hospital’s indirect subsidiaries and/or other affiliates to the Obligated Group or designating such entities as Designated Affiliates under the Master Trust Indenture, and it is not possible to predict what impact adding another entity to the Obligated Group would have on the Series 2016 Bonds. See APPENDIX A – “THE OBLIGATED GROUP AND THE MASTER TRUST INDENTURE – Possible Additions to the Obligated Group under the Master Trust Indenture” attached hereto for a discussion of Management’s decision-making process regarding the addition of members to the Obligated Group or designating Designated Affiliates and APPENDIX E – “FORMS OF THE MASTER INDENTURE AND SUPPLEMENTAL INDENTURE –

Addition of Obligated Members” attached hereto for a description of the provisions permitting an entity to join or withdraw from the Obligated Group under the Master Indenture. The Hospital has agreed in the Supplemental Indenture that it will not withdraw from the Obligated Group. The Hospital is not restricted by the Bond Indenture or otherwise from incurring additional indebtedness and may grant liens on its property subject to the limitations contained in the Bond Indenture and the Master Indenture. See “SOURCES OF PAYMENTS FOR THE BONDS” herein, APPENDIX D – “FORM OF BOND INDENTURE – Authorization of Bonds” and “– Compliance with Bond Indenture” and APPENDIX E – “FORMS OF THE MASTER INDENTURE AND SUPPLEMENTAL INDENTURE” attached hereto.

Redemption

The Bonds are subject to optional redemption in whole or in part by the Hospital prior to maturity, on any Business Day, in such order of maturity as directed by the Hospital, at the Make-Whole Redemption Price, together with accrued interest to the date fixed for redemption, as further described herein. See “THE BONDS – Redemption” herein.

Book-Entry Only System

The following information concerning DTC and DTC’s book-entry system has been obtained from sources that the Hospital and the Underwriter believe to be reliable, but none of the Hospital or the Underwriter takes any responsibility for the accuracy thereof.

When delivered, the Bonds will be registered in the name of Cede & Co., the nominee of The Depository Trust Company (“DTC”). DTC will act as the securities depository for the Bonds. Purchases of the Bonds may be made in book-entry form only, through brokers and dealers who are, or who act through, DTC Participants. Beneficial Owners of the Bonds will not receive physical delivery of certificated securities (except under certain circumstances described in the Bond Indenture). Payment of the principal or Make-Whole Redemption Price of and interest on the Bonds are payable by the Bond Trustee to DTC, which will in turn remit such payments to the DTC Participants, which will in turn remit such payments to the Beneficial Owners of the Bonds. In addition, so long as Cede & Co. is the registered owner of the Bonds, the right of any Beneficial Owner to receive payment for any Bond will be based only upon and subject to the procedures and limitations of the DTC book-entry system. See “BOOK-ENTRY ONLY SYSTEM” herein.

Certain Information Related to this Offering Memorandum

The descriptions herein of the Bond Indenture and other documents relating to the Bonds do not purport to be complete and are qualified in their entirety by reference to such documents, and the description herein of the Bonds is qualified in its entirety by the form thereof and the information with respect thereto included in such documents. See APPENDIX D – “FORM OF BOND INDENTURE” attached hereto for the proposed form of the Bond Indenture, and APPENDIX E – “FORMS OF THE MASTER INDENTURE AND SUPPLEMENTAL INDENTURE” attached hereto for the proposed forms of the Master Indenture and the Supplemental Indenture.

All capitalized terms used in this Offering Memorandum and not otherwise defined herein have the same meanings as in the Bond Indenture. See APPENDIX D – “FORM OF BOND INDENTURE” attached hereto for definitions of certain words and terms used but not otherwise defined herein.

Information concerning the Hospital and its affiliates is included in Appendices A and B attached hereto. For supplementary information concerning the financial operations of the Hospital, see (i) Appendix C-1, which sets forth audited consolidated financial statements of the Hospital for the years

ended December 31, 2015, 2014 and 2013, (ii) Appendix C-2, which sets forth the unaudited interim consolidated financial statements of the Hospital as of and for the three (3) month period ended March 31, 2016, and (iii) “THE HOSPITAL – FINANCIAL AND OPERATING INFORMATION – Summary Statements of Operations and of Financial Position”, “– Management’s Discussion and Analysis of Utilization” and “– Management’s Discussion and Analysis of Recent Financial Performance” in Appendix A hereto. Information for the three (3) month period ended March 31, 2016 is derived from unaudited internal records of the Hospital and should be read in conjunction with the audited consolidated financial statements of the Hospital for the years ended December 31, 2015, 2014 and 2013, together with the Reports of Independent Auditors, which are included in Appendix C-1 hereto. No affiliate of the Hospital will be obligated to make any payments under or with respect to Obligation No. 2 or the Bonds, unless such affiliate becomes and remains an Obligated Group Member.

Certain risk factors that should be considered by prospective investors in the Bonds are set forth below under “BONDHOLDERS’ RISKS.”

The information and expressions of opinion herein speak only as of their date and are subject to change without notice. Neither delivery of this Offering Memorandum nor any sale made hereunder nor any future use of this Offering Memorandum will, under any circumstances, create any implication that there has been no change in the affairs of the Hospital.

SOURCES OF PAYMENT FOR THE BONDS

Set forth below is a narrative description of certain contractual provisions relating to the source of payment of the Bonds and certain related covenants. These provisions have been summarized and this description does not purport to be complete. Reference should be made to the Bond Indenture, the Master Indenture and the Supplemental Indenture.

Definitions for defined terms used under this heading are contained in APPENDIX D – “FORM OF BOND INDENTURE” and APPENDIX E – “FORMS OF THE MASTER INDENTURE AND SUPPLEMENTAL INDENTURE” attached hereto. The summary set forth below does not purport to be complete. See also APPENDIX D – “FORM OF BOND INDENTURE” and APPENDIX E – “FORMS OF THE MASTER INDENTURE AND SUPPLEMENTAL INDENTURE” attached hereto for a more complete statement of the rights, duties and obligations of the parties thereto.

Bond Indenture

The Bond Indenture provides that, on or before each Payment Date, the Hospital will pay the Bond Trustee a sum equal to the amount payable on such Payment Date as principal of and interest on the Bonds. In addition, the Bond Indenture provides that each such payment made will at all times be sufficient to pay the total amount of interest and principal (whether at maturity or upon redemption or acceleration) becoming due and payable on the Bonds on such Payment Date. If on any Payment Date, the amounts held by the Bond Trustee in the accounts within the Bond Fund (as described below) are insufficient to make any required payments of principal of (whether at maturity or upon acceleration) and interest on the Bonds as such payments become due, the Hospital is required to pay such deficiency to the Bond Trustee. In the event that the Hospital does not make up such deficiency the Bond Trustee is directed to request payment under Obligation No. 2. See APPENDIX D – “FORM OF BOND INDENTURE – Bond Trustee Direction Regarding Obligation No. 2” attached hereto. Additional Bonds may be issued pursuant to the Bond Indenture from time to time, that are consolidated with the Bonds or which are issued as a separate series of bonds. Additional Bonds consolidated with the Bonds pursuant to the terms of the Bond Indenture shall have the same interest rate,

redemption provisions, maturity date and other terms (other than issue price) as the Bonds offered hereby, may have the same CUSIP number as the Bonds and shall be treated as a single series of Bonds for all purposes of the Bond Indenture.

Master Indenture, Supplemental Indenture and Obligation No. 2

The Hospital will execute Obligation No. 2 to evidence its payment obligations with respect to the Series 2016 Bonds and its related obligations under the Bond Indenture. Obligation No. 2 will be payable to the Bond Trustee as security for the Series 2016 Bonds. Payments on Obligation No. 2 are scheduled to be made at the times and in the amounts required to pay debt service on the Series 2016 Bonds and will be credited against the loan payment requirements of the Hospital under the Bond Indenture. Obligation No. 2 is being issued by the Hospital pursuant to the Master Indenture and the Supplemental Indenture and will constitute an “Obligation” within the meaning of the Master Indenture. Obligation No. 2 will be an Obligation of the Obligated Group payable on a parity basis with all other Obligations that may be issued thereunder, including Obligation No. 1 issued in connection with the Series 2015 Bonds described below.

Currently, the Hospital is the sole Member of the Obligated Group under the Master Indenture. However, the Master Indenture permits other entities, upon compliance with certain conditions, to become Members of the Obligated Group and to issue Obligations thereunder. Each Obligation will be a joint and several general obligation of the Members of the Obligated Group. Pursuant to the provisions of the Master Indenture, each Member of the Obligated Group is jointly and severally obligated (subject to the right of such Member to withdraw from the Obligated Group upon satisfying the applicable provisions of the Master Indenture) to make any and all payments promptly on all Obligations thereafter, and in certain cases, theretofore, issued under the Master Indenture, including Obligation No. 2, according to the terms thereof. Management of the Hospital is considering the possibility of adding one or more of the Hospital’s indirect subsidiaries and/or other affiliates to the Obligated Group or designating such entities as Designated Affiliates under the Master Trust Indenture, and it is not possible to predict what impact adding another entity to the Obligated Group would have on the Series 2016 Bonds. See APPENDIX A – “THE OBLIGATED GROUP AND THE MASTER TRUST INDENTURE – Possible Additions to the Obligated Group under the Master Trust Indenture” attached hereto for a discussion of Management’s decision-making process regarding the addition of members to the Obligated Group or designating Designated Affiliates and APPENDIX E – “FORMS OF THE MASTER INDENTURE AND SUPPLEMENTAL INDENTURE – Addition of Obligated Members” attached hereto.

Limitations on Liens

Pursuant to the Master Indenture, each Member of the Obligated Group agrees that it will not create or suffer to be created or permit the existence of any Lien upon the Property of the Obligated Group, except for Permitted Liens.

Certain Permitted Liens existing as of the date of delivery of the Series 2016 Bonds include (i) the FHA-Insured Mortgages (as defined below) and related liens granted under the mortgage loan documents with respect thereto (the FHA-Insured Mortgages and such other mortgage loan documents, the “FHA-Insured Loan Documents”) securing approximately $920,132,000 of long- term indebtedness (the “FHA-Insured Indebtedness”), and (ii) the Lower Manhattan Mortgage (as defined below) and related liens granted under the mortgage loan documents with respect thereto (the Lower Manhattan Mortgage and such other mortgage loan documents, the “Lower Manhattan

Loan Documents”) securing approximately $23,295,000 of long-term indebtedness (the “Lower Manhattan Indebtedness”), as described below under “Outstanding Indebtedness”. The Obligated Group has agreed not to incur additional FHA-Insured Indebtedness other than to refinance existing FHA-Insured Indebtedness. SEE APPENDIX E – “FORMS OF THE MASTER INDENTURE AND SUPPLEMENTAL INDENTURE – Supplemental Indenture” attached hereto and see also “Outstanding Indebtedness”, “BONDHOLDER RISKS”, APPENDIX A – “THE HOSPITAL”, APPENDIX B – “SELECT INFORMATION REGARDING THE HOSPITAL SUBSIDIARIES”, and APPENDIX C-1 – “CONSOLIDATED FINANCIAL STATEMENTS OF THE HOSPITAL AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 AND DECEMBER 31, 2014 AND 2013 WITH REPORTS OF INDEPENDENT AUDITORS”). Additional Permitted Liens include, but are not limited to, Liens that may be granted to secure additional Obligations and other Indebtedness and Liens not otherwise identified as a Permitted Lien where the Value of all Property that is encumbered by such Liens does not exceed 30% of the Value of all Property of the Obligated Group, calculated at the time of creation of such Lien. The Obligated Group may incur substantial liabilities secured by Permitted Liens. See “BONDHOLDER RISKS”, and APPENDIX E -- “FORMS OF THE MASTER INDENTURE AND SUPPLEMENTAL INDENTURE – Permitted Liens” and – Additional Long Term Obligations” attached hereto.

Certain Covenants of the Obligated Group

In addition to the provisions described above, the Master Indenture and the Supplemental Indenture contains provisions, covenants and restrictions related to debt service coverage, mergers and other corporate combinations and divestitures, and other matters. The Master Indenture does not restrict the disposition of assets or establish financial tests to become a Member of or to withdraw from the Obligated Group. The Hospital has agreed that it will not withdraw from the Obligated Group. See APPENDIX E – “FORMS OF THE MASTER INDENTURE AND SUPPLEMENTAL INDENTURE.”

The rights and remedies of the Master Trustee under the Master Indenture and of the Bondholders and the Issuer under the Bond Indenture are subject to and may be limited by the application of general principles of equity and the laws of the State of New York, and the United States with respect to bankruptcy, insolvency, creditors’ rights generally, now existing or hereafter enacted.

Outstanding Indebtedness

The Hospital has FHA-Insured Indebtedness outstanding, as of March 31, 2016, in the amount of $920,132,000, which is secured by mortgages on the Weill Cornell Campus, the Columbia Campus, Morgan Stanley Children’s Hospital, Allen Hospital and the Westchester Division (the “FHA-Insured Mortgages”), and a pledge of revenues and accounts of the Hospital. See Appendix A for descriptions of these facilities.

In connection with the FHA-Insured Loan Documents, the Hospital is required to maintain certain debt service funds including mortgage reserve funds. In addition, the Hospital is required to maintain debt service coverage and other financial ratios, and to obtain approval to incur additional debt above specified levels if certain covenant requirements are not met. Under the terms of the FHA-Insured Loan Documents, the Hospital is eligible for enhanced status which provides greater flexibility in its financial operations and ability to incur both short-term and long-term debt. The Hospital’s eligibility for the enhanced status is based on its historically strong financial performance. If that enhanced status is revoked in the future, the Hospital may be required to enter into one or more deposit account control

agreements (“DACA”) to perfect the FHA-insured mortgagees’ security interests in the Hospital’s deposit accounts and the ability of the Hospital to incur additional debt may be restricted.

HUD has consented to the Hospital entering into the loans evidenced by the Series 2015 Bonds and the Series 2016 Bonds. HUD, the FHA-Insured mortgagees, DASNY and the Master Trustee have entered into an intercreditor agreement, as amended by a first amendment to intercreditor agreement (as amended, the “Intercreditor Agreement”) which provides for the cross-default of the FHA-Insured Indebtedness and the Lower Manhattan Indebtedness (collectively, the “Senior Debt”) with the Series 2016 Bonds and the Series 2015 Bonds. The Intercreditor Agreement provides that the Trustee may accelerate the Series 2016 Bonds only upon: (i) a payment default on the Series 2016 Bonds or Series 2015 Bonds after the expiration of any applicable notice and cure periods as provided for in the Master Indenture and the Bond Indenture, (ii) a payment default on the Senior Debt, (iii) an acceleration of any portion of the Senior Debt, and (iv) an insolvency proceeding with respect to the Hospital. The Series 2016 Bonds and the Series 2015 Bonds cannot be accelerated for any other defaults or events of default under the Master Indenture or the Bond Indenture. Other than with respect to an insolvency proceeding, the Trustee and Master Trustee must provide HUD, DASNY, and Prudential with not less than thirty (30) days prior written notice of its intent to exercise a right of acceleration. The Intercreditor Agreement also set forth the terms as to the subordinate and junior nature of the Series 2016 Bonds and the Series 2015 Bonds with respect to the Senior Debt. It provides that payment of amounts due on the Series 2016 Bonds and the Series 2015 Bonds will not be made if there is a payment default on the Senior Debt or the Senior Debt has been accelerated. It further provides that all Senior Debt shall first be paid in full in cash before any payment of, or distribution is made in respect or on account of, the Series 2016 Bonds or the Series 2015 Bonds in any insolvency proceeding. Any payments received by the Trustee or Master Trustee in contravention of the Intercreditor Agreement must be paid over to the holders of the Senior Debt. In any insolvency proceeding, the Trustee and the Master Trustee assign to the holders of the Senior Debt their rights with respect to the Series 2016 Bonds and the Series 2015 Bonds in such proceeding, including voting rights. Given the substantial amount of secured indebtedness that the Hospital has and the senior rights of HUD, the FHA-Insured Mortgagees and DASNY, as the secured lenders, the exercise of remedies by the Trustee and the Master Trustee on behalf of the Bondholders may not result in the collection of sufficient funds to pay the Series 2016 Bonds or the Series 2015 Bonds. The payment of any claims related to the Series 2016 Bonds and the Series 2015 Bonds is subordinate to the payment of the FHA-Insured Indebtedness and the Lower Manhattan Indebtedness as set forth in the Intercreditor Agreement. See “BONDHOLDER’S RISKS”.

In the event of a default under the FHA-Insured Loan Documents, the FHA mortgagees are entitled to exercise certain rights as secured parties, including rights to take control of the Hospital’s accounts and revenues, and, at the direction of HUD, to accelerate the FHA-Insured Indebtedness and foreclose on the lien of the FHA-Insured Mortgages. The proceeds of the exercise of any such rights would be applied to the payment of the FHA-Insured Indebtedness prior to the payment of the 2016 Bonds and the Series 2015 Bonds.

The Lower Manhattan Indebtedness relates to the Secured Hospital Revenue Refunding Bonds, New York Downtown Hospital, Series 2010, which were issued by the Dormitory Authority of the State of New York (“DASNY”). This debt, which was outstanding as of March 31, 2016 in the amount of $23,295,000, is secured by a mortgage on the Lower Manhattan Hospital facility (the “Lower Manhattan Mortgage”) and a security interest in the gross receipts and certain fixtures, furnishings and equipment of the Hospital. See Appendix A for descriptions of these facilities. Pursuant to a Subordination Agreement, dated as of June 28, 2013 (the “DASNY Subordination Agreement”), DASNY agreed to subordinate its interest in the Hospital’s gross receipts to the security interests granted under the FHA- Insured Loan Documents.

In the event of a default under the Lower Manhattan Loan Documents, subject to the DASNY Subordination Agreement, DASNY is entitled to exercise certain rights as a secured party, including the right to accelerate the Lower Manhattan Indebtedness and foreclose on the lien of the Lower Manhattan Mortgage. The proceeds of the exercise of any such rights would be applied to the payment of the Lower Manhattan Indebtedness prior to the payment of the 2016 Bonds.

In February 2015, the Hospital issued its Series 2015 Bonds. To evidence and secure the payment obligations of the Hospital with respect to the Series 2015 Bonds, the Hospital issued its Obligation No. 1, dated the date of issuance of the Series 2015 Bonds, under and pursuant to the Master Indenture and the Supplemental Master Indenture for Obligation No. 1, dated as of January 1, 2015, between the Hospital and the Master Trustee.

The Hospital also has various capital leases totaling $53,415,000 (as of March 31, 2016) secured by the financed equipment.

In addition the Hospital has a $100 million unsecured line of credit with a commercial bank which expires on June 30, 2016. As of the date of this Offering Memorandum, no draws have been made under this line of credit. This is a 364-day line of credit that is generally renewed annually. The Hospital is in the process of renewing it through June 30, 2017.

Certain of the Outstanding Indebtedness described in this section is benefitted by specific liens on Hospital revenues and property that are superior to the rights of other creditors including the Series 2016 Bonds. The ability of the holders of Outstanding Indebtedness to exercise certain rights and to foreclose on their liens in the event of a default by the Hospital could result in the Hospital’s inability to repay the Series 2016 Bonds. See “BONDHOLDER RISKS”, APPENDIX A – “THE HOSPITAL” and APPENDIX C-1 – “FINANCIAL STATEMENTS OF THE HOSPITAL AS OF AND FOR THE YEARS ENDING DECEMBER 31, 2015 AND 2014 WITH REPORT OF INDEPENDENT AUDITORS”).

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ESTIMATED DEBT SERVICE REQUIREMENTS ON THE SERIES 2016 BONDS AND CERTAIN OTHER INDEBTEDNESS

The following is a summary of the estimated debt service requirements on the Bonds and certain other indebtedness of the Hospital: Total Debt Estimated Fiscal Year Principal Interest Service Existing Debt Total Debt Ending on the Bonds on the Bonds on the Bonds Service (1) Service

2016 $ 142,197,000 2017 137,300,000 2018 134,152,000 2019 131,925,000 2020 130,700,000 2021 129,290,000 2022 124,809,000 2023 120,321,000 2024 120,320,000 2025 108,758,000 2026 92,573,000 2027 92,573,000 2028 92,575,000 2029 92,575,000 2030 92,575,000 2031 92,574,000 2032 92,575,000 2033 92,572,000 2034 92,574,000 2035 84,712,000 2036 76,850,000 2037 76,850,000 2038 68,511,000 2039 43,497,000 2040 43,499,000 2041 43,497,000 2042 43,500,000 2043 43,500,000 2044 43,500,000 2045 43,498,000 2046 -

(1) Includes estimated debt service on the Outstanding Indebtedness described under “Sources of Payment for the Bonds – Outstanding Indebtedness”.

For a discussion of outstanding debt of the Hospital, see APPENDIX A – “THE HOSPITAL”, APPENDIX C-1 – “CONSOLIDATED FINANCIAL STATEMENTS OF THE HOSPITAL AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 AND DECEMBER 31, 2014 AND 2013 WITH REPORTS OF INDEPENDENT AUDITORS”.

THE BONDS

Description of the Bonds

Unless the context requires otherwise, references to “Bonds” for all purposes of the Bond Indenture and this “Description of the Bonds” include any Additional Bonds that are actually issued and consolidated with the Bonds.

The Bonds will be dated, will bear interest at the rates and will mature on the dates (subject to prior redemption) as set forth on the cover page to this Offering Memorandum. Interest on the Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

The Bonds will be delivered in the form of fully registered Bonds in denominations of $1,000 and any integral multiple thereof. The Bonds will be registered initially in the name of “Cede & Co.,” as nominee of DTC and will be evidenced by one Bond for each maturity in the principal amount of the Bonds of such maturity. Registered ownership of the Bonds, or any portions thereof, may not thereafter be transferred except as set forth in the Bond Indenture. See APPENDIX D – “FORM OF BOND INDENTURE” attached hereto.

The principal or Make-Whole Redemption Price of the Bonds will be payable by check or by wire transfer of immediately available funds in lawful money of the United States of America at the Designated Office of the Bond Trustee.

Interest on the Bonds will accrue beginning on the date of issuance of the Bonds and will be payable on each Interest Payment Date. An “Interest Payment Date” for the Bonds will occur on February 1 and August 1 of each year commencing on February 1, 2017. Payment of the interest on each Interest Payment Date will be made to the Person whose name appears on the bond registration books of the Bond Trustee as the Holder thereof as of the close of business on the Record Date for each Interest Payment Date, such interest to be paid by check mailed by first class mail to such Holder at its address as it appears on such registration books, or, upon the written request of any Holder of at least $1,000,000 in aggregate principal amount of Bonds, submitted to the Bond Trustee at least one Business Day prior to the Record Date, by wire transfer in immediately available funds to an account within the United States designated by such Holder. Notwithstanding the foregoing, as long as Cede & Co. is the Holder of the Bonds in book-entry form, said principal or Make-Whole Redemption Price and interest payments will be made to Cede & Co. by wire transfer in immediately available funds.

All payments by the Hospital in respect of the Bonds will be made after the deduction or withholding of any taxes required by law to be deducted or withheld.

Redemption

Optional Redemption

The Bonds are subject to redemption prior to their stated maturity in whole or in part on any Business Day in such order of maturity as directed by the Hospital, and the Bond Trustee shall select the Bonds of a maturity to be redeemed from the Bonds Outstanding of such maturity not previously called for redemption, pro rata, at the Make-Whole Redemption Price, together with accrued interest to the date fixed for redemption. For purposes of this paragraph, the following definitions shall apply:

“Comparable Treasury Issue” shall mean the United States Treasury security or securities selected by a Designated Investment Banker as having an actual or interpolated maturity comparable to

the remaining term of the Bonds to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of such Bonds.

“Comparable Treasury Price” shall mean, with respect to any redemption date, the average of the Reference Treasury Dealer Quotations for such redemption date or, if the Designated Investment Banker obtains only one Reference Treasury Dealer Quotation, such Reference Treasury Dealer Quotation.

“Designated Investment Banker” shall mean one of the Reference Treasury Dealers appointed by the Hospital.

“Make-Whole Redemption Price” shall mean the greater of:

(1) 100% of the principal amount of any Bonds being redeemed; or

(2) The sum of the present values of the remaining unpaid scheduled payments of principal and interest on any Bonds being redeemed (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis (assuming a 360- day year consisting of twelve 30-day months) at the Treasury Rate plus ______(__) basis points.

“Reference Treasury Dealer” shall mean Goldman, Sachs & Co. or its affiliates which are primary U.S. government securities dealers, and their respective successors; provided that if Goldman, Sachs & Co. or its affiliates shall cease to be a primary U.S. government securities dealer (a “Primary Treasury Dealer”), the Hospital shall substitute therefore another Primary Treasury Dealer; provided, further, that the Hospital may, at its option, substitute another Primary Treasury Dealer for Goldman, Sachs & Co. or its affiliates.

“Reference Treasury Dealer Quotations” shall mean, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Designated Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Designated Investment Banker by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the third Business Day preceding such redemption date.

“Treasury Rate” shall mean, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity or interpolated (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

Purchase in Lieu of Redemption

The Bonds are subject to purchase in lieu of redemption by the Bond Trustee at the direction of the Hospital prior to maturity on the same terms that would apply to the Bonds if the Bonds were then being optionally redeemed.

Selection of Bonds for Redemption

If less than all of the Bonds are called for redemption, the Hospital shall select the maturities of Bonds to be redeemed. If less than all of the Bonds of a maturity are to be redeemed, the Bond Trustee shall select the Bonds of a maturity to be redeemed from the Bonds Outstanding of such maturity not previously called for redemption, pro rata.

If the Bonds are registered in book-entry only form and so long as DTC or a successor securities depository is the sole registered owner of the Bonds, if less than all of the Bonds of a maturity are called for prior redemption, the particular Bonds or portions thereof to be redeemed shall be selected on a pro rata pass-through distribution of principal basis in accordance with DTC procedures, provided that, so long as the Bonds are held in book-entry form, the selection for redemption of such Bonds shall be made in accordance with the operational arrangements of DTC then in effect.

It is the Hospital’s intent that redemption allocations made by DTC be made on a pro rata pass- through distribution of principal basis as described above. However, the Hospital can provide no assurance that DTC, DTC’s direct and indirect participants or any other intermediary will allocate the redemption of Bonds on such basis. If the DTC operational arrangements do not allow for the redemption of the Bonds on a pro rata pass-through distribution of principal basis as discussed above, the Bonds will be selected for redemption, in accordance with DTC procedures, by lot.

Notice of Redemption

Notice of redemption will be mailed by the Hospital to the Bond Trustee by first class mail, not less than 45 days, nor more than 60 days prior to the redemption date, or such fewer days as may be agreed to by the Hospital and the Bond Trustee. Notice of redemption will be mailed by the Bond Trustee by first class mail, not less than 30 days, nor more than 60 days prior to the redemption date, to the respective Holders of any Bonds designated for redemption at their addresses appearing on the bond registration books of the Bond Trustee. If the Bonds are no longer held by DTC or its successor or substitute, the Bond Trustee shall also give notice of redemption by overnight mail to such securities depositories and/or securities information services as shall be designated in a certificate of the Hospital. Each notice of redemption shall state the date of such notice, the date of issue of the Bonds, the redemption date, the method of calculating the Make-Whole Redemption Price, the interest rate, the place or places of redemption (including the name and appropriate address or addresses of the Bond Trustee), the maturity (including CUSIP number, if any), and, in the case of Bonds to be redeemed in part only, the portion of the principal amount thereof to be redeemed. Each such notice will also state that on said date there will become due and payable on each of said Bonds the Make-Whole Redemption Price thereof or of said specified portion of the principal amount thereof in the case of a Bond to be redeemed in part only, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered.

Failure by the Bond Trustee to give notice as described above to any one or more of the securities information services or depositories designated by the Hospital, or the insufficiency of any such notice will not affect the sufficiency of the proceedings for redemption. Failure by the Bond Trustee to mail notice of redemption to any one or more of the respective Holders of any Bonds designated for redemption will not affect the sufficiency of the proceedings for redemption with respect to the Holders to whom such notice was mailed.

The Hospital may instruct the Bond Trustee to provide conditional notice of redemption, which may be conditioned upon the receipt of moneys or any other event. If such conditions are not met, the Bond Trustee is to give notice, as soon thereafter as practicable, in the same manner, to the same Persons, as notice of such redemption was given pursuant to the Bond Indenture and as described above. Additionally, any such notice may be rescinded by written notice given to the Bond Trustee by the Hospital no later than five Business Days prior to the date specified for redemption. The Bond Trustee will give notice of such rescission, as soon thereafter as practicable, in the same manner, to the same Persons, as notice of such redemption was given.

Partial Redemption of Bonds

Upon surrender of any Bond redeemed in part only, the Bond Trustee shall provide a replacement Bond in a principal amount equal to the portion of such Bond not redeemed, and deliver it to the registered owner thereof. The Bond so surrendered shall be cancelled by the Bond Trustee as provided herein. The Hospital and the Bond Trustee shall be fully released and discharged from all liability to the extent of payment of the redemption price for such partial redemption.

Effect of Redemption

Notice of redemption having been duly given as aforesaid, and moneys for payment of the redemption price being held by the Bond Trustee, the Bonds, or portions thereof, so called for redemption shall, on the redemption date designated in such notice, become due and payable at the redemption price specified in such notice, interest on the Bonds or portions thereof so called for redemption shall cease to accrue, said Bonds shall cease to be entitled to any lien, benefit or security under the Bond Indenture, and the Holders of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. All Bonds fully redeemed pursuant to the provisions of the Bond Indenture described above shall be cancelled upon surrender thereof and may be destroyed by the Bond Trustee, which shall, upon request of the Hospital, deliver to the Hospital a certificate evidencing such destruction.

Transfer of Bonds

Any Bond may, in accordance with its terms and subject to the limitations provided in the Bond Indenture, be transferred upon the books required to be kept pursuant to the provisions of the Bond Indenture by the Person in whose name it is registered, in person or by its duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form approved by the Bond Trustee.

Whenever any Bond or Bonds shall be surrendered for transfer, the Hospital shall execute and the Bond Trustee shall authenticate and deliver a new Bond or Bonds of the same series, bearing interest at the same rate and maturing on the same date, for a like aggregate principal amount in Authorized Denominations. The Bond Trustee may require the Bondholder requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer, and the Bond Trustee may also require the Bondholder requesting such transfer to pay a reasonable sum to cover any expenses incurred by the Hospital in connection with such transfer. The Bond Trustee shall not be required to transfer (i) any Bond during the fifteen (15) days next preceding the selection of Bonds for redemption or (ii) any Bond called for redemption.

Exchange of Bonds

Bonds may be exchanged at the Designated Office of the Bond Trustee for a like aggregate principal amount of Bonds of the same series, bearing interest at the same rate and maturing on the same date of other Authorized Denominations. The Bond Trustee may require the Bondholder requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange, and the Bond Trustee may also require the Bondholder requesting such exchange to pay a reasonable sum to cover any expenses incurred by the Hospital in connection with such exchange. The Bond Trustee shall not be required to exchange (i) any Bond during the fifteen (15) days next preceding the selection of Bonds for redemption or (ii) any Bond called for redemption.

Bond Register

The Bond Trustee shall keep or cause to be kept sufficient books for the registration and transfer of the Bonds, which shall at all times (during regular business hours at the location where such books are kept) be open to inspection by any Bondholder, the Hospital or their respective agents duly authorized in writing; and, upon presentation for such purpose, the Bond Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such books, Bonds as provided in the Bond Indenture.

Acceleration

If any Event of Default occurs under the Bond Indenture, including an Event of Default resulting from a payment default on the part of the Hospital, the principal of the Bonds, and the interest accrued thereon, may be accelerated and become immediately due and payable, at the Make-Whole Redemption Price, with interest payable thereon to the accelerated payment date. For a description of the Events of Default under the Bond Indenture, see APPENDIX D – “FORM OF BOND INDENTURE – Events of Default and Remedies of Bondholders” attached hereto. See “Bondholders’ Risk”.

BOOK-ENTRY ONLY SYSTEM

The Depository Trust Company, New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities 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, and will be deposited with DTC.

General

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, as amended. 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 for 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 and 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

“AAA.” 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 ownership interests in the Bonds, except in the event that use of the book-entry system for such 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.

Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity 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 Hospital 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 the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal, redemption premium, if any, and interest payments 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 Hospital or the Bond Trustee on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name”, and will be the responsibility of such Participant and not of DTC, the Underwriter, the Bond Trustee or the Hospital subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption premium, if any, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Hospital or the Bond Trustee, disbursement of such payments to Direct

Participants will be the responsibility of DTC and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

The Hospital and the Bond Trustee may treat DTC (or its nominee) as the sole and exclusive registered owner of the Bonds registered in its name for the purposes of payment of the principal and redemption premium, if any, of, or interest on, the Bonds, giving any notice permitted or required to be given to a registered owners under the Bond Indenture, registering the transfer of the Bonds, or other action to be taken by registered owners and for all other purposes whatsoever. The Hospital and the Bond Trustee shall not have any responsibility or obligation to any Direct or Indirect Participant, any person claiming a beneficial ownership interest in the Bonds under or through DTC or any Direct or Indirect Participant, or any other person which is not shown on the registration books of the Hospital (kept by the Bond Trustee) as being a registered owner, with respect to the accuracy of any records maintained by DTC or any Direct or Indirect Participant; the payment by DTC or any Direct or Indirect Participant of any amount in respect of the principal, redemption premium, if any, or interest on the Bonds; any notice which is permitted or required to be given to registered owners thereunder or under the conditions to transfers or exchanges adopted by the Hospital; or other action taken by DTC as registered owner. Interest, redemption premium, if any, and principal will be paid by the Bond Trustee to DTC, or its nominee. Disbursement of such payments to the Direct or Indirect Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of the Direct or Indirect Participants.

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

The Hospital may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, the Bond certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Hospital, the Bond Trustee and the Underwriter believe to be reliable, but the Hospital, the Bond Trustee and the Underwriter do not take responsibility for the accuracy thereof.

Each person for whom a Participant acquires an interest in the Bonds, as nominee, may desire to make arrangements with such Participant to receive a credit balance in the records of such Participant, and may desire to make arrangements with such Participant to have all notices of redemption or other communications of DTC, which may affect such persons, to be forwarded in writing by such Participant and to have notification made of all interest payments. NONE OF THE HOSPITAL, THE UNDERWRITER AND THE BOND TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO SUCH PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE BONDS.

So long as Cede & Co. is the registered owner of the Bonds, as nominee for DTC, references herein to the Bondholders or registered owners of the Bonds shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners of the Bonds.

When reference is made to any action which is required or permitted to be taken by the Beneficial Owners, such reference only relates to those permitted to act (by statute, regulation or otherwise) on behalf of such Beneficial Owners for such purposes. When notices are given, they will be sent by the Bond Trustee to DTC only.

For every transfer and exchange of Bonds, the Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto.

NONE OF THE HOSPITAL, THE UNDERWRITER AND THE BOND TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DIRECT PARTICIPANTS, TO INDIRECT PARTICIPANTS, OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (I) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY DIRECT PARTICIPANT, OR ANY INDIRECT PARTICIPANT; (II) ANY NOTICE THAT IS PERMITTED OR REQUIRED TO BE GIVEN TO THE OWNERS OF THE BONDS UNDER THE BOND INDENTURE; (III) THE SELECTION BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS; (IV) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OR REDEMPTION PREMIUM, IF ANY, OR INTEREST DUE WITH RESPECT TO THE BONDS; (V) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE OWNER OF THE BONDS; OR (VI) ANY OTHER MATTER.

BONDHOLDERS’ RISKS

General Factors Affecting the Series 2016 Bonds and the Hospital’s Revenues and Expenses

AN INVESTMENT IN THE BONDS INVOLVES A DEGREE OF RISK. A PROSPECTIVE PURCHASER OF THE BONDS IS ADVISED TO READ THE ENTIRE OFFERING MEMORANDUM, INCLUDING THE APPENDICES HERETO. REFER TO THE SECTION “SOURCES OF PAYMENT FOR THE BONDS” AND THIS SECTION FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE BONDS. The factors listed below, among others, could adversely affect the Hospital’s operation, revenues and expenses to an extent and in a manner which cannot be determined at this time.

Introduction

Payment of the Bonds depends directly on the ability of the Members of the Obligated Group, currently the Hospital only, to collectively generate revenues sufficient to cover the debt service on the Bonds and all other indebtedness of the Obligated Group. In the last decade, health care providers, especially hospitals, have faced increasing economic pressures from both governmental health care programs and private purchasers of health care such as insurance companies and health maintenance organizations (collectively “third party payers”). The dependence of hospitals on governmental programs requires them to accept limitations on payments and comply with regulations and other restrictions and requirements triggered by participation in such programs. Some governmental and private third party payers have entered into contracts with health care providers that require “capitated” or other fixed payments, which have the effect of shifting significant economic risks to health care providers.

The Hospital has a significant amount of outstanding indebtedness that is secured by mortgages on the Hospital’s assets and which is payable on a priority ahead of the Bonds. Although the Hospital is part of a larger system as described in Appendix A hereto, the Hospital is currently the sole Member of the Obligated Group and no other entity is obligated on the Bonds. Health care, especially at the hospital level, is a highly regulated industry with complicated and frequently changing regulations arising both from payment programs and extensive governmental oversight. Health care providers are increasingly subject to audits, investigations and litigation that may threaten access to governmental reimbursement programs, require substantial fines and payments, generate adverse publicity and create significant legal and other transaction costs. In addition, because the Hospital is a 501(c)(3) organization under the

Internal Revenue Code, it is subject to increasing regulation and restrictions that may have adverse effects on its economic performance or threaten its tax-exempt status and the economic benefits derived from such status. In particular, such regulations and restrictions may require the provision of health care services without payment.

Set forth below is a limited discussion of certain of the risks affecting the Hospital and its ability to provide for payment of the Bonds. Investors should recognize that the discussion below 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 Offering Memorandum, including the Appendices hereto, in evaluating the Bonds.

Adequacy of Revenues

The Bonds are general unsecured obligations of the Hospital, the payment of which is evidenced by the Bonds and Obligation No. 2. No representation or assurance can be made that revenues will be realized by the Hospital in amounts sufficient to pay maturing principal of, redemption premium, if any, and interest on the Bonds. The ability of the Hospital to make payments on the Bonds under the Bond Indenture depends, among other things, upon the capabilities of management of the Hospital and the ability of the Hospital to maximize revenues under various third party reimbursement programs and to minimize costs and to obtain sufficient revenues from their operations to meet such obligations. Revenues and costs are affected by and subject to conditions which may change in the future to an extent and with effects that cannot be determined at this time. The risk factors discussed below should be considered in evaluating the ability of the Hospital to make payments in amounts sufficient to meet its obligations with respect to the Bonds and Obligation No. 2. This discussion is not, and is not intended to be, exhaustive.

The ability of the Hospital to make required payments under the Bonds and Obligation No. 2 is subject to, among other things, the capabilities of the management of the Hospital and future economic and other conditions, which are unpredictable and which may affect revenues and costs and, in turn, the payment of principal of, premium, if any, and interest on the Bonds. Future revenues and expenses of the Obligated Group will be affected by events and conditions relating generally to, among other things, demand for the Obligated Group’s services, its ability to provide the services required by patients, physicians’ relationships with the Obligated Group, patient and physician satisfaction with the Hospital and its facilities, management capabilities, the design and success of the Hospital’s strategic plans, demographic, financial and economic developments in the United States, the State and the Hospital’s service area, the Hospital’s ability to control expenses, maintenance by the Hospital of relationships with managed care organizations (“MCOs”) and PPOs (as defined herein), competition, rates, costs, third party reimbursement, legislation and governmental regulation. The ability of the Hospital to operate successfully over the life of the Bonds may also be dependent upon its ability to finance, acquire and support additional capital replacements and improvements, which ability will be affected by legislation, regulations and applicable principles of reimbursement. Federal and state statutes and regulations are the subject of intense legislative debate and are likely to change, and unanticipated events and circumstances may occur which cause variations from the Hospital’s expectations, and the variations may be material. THERE CAN BE NO ASSURANCE THAT THE REVENUES OF THE HOSPITAL WILL BE SUFFICIENT TO ENABLE THE HOSPITAL TO MAKE SUCH PAYMENTS.

None of the provisions, covenants, terms and conditions of the Bond Indenture or the Master Indenture will afford the Bond Trustee any assurance that the principal and interest owing under the Bonds and Obligation No. 2 (which, except for money held under the Bond Indenture and the other collateral securing the Bonds, constitute the sole source of funds for the payment of the Bonds) will be paid as and when due, if the financial condition of the Obligated Group deteriorates to a point where the Members of the Obligated Group are unable to pay their debts as they come due, or otherwise become insolvent.

Outstanding Indebtedness

FHA-Insured Indebtedness

The Hospital has FHA-Insured Indebtedness outstanding, which is secured by the FHA-Insured Mortgages and a pledge of accounts and revenues derived from the facilities subject to the FHA-Insured Mortgages. See “SOURCES OF PAYMENT FOR THE BONDS – Outstanding Indebtedness,” above for additional details. In the event of a default under the FHA-Insured Loan Documents, the FHA mortgagees are entitled to exercise certain rights as secured parties, including rights to take control of the Hospital’s accounts and revenues, and, at the direction of HUD, to accelerate the FHA-Insured Indebtedness and foreclose on the lien of the FHA-Insured Mortgages. The proceeds of the exercise of any such rights would be applied to the payment of the FHA-Insured Indebtedness prior to the payment of the 2016 Bonds. Furthermore, in the event of a default under the FHA-Insured Loan Documents, and prior to any acceleration of the FHA-Insured Indebtedness, HUD may require that the Hospital enter into a DACA. A DACA may restrict the flow of Hospital revenues that would otherwise be available to pay debt service on the Series 2016 Bonds. In the event that the Hospital fails to make the payments due on the FHA-Insured Indebtedness, it is not likely that the Hospital will have funds available to pay the Series 2016 Bonds. A failure to make payments on the FHA-Insured Indebtedness would result in a default under the Master Indenture and the Bond Indenture. Under the terms of the Bond Indenture, the Bond Trustee could accelerate the payment of the Series 2016 Bonds, subject to the terms of the Intercreditor Agreement. See “SOURCES OF PAYMENT FOR THE BONDS – Outstanding Indebtedness” above for a description of the Intercreditor Agreement. Because the Series 2016 Bonds are not secured by any property or revenues of the Hospital, so long as the FHA-Insured Indebtedness remains outstanding in a material amount, the Bond Trustee may not be able to exercise any remedies that are likely to result in the collection of sufficient funds to pay the accelerated Series 2016 Bonds.

Other Secured Indebtedness

The Hospital also has the Lower Manhattan Indebtedness outstanding, which is secured by the Lower Manhattan Mortgage and a pledge of gross receipts of the Hospital. See “SOURCES OF PAYMENT FOR THE BONDS – Outstanding Indebtedness,” above for additional details. In the event of a default under the Lower Manhattan Loan Documents, DASNY is entitled to exercise certain rights as a secured party, including the right to accelerate the Lower Manhattan Indebtedness and foreclose on the lien of the Lower Manhattan Mortgage. The proceeds of the exercise of any such rights would be applied to the payment of the Lower Manhattan Indebtedness prior to the payment of the 2016 Bonds. Furthermore, the loss of the Lower Manhattan Hospital facility through foreclosure could negatively affect the financial condition of the Hospital and its ability to pay the Series 2016 Bonds.

Impact of Market Turmoil

The disruption of the credit and financial markets in 2008 and the recession that followed resulted in volatility in the securities markets, significant losses in investment portfolios, increased business failures and consumer and business bankruptcies.

In response to this disruption of the markets, in 2010 Congress enacted and the President approved the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Additional legislation is under active consideration by Congress and regulatory action is being considered by various federal agencies, the Federal Reserve Board and foreign governments which legislation is intended to increase the regulation of financial Hospitals and domestic and global credit and securities markets. The effects of these legislative, regulatory and other governmental actions, including the Dodd- Frank Act, upon the Hospital and any other future Members of the Obligated Group and, in particular upon their access to capital markets and their investment portfolios, cannot be predicted.

The healthcare sector has been adversely affected as a direct consequence of the disruption of the credit and financial markets. The consequences of these developments have generally included, realized and unrealized investment portfolio losses, reduced investment income, limitations on access to the credit markets, and difficulties in remarketing revenue bonds subject to tender. Generally, patient service revenues and inpatient volumes have not increased as historic trends would otherwise indicate. Reduced employment and personal income have resulted in increases in self-pay admissions, increased levels of bad debt and uncompensated care, reduced demand for elective procedures, and reduced availability and affordability of health insurance. The recent recession increased stresses on state budgets, which could potentially result in reductions in Medicaid payment rates or Medicaid eligibility standards, and delays of payment of amounts due under Medicaid and other state or local payment programs.

The economic environment may also adversely affect the operations of the Hospital as a result of, among other factors, increases in the number of uninsured patients or if persons that would otherwise use their facilities and services choose to defer elective medical procedures. Economic conditions are also adversely affecting revenue available to states and increasing expenses under various state programs, including Medicaid.

New York State Department of Health Regulations

The Hospital is subject to regulations issued by the New York State Department of Health (“DOH”). Compliance with such regulations may require substantial expenditures for administrative or other costs. Regulations of DOH could change, requiring the Obligated Group to admit or maintain more indigent patients than is currently required. DOH could decide to revoke or not renew the operating certificate of the Hospital for failure to comply with regulatory requirements. The Hospital’s ability to provide services or maintain beds or to modify certain existing services is also subject to DOH review and approval. Approvals can be highly discretionary, may involve substantial delay, and may require substantial changes in the proposed request. Accordingly, the Hospital’s ability to make changes to their services and respond to changes in the competitive environment may be limited.

Nonprofit Healthcare Environment

The Hospital is a nonprofit corporation, exempt from federal income taxation as an organization described in Section 501(c)(3) of the Code. As a nonprofit tax-exempt organization, the Hospital is subject to federal, state and local laws, regulations, rulings and court decisions relating to its organization and operation, including its operation for charitable purposes.

Recently, an increasing number of the operations or practices of healthcare providers have been challenged or questioned to determine if they are consistent with the regulatory requirements for 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 some cases examine core business practices of healthcare organizations. Areas which 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 others. These challenges and questions have come from a variety of sources, including state attorneys general, the IRS, labor unions, Congress, state legislatures, and patients, and in a variety of forums, including hearings, audits and litigation. If the Hospital were to face a challenge of this nature, it could have a material impact on the financial condition of the Hospital in the future. These challenges or examinations include the following, among others:

Litigation Relating to Billing and Collection Practices. Lawsuits have been filed against various nonprofit health care providers in federal and state courts across the country regarding billing and collection practices relating to the uninsured. The lawsuits are premised on the notion that federal and state laws require nonprofit health care providers to provide certain levels of free or discounted health care to the uninsured. Thus, the plaintiffs in those lawsuits have alleged, among other things, that the defendants violated federal and state law by billing the uninsured at undiscounted rates, that the medical bills the defendants sent to the uninsured are inflated, and that the defendants engaged in unfair debt collection practices.

Congressional Hearings. In recent years, multiple congressional committees have conducted hearings and other proceedings inquiring into various practices of nonprofit hospitals and health care providers. Among the legislation proposed or discussed as a result of these hearings and proceedings are: (1) establishment of minimum required levels of charity care to be provided by nonprofit health care providers; (2) periodic review of hospitals’ tax-exempt status by the IRS; and (3) greater and more uniform reporting of charitable and community benefit activities.

Revision of IRS Form 990 for Not-for-Profit Corporations. The IRS Form 990 is used by 501(c)(3) not-for-profit organizations (including the Hospital) to submit information required by the federal government for tax exemption. The revised form 990 requires detailed public disclosure of compensation practices, corporate governance, loans to management and others, joint ventures and other types of transactions, political campaign activities, and other areas the IRS deems to be compliance risk areas. The revised form also requires the disclosure of a significantly greater amount of both hard data and anecdotal information on community benefits on Schedule H to the Form 990, and establishes uniform standards for reporting of information relating to tax-exempt bonds, including compliance with the arbitrage rules and rules limiting private use of bond-financed facilities, including compliance with the safe harbor guidance in connection with management contracts and research contracts. The redesigned Form 990 is intended to enhance transparency as to the operations of exempt organizations. It is also likely to result in enhanced enforcement, as the redesigned Form 990 will make a wealth of detailed information on compliance risk areas available to the IRS and other enforcement agencies. Completion of the revised Form 990 has placed an additional burden on the Hospital.

IRS Enforcement of Community Benefit. The IRS has undertaken a community benefit initiative directed at hospitals. The IRS determined that a lack of uniformity in definitions of community benefit used by reporting hospitals, including those regarding uncompensated care and various types of benefits, made it difficult for the IRS to assess whether any particular hospital is in compliance with current law. Schedule H of the revised Form 990, which hospitals must use to report their community benefit activities, including the cost of providing charity care and other tax-exemption related information. Proposals have also been made within Congress to codify the requirements for hospitals’

tax-exempt status, including requirements to conduct a regular community needs analysis and to provide minimum levels of charity care.

The Affordable Care Act (as hereinafter defined) imposes additional requirements on non-profit hospitals in order to maintain their tax-exempt status. First, each hospital must conduct a community health needs assessment at least once every three taxable years and adopt an implementation strategy to meet the needs identified, or subject to an excise tax penalty of $50,000. Hospitals must disclose a summary of the assessment and implementation strategy and audited financial statements on the revised Form 990. The Secretary of the Treasury must review the community benefit of the activities of each tax- exempt hospital at least once every three years. Second, each hospital must adopt, implement and publicize a financial assistance policy and a policy relating to emergency medical care. Third, hospitals must limit the charges for emergency or other medically necessary care provided to individuals eligible for assistance under the financial assistance policy to not more than the amounts generally billed to individuals who have insurance that covers such care. Finally, a hospital may not engage in extraordinary collection actions before making reasonable efforts to determine whether an individual is eligible for assistance under the organization’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 hospital 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.

IRS Focus on Compensation, Private Benefit and Private Inurement. In 2004, the IRS began a new compliance program to measure compliance by tax-exempt organizations with requirements that they not pay excessive compensation and benefits to their officers and other insiders. In February 2009, the IRS issued its Hospital Compliance Project Final Report (the “IRS Final Report”) that examined tax- exempt hospitals’ practices and procedures with regard to compensation and benefits paid to their officers and other defined “insiders.” The IRS Final Report indicates that the IRS (1) will continue to heavily scrutinize executive compensation and 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 such organizations.

As a tax-exempt organization, the Hospital is limited with respect to the use of practice income guarantees, reduced rent on medical office space, below market interest loans, joint venture programs, and other means of recruiting and retaining physicians. The IRS scrutinizes a broad variety of contractual relationships commonly entered into by hospitals and affiliated entities, including the Hospital, and has issued detailed hospital audit guidelines suggesting that field agents scrutinize numerous activities of hospitals 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. The IRS has also commenced intensive audits of select health care providers to determine whether the activities of these providers are consistent with their continued tax-exempt status. The IRS has indicated that, in certain circumstances, violation of the fraud and abuse statutes could constitute grounds for revocation of a hospital’s tax- exempt status.

Section 501(c)(3) of the Code specifically conditions the continued exemption of all Section 501(c)(3) organizations upon the requirement, among others, that no part of the net earnings of the organization inure to the benefit of any private individual. Any violation of the prohibition against private

inurement may cause the organization to lose its tax-exempt status under 501(c)(3) of the Code. The IRS has issued guidance in informal private letter rulings and general counsel memoranda on some situations that give rise to private inurement, but there is no definitive body of law and no regulations or public advisory rulings that address many common arrangements between exempt health care providers and nonexempt individuals or entities. There can be no assurances concerning the outcome of an audit or other investigation given the lack of clear authority interpreting the range of activities undertake by the Hospital.

Intermediate sanctions legislation enacted in 1996 imposes penalty excise taxes in cases where an exempt organization is found to have engaged in an “excess benefit transaction” with a “distinguished person.” Such penalty excise taxes may be imposed in lieu of revocation of exemption or in addition to such revocation in cases where the magnitude or nature of the excess benefit call into question whether the organization functions as a public charity. The tax is imposed both on the disqualified person receiving such excess benefit and on any officer, director, trustee or other person having similar powers or responsibilities who participated in the transaction willfully or without reasonable cause, knowing it will involve “excess benefit.” “Excess benefit transactions” include transactions in which a disqualified person receives compensation for services that exceeds the fair market value of the services provided by the disqualified person. “Disqualified persons” include “insiders” such as board members and officers, senior management, and members of the medical staff, who in each case are in a position to substantially influence the affairs of the organization; their family members; and entities which are more than 35% controlled by a disqualified person.

Any imposition of a penalty excise tax in lieu of revocation, based upon a finding that the Hospital engaged in an excess benefit transaction would be likely to result in negative publicity and other consequences that could have a materially adverse effect on the operations, property or assets of the Hospital.

Tax Audits. Taxing authorities have historically conducted tax audits of non-profit organizations to confirm that such organizations are in compliance with applicable tax rules and in some instances have collected significant payments as part of the settlement process. Such audit processes may be prolonged, and it may take several years to reach the final determination of allowable amounts. The Hospital is not currently under audit.

The foregoing are some examples of the challenges and examinations facing nonprofit healthcare organizations. They are indicative of a greater scrutiny of the billing, collection and other business practices of these organizations, and may indicate an increasingly more difficult operating environment for healthcare organizations. The challenges and examinations, and any resulting legislation, regulations, judgments, or penalties, could have a material adverse effect on the Hospital.

Challenges to Real Property Tax Exemptions. Recently, the real property tax exemptions afforded to certain nonprofit healthcare providers by state and local taxing authorities have been challenged on the grounds that the healthcare providers were not engaged in charitable activities. These challenges have been based on a variety of grounds, including allegations of aggressive billing and collection practices and excessive financial margins. While the Hospital is not aware of any current challenge to the tax exemption afforded to any material real property of the Hospital, there can be no assurance that these types of challenges will not occur in the future.

Charity Care. Hospitals are permitted to qualify for tax-exempt status under the Code because the provision of health care historically has been treated as a “charitable” enterprise. This treatment arose before most Americans had health insurance, when charitable donations were required to fund the health care provided to the sick and disabled. Some commentators and others have taken the position that, with

the onset of employer health insurance and governmental reimbursement programs, there is no longer any justification for special tax treatment for the health care industry, and the availability for tax-exempt status should be eliminated. Furthermore, federal and state tax authorities are beginning to demand that tax-exempt hospitals justify their tax-exempt status by documenting their charitable care and other community benefits.

As described above under the caption “Nonprofit Healthcare Environment – Litigation Relating to Billing and Collection Practices,” charity care issues also serve as the basis of certain claims against major hospital systems throughout the United States on behalf of uninsured patients. Many lawsuits filed against non-profit hospitals raise a number of claims against the hospital defendants, including claims that the defendants, by accepting tax-exempt status, entered into agreements with the federal, state and local governments promising to provide free or reduced care to all those who need it; the uninsured patients are beneficiaries of those agreements and can bring suit on them; the defendants engaged in illegal and oppressive tactics against the uninsured; the defendants engaged in illegal price discrimination by charging the uninsured rates far in excess of the rates charged to such third party payors as Medicare and certain insurers; the defendants violated state consumer fraud statutes; the defendants allowed a portion of their properties to be used by for-profit entities at less than fair value and engaged in other inappropriate transactions with doctors and certain insiders; the defendants transferred monies illegally to their affiliates for other than charitable purposes; and the defendants and the American Hospital Association, another named defendant in many of the lawsuits, conspired with the defendants to charge illegal prices to the uninsured.

Litigation has been initiated against several hospitals in the United States by individual uninsured plaintiffs alleging, among other things, that the defendants violated their duty to the plaintiffs by charging higher rates and fees for services to those plaintiffs than the hospitals received from Blue Cross Blue Shield entities, Medicare, Medicaid or other insurers. Among the remedies sought by the plaintiffs are money damages and a court order against the defendants compelling them to reduce the rates and fees charged to uninsured patients. The Hospital has not been named in any such law suit.

Federal Legislation

On January 2, 2013, the American Taxpayer Relief Act of 2012 (the “Taxpayer Relief Act”) was signed into law to address the federal deficit and the budget sequestration provisions of the Budget Control Act of 2011. The Taxpayer Relief Act postponed the budget sequestration provisions of the Budget Control Act of 2011 for two months to allow Congress to attempt to reach a budget compromise. With no budget compromise forthcoming, on March 1, 2013, the President issued a sequestration order, requiring across-the-board reductions in Federal spending. Accordingly, on March 8, 2013, Centers for Medicare and Medicaid Services (“CMS”) announced that Medicare claims for payment with a date of service or date of discharge on or after April 1, 2013, will incur a two percent (2%) reduction in Medicare payment. Under current law, sequestration is scheduled to continue through 2021. Congress and the Administration could reach a budget deal to end sequestration. It is impossible to predict, however, if a budget deal will be made and whether any such budget deal would have an impact on federal spending on the Medicare and Medicaid programs. Likewise, it is not possible to predict whether additional budget control measures will be made to the Medicare payment system in light of Federal budgetary pressures.

On March 23, 2010, the Patient Protection and Affordable Care Act was signed into law and on March 30, 2010, the Health Care and Education Reconciliation Act was signed into law and amended the Patient Protection and Affordable Care Act. Together, these laws (hereinafter referred to as the “Affordable Care Act”) introduce the most far reaching changes in our national health care system since the creation of Medicare in 1965. Implementation of the Affordable Care Act will affect health care organizations in countless ways through insurance reforms, changes in Medicare and Medicaid provider

payments, quality and transparency initiatives, and delivery system reforms. Many of the numerous health care related provisions in the Affordable Care Act take effect over a four-year period and include such provisions as prohibiting health insurers from denying coverage or refusing claims based on pre- existing conditions, expanding Medicaid eligibility, subsidizing insurance premiums, providing incentives for businesses to provide health care benefits, and establishing health insurance exchanges.

The primary purpose of the Affordable Care Act is to extend health insurance coverage to approximately thirty-two (32) million Americans currently uninsured. Medicaid may be expanded to cover all adults earning less than 133% of the federal poverty level, and private health insurance will be made available to individuals and small companies through exchanges that will be run by the states. Individuals who do not buy health care insurance, and employers that do not offer health insurance to workers, will be subject to monetary penalties. The expectation is that the reforms will provide coverage to most Americans, with approximately half of those currently uninsured covered through possible expansions of Medicaid and more or less the other half through private insurance.

The Affordable Care Act will also impact health care provider payment and care delivery models. The current fee-for-service models have been criticized for contributing to higher costs and systematic fragmentation. New programs in the Affordable Care Act will promote emerging payment and care delivery models and the development of alternative payment systems designed to reward providers for improving care coordination, demonstrating quality improvement and providing greater transparency about care processes and outcomes. These new systems include bundled payment, value-based purchasing, accountable care organizations and patient-centered medical homes.

Although the Affordable Care Act is likely to affect many aspects of hospital operations, it is not possible to predict the effects that these and other federal statutes will have on hospital revenues or whether additional changes will be made to the Medicare payment system in light of Federal budgetary pressures. In addition, it is not possible to predict whether and to what extent there may be changes made to the Affordable Care Act, through legislation or as a result of legal challenges, and whether and to what extent any such changes may impact hospital revenues.

The U.S. Supreme Court decided the constitutionality of certain provisions of the Affordable Care Act in National Federation of Independent Business v. Sebelius: (i) the “individual mandate” that requires individuals to purchase health insurance starting in 2014 or be penalized, and (ii) the expansion of the Medicaid program. On June 28, 2012, the Supreme Court of the United States upheld a constitutional challenge to the Affordable Care Act. The Court held that the insurance mandate was constitutional under Congress’s taxing power. However, the Court ruled that Congress’s expansion of the Medicaid program was unconstitutional because it would have withdrawn all federal funding to states that did not abide by the expansion. Accordingly, states have the option of expanding Medicaid under the Affordable Care Act. In a subsequent case decided in June 2015, King v. Burwell, the Supreme Court upheld the grant of federal subsidies to individuals who obtain insurance through the federally managed health insurance exchange.

Although the Supreme Court’s ruling removed a significant source of uncertainty surrounding the implementation of the Affordable Care Act, legislative repeal under a future Congress or Presidential administration remains a possibility. Controversy over the Affordable Care Act continues even after the Supreme Court’s decisions and the implementation under the Affordable Care Act of the health insurance exchanges at the federal level and in states that elected to establish marketplaces. These exchanges began enrolling individuals in late 2013 for coverage in 2014; the enrollment period for 2016 concluded in January 2016.

The U.S. House of Representatives has voted many times over the past several years to repeal the Affordable Care Act, in whole or in part, and to cut funding for various Affordable Care Act provisions. Similar efforts in the U.S. Senate were unsuccessful until December 2015 when the Senate voted to repeal most of the Affordable Care Act. The Senate’s bill was adopted through budget reconciliation, which required a majority vote, rather than 60 votes generally required. After the House adopted this bill, it was sent to President Obama, who vetoed it. Efforts to override the President’s veto were unsuccessful.

Additionally, many of the reductions in reimbursement to health care providers included in the Affordable Care Act have yet to take full effect, and the increased health care coverage anticipated to derive from the Affordable Care Act has not yet been realized. The practical consequences of the Affordable Care Act, as well as of other future federal and state actions to cut costs and change the health care delivery system, cannot be foreseen. The Hospital cannot predict with any reasonable degree of certainty or reliability any interim or ultimate effects of the legislation. Moreover, uncertainties regarding the implementation of the Affordable Care Act on a national level and in New York State create unpredictability for the strategic and business planning efforts of health care providers, which in itself constitutes a risk. These uncertainties become particularly pronounced as the nation approaches the 2016 Presidential election. Some of the specific provisions of the Affordable Care Act that may affect the Hospital’s operations, financial performance or financial condition are described below. This listing is not intended to be, nor should be considered by as comprehensive. The Affordable Care Act is complex, and includes a myriad of new programs, initiatives, and changes to existing programs, policies, practices and laws. For a comprehensive understanding, Holders of the Series 2016 Bonds should review the Affordable Care Act in its entirety.

Federal and State Policies Affecting Health Care Facilities. Health care facilities may be affected significantly by changes in federal health care policy. These changes may reduce federal payments under Medicaid and Medicare, increase or reduce federal regulation of health facilities and encourage more competition among health care providers. The impact of future cost control programs and future legislation upon the projected financial performance of the Obligated Group cannot be determined at this time.

Risks Related to Rules Governing Payment for Healthcare Services

The Medicare and Medicaid Programs. Medicare provides certain health care benefits to beneficiaries who are 65 years of age or older, disabled or qualify for the End Stage Renal Disease Program. Medicare is administered by CMS, of the federal Department of Health and Human Services. Medicaid is funded jointly by the federal government and the states and provides medical assistance to certain needy individuals and families. Significant changes have been and may be made in the Medicare and Medicaid programs that could have a material adverse impact on the financial condition of the Obligated Group, for example, by decreasing the amount of payment for services. In addition, the requirements for Medicare and Medicaid certification are subject to change, and to remain qualified for participation in such programs, it may be necessary for the Hospital to effect changes from time to time in its facilities, equipment, personnel, billing processes, policies and services.

Medicare

Medicare pays acute care hospitals for services provided on an inpatient basis according to the inpatient prospective payment system (“PPS”). PPS pays hospitals a pre-determined amount for services. The amount of the payment is the product of a nationally determined base payment rate, which is adjusted for a variety of factors on a hospital-specific basis, and a relative weight that reflects the anticipated costs of care in a particular clinical category compared with a national average of all cases. The base rate is designed to provide some payment to hospitals for both inpatient operating and capital related costs. The

base rate is adjusted by factors related to market conditions of a hospital’s geographic location and other circumstances of a particular hospital, such as whether it is a teaching hospital. The relative weight factor of a PPS calculation depends on the clinical category of services rendered to a patient. The clinical category is determined by how a patient’s case is classified at discharge under one of hundreds of Severity Diagnosis Related Groups (“MS-DRG”) defined by the CMS.

The PPS standardized base rates are updated annually based on a statistical estimate of the increase (the “update factor”) in the cost of goods and services used by hospitals in providing care (the “market basket”). Currently, the update factor equals the percentage increase in the market basket, but from time to time Congress has set updates legislatively that are less than the market basket. For every year since 1983, Congress has modified the increases and given substantially less than the increase in the market basket index. The Affordable Care Act provides for additional reductions to the market basket update, as well as other payment adjustments, in future years. There is, therefore, no assurance that future updates in MS-DRG payments will keep pace with the increases in providing inpatient hospital services.

Hospitals receive additional payment for cases that exceed MS-DRG-specific cost thresholds, referred to as “outlier payments”. In addition, hospitals that satisfy specific program requirements may be eligible to receive additional revenue to defray the costs of organ procurement and treatments that use new technologies. With the exception of outlier cases, PPS payments are not adjusted for actual costs or variations in service or length of stay. The PPS amount and adjustments described above are calculated using formulae established by CMS that are revised periodically pursuant to federal budgetary policy. There is no assurance that the Hospital will be paid amounts that adequately reflect the actual cost of providing health care or the cost of the health care technologies available to patients.

Medicare also pays providers for inpatient psychiatric services on a PPS basis. Under that system, Medicare pays for the per diem routine, ancillary, and capital costs associated with those services. A base per diem payment is adjusted to account for differences in the cost of care related to patient characteristics (e.g., age, diagnosis, and length of stay) and facility characteristics (e.g., location and teaching status).

The Affordable Care Act also contains reductions in Medicare market basket updates and cuts in Medicare and Medicaid disproportionate share hospital (“DSH”) payments for providing care to low income and uninsured patients.

Beginning in 2014, hospitals receiving DSH payments have had these payments cut by up to 75% (offset, however, by the level of uninsured that remains). The base 25% is supplemented by 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 Affordable Care Act take effect. Separately, beginning in 2016, Medicaid DSH allotments to each state are reduced based on a methodology to be determined by the United States Department of Health and Human Services (“HHS”), accounting for statewide reductions in uninsured and uncompensated care. CMS has issued a proposed rule to change the methodology of Medicare DHS allotments according to a calculation using limited data from the Medicare Cost Report Worksheet S-10 beginning in federal fiscal year 2018. The proposed rule, if enacted, would cause the Hospital to experience significant future payment reductions in connection with DHS allotments.

Beginning in 2013, Medicare inpatient payments to each hospital were reduced based on the dollar value of that hospital’s percentage of preventable Medicare readmissions for certain medical conditions. For fiscal years 2015 and 2016, a hospital’s payments can be reduced by a maximum of 3%. In addition, as permitted by the Affordable Care Act, CMS expanded the conditions measured for the readmission rate penalties beginning in 2015 to include additional conditions.

Teaching hospitals receive increases to their Medicare PPS payment for costs related to training physicians and other medical professionals (graduate medical education (“GME”) payments), as well as for providing care to a high level of Medicaid and disabled patients (disproportionate share payments or DSH payments). There are two forms of payment for GME: Direct Graduate Medical Education (“DGME”) and Indirect Medical Education (“IME”) payments. DGME payments support the direct costs of training (e.g., resident stipends, supervision), while IME payments support the higher infrastructure relating to teaching, greater patient acuity and the extensive “stand-by” capabilities of teaching hospitals. While a recommendation from The Medicare Payment Advisory Commission (“MedPAC”) and a CMS proposed rule both have suggested reducing the level of IME adjustments, such reduction has not yet been implemented. There can be no assurance that payments to the Hospital for providing medical education will be adequate to cover the costs attributable to medical education programs for training residents, nurses and allied health professionals.

Hospital outpatient services also are paid by Medicare according to a prospective payment system for hospital outpatient services (“OPPS”). Under OPPS, most outpatient services are grouped into one of approximately 800 Ambulatory Patient Classifications and paid a uniform national payment amount adjusted for area wage differences and the average amount of resources required to provide the service (e.g., visit, chest x-ray, surgical procedure). OPPS applies to most hospital outpatient services, other than ambulance and rehabilitation services, clinical diagnostic laboratory services, dialysis for end-stage renal disease, non-implantable durable medical equipment, prosthetic devices and orthotics. Hospitals can receive three additional payments in addition to the amount determined under the standard OPPS rule: pass-through payments for certain new technologies; outlier payments for unusually costly cases; and special payments to certain children’s and cancer hospitals. Outpatient services not covered by OPPS are paid on the basis of fee schedules, the lower of costs or charges, or a blend of fee schedules and costs.

The Affordable Care Act directs the Medicare Independent Payment Advisory Board (“IPAB”) to provide recommendations to reduce Medicare cost growth if growth exceeds established targets. If Congress does not adopt alternative legislation to meet the savings targets, the Affordable Care Act provides for the IPAB’s recommendations to be automatically implemented. Starting in 2020, hospitals will be subject to the IPAB’s cost reduction proposals. The IPAB was to begin submitting its annual recommendations no later than January 2014. However, President Obama has not yet appointed the IPAB members. Additionally, the Chief Actuary of CMS has concluded that the projected Medicare per capita growth rate has not yet exceeded the targeted growth rate and there will be no need for IPAB activity at least through 2016. In June 2015, the House of Representatives voted to repeal the IPAB, but the Senate has not approved the repeal.

In 1986 Congress enacted the Emergency Medical Treatment and Active Labor Act (“EMTALA”) in response to allegations of inappropriate hospital transfers of indigent and uninsured emergency patients. EMTALA imposes strict requirements on hospitals in the treatment and transfer of patients with emergency medical conditions.

EMTALA requires hospitals to provide a medical screening examination to any individual who comes to the hospital’s dedicated emergency department (“DED”) for treatment, without regard to ability to pay, to determine whether the individual suffers from an emergency medical condition within the meaning of the statute. A DED is licensed by the state in which it is located as an emergency room or department, or is held out to the public as a place providing care for emergency medical conditions without requiring an appointment or during the immediately preceding calendar year, provided treatment of emergency medical conditions without requiring an appointment for at least one-third of all of its outpatient visits. A participating hospital may not delay provision of a medical screening examination in order to inquire about method of payment or insurance status. If an emergency medical condition is present, the hospital must provide such additional medical examination and treatment as may be required

to stabilize the emergency medical condition. If the hospital deems it in the best interest of the individual to transfer the individual to another medical facility, the treating physician must execute a transfer certificate complying with the standards of the EMTALA and must provide a medically appropriate transfer.

EMTALA imposes significant costs on hospitals, including the costs of treatment of individuals who may not be able to pay for such services, costs of development and implementation of protocols concerning medical screening examinations and stabilization and appropriate transfers and, in some cases, costs associated with assuring on-call availability of special physicians.

If a hospital with 100 beds or more violates EMTALA, whether knowingly and willfully or negligently, it is subject to a civil money penalty of up to $50,000 per violation. Failure to satisfy the requirements of EMTALA may also result in termination of the hospital’s provider agreement. In addition, EMTALA creates a private cause of action for individuals who suffer personal harm as a result of an EMTALA violation, and for any hospital that suffers financial loss as a result of another hospital’s violation of EMTALA. This is a complaint-driven process, so any patient or family member could allege an EMTALA violation. The statute of limitations for filing such a civil action is two years.

The Medicare payment rules are reviewed, and many of them are revised, annually based on recommendations from government advisory commissions, such as MedPAC, and other sources, including health care providers. MedPAC has encouraged CMS to reduce payments for hospital-based services to the levels paid for comparable services to freestanding independent facilities, which could lead to a decrease in Medicare payments received by the Hospital. In the future, continuing revisions to these rules may also lead to a decrease in Medicare payment received by the Hospital. The Medicare program has experienced frequent legislative, regulatory and administrative revisions in its payment methodologies and other provisions, many of which have sought to reduce the rate of increase in the cost of the program. It is likely that revisions will continue, some of which may adversely affect the Medicare payment which the Hospital receives.

In the 2014 Medicare inpatient prospective payment system final rule, CMS promulgated the two- midnight rule. Under this rule administrative contractors auditing the medical necessity of inpatient hospital admissions have been directed to consider admissions spanning less than two midnights to be, except in rare and unusual cases, outpatient cases.

Medicare Advantage

Medicare Advantage plans are alternate insurance products offered by private companies that engage in direct managed care risk contracting with the Medicare program. Under the Medicare Advantage program these private companies agree to accept a fixed, per-beneficiary payment from the Medicare program to cover all care that the beneficiary may require. In recent years, a similar program involving private insurers providing coverage to Medicare beneficiaries, known as the Medicare+Choice program, failed after changes were made to its funding methodologies and many private managed care companies discontinued their participation. The result was that the beneficiaries who were covered by the now-discontinued Medicare+Choice plans shifted back into the traditional Medicare fee-for-service program or into a Medicare cost plan.

Future legislation or regulations may decrease the financial incentives available to private insurers who offer Medicare Advantage plans and cause some of them to no longer offer those plans. This would likely increase the burdens of the traditional Medicare program as payment obligations revert from private insurers to the Federal government. Other legislative or regulatory changes to the Medicare Advantage program could occur that might increase or decrease its popularity and level of acceptance

among Medicare beneficiaries. The effect of such future legislation/regulation is unknown but could materially and adversely affect the Hospital.

The costs of providing a unit of care may exceed the revenues realized from Medicare for providing that service. Additionally, the aggregate costs to a hospital of providing care to Medicare beneficiaries may exceed aggregate Medicare revenues received during the relevant fiscal period.

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 pre-determined 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.

Payment of Hospital Capital Costs.

Hospitals are paid on a fully prospective basis for capital costs (including depreciation and interest) related to the provision of inpatient services to Medicare beneficiaries. Thus, capital costs are paid exclusively on the basis of a standard federal rate (based upon average national costs of capital), subject to certain adjustments (such as for disproportionate share, indirect medical education and outlier cases) specific to the hospital.

There can be no assurance that the prospective payments for capital costs will continue under either Medicare or Medicaid, or that such payments will be sufficient to cover the actual capital-related costs of the Hospital allocable to Medicare patient stays, or that such payments will provide adequate flexibility in meeting the Hospital’s future capital needs. New York State recently announced long- awaited capital awards as part of the DSRIP program (discussed further below). The Hospital received $11.2 million of capital awards under the DSRIP Capital Restructuring Financing Program. The Hospital will be providing a 1:1 match of the award.

Payment for Physician Services. Certain physician services are paid on a national fee schedule called the “resource-based-relative-value scale” (“RB-RVS”). The RB-RVS fee schedule establishes payment amounts for all physician services, including services of provider-based physicians, and is subject to annual updates. The Sustainable Growth Rate formula (“SGR”), which is 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. Every year since 2003, Congress provided temporary relief from scheduled “negative” updates that would have reduced physician payments. In April 2015, Congress passed and the President signed the Medicare Access and CHIP Reauthorization Act of 2015, which permanently repealed the SGR. As a result, payments under the Medicare physician fee schedule for services rendered on or after April 1, 2015 will not be cut by approximately 20%, as would have been required absent legislative action. Instead, current payment rates will increase by 0.5% through 2019 and then remain constant from 2020 through 2025. Beginning in 2019, physicians will be required to choose between two different Medicare payment options. Under the Merit-Based Incentive Payment System (“MIPS”), physicians will be subject to payment adjustments of +/- 4% in 2019, growing to +/- 9% in 2022 and beyond, based on their performance against certain quality metrics that have yet to be defined by CMS. High-performing physicians will be eligible to receive bonus payments under MIPS. Physicians participating in Alternative Payment Models (“APMs”), which will also be defined later by CMS, can elect to be exempted from MIPS and will receive a 5% annual bonus for participation between 2019 and 2024. Beginning in 2026, physicians participating in APMs will be eligible for annual payment updates of 1.0%, with all other physicians receiving updates of 0.5%.

Medicare Trust Funds. Two trust funds are maintained as part of the Medicare Program. Hospital Insurance (“HI”) or Medicare Part A, helps to pay for hospital, home health, skilled nursing facility, and hospice care for the aged and disabled (including certain individuals with end stage renal disease) and is financed primarily by payroll taxes paid by workers and employers. Supplementary Medical Insurance (“SMI”) consists of Medicare Part B and Part D. Part B helps pay for physician, outpatient, and other services for the aged and disabled who have voluntarily enrolled. Part D initially provided access to prescription drug discount cards and transitional assistance to low-income beneficiaries. In 2006 and later, Part D provides subsidized access to drug insurance coverage on a voluntary basis for beneficiaries.

The Medicare Board of Trustees annual report to Congress on July 28, 2014 (the “Medicare Annual Report”) indicated that the HI Trust Fund is not adequately financed and is projected to be exhausted in 2030, four years later than projected in 2013. The Medicare Annual Report noted that HI expenditures have exceeded income annually since 2008 and are projected to continue doing so through 2014. The trustees projected slight surpluses in 2015 through 2022, with a return to deficits thereafter until the HI Trust Fund becomes depleted in 2030. The Part B and Part D accounts in the SMI Trust Fund were projected to be adequately financed over the next 10 years because premiums and general revenue income are reset each year to match expected costs. Such financing, however would have to increase rapidly to match expected expenditure growth and to rebuild the Part B assets to an appropriate level. The trustees expressed the need for timely action to address Medicare’s financial challenges and promote consideration of reforms for the program in the near future. Accordingly, it is likely that statutory and regulatory attempts to contain increases in Medicare costs will continue in the future.

The Medicaid Program

Under Medicaid, the federal government provides grants to states that have medical assistance programs that meet federal standards. Competing pressures on the federal budget and the State’s attempt to address its own budgetary needs have also resulted in uncertainty with respect to Medicaid spending. Such decreases in spending may have a material adverse impact on the future financial condition of the Hospital.

Under federal law, Medicaid coverage is mandatory for persons receiving assistance from Temporary Assistance for Needy Families (previously known as Aid to Families With Dependent Children) or the federal Supplemental Social Security (“SSI”) program and for certain categories of children and pregnant women. Implementation of the Medicaid program falls to each state, however, and there are significant variations in virtually all aspects of the Medicaid program across states. State specific variations arise from the fact that the Medicaid statute allows for optional benefits and categories of beneficiaries, as well as waivers of general statutory requirements to implement specific programs or demonstration projects.

Under the Affordable Care Act, the new health insurance exchanges, increased employer insurance coverage requirements, and Medicaid expansions have decreased the number of uninsured patients. This increase in insured patients could result in lower levels of bad debt and increased utilization or profitable shifts in utilization patterns for hospitals generally. New York State, which has established its own exchange and participated in the Medicaid expansion, enrolled nearly 1.0 million New Yorkers in health plans during the initial enrollment period (October 1, 2013 through April 15, 2014), over 2.1 million during the 2015 enrollment period and over 2.7 million in the 2016 enrollment period. Nonetheless, given the continued political controversy about the Affordable Care Act and that it remains in the early years of its implementation, it remains unclear how these Affordable Care Act insurance changes will impact the Hospital.

Audits and Withholds

Participating providers are subject to audits and retroactive audit adjustments with respect to the Medicare and Medicaid programs. Such adjustments could exceed reserves and could be substantial. Medicare and Medicaid regulations also provide for withholding payments in certain circumstances. Any withholds that may occur could have a material adverse impact on the future financial condition of the Hospital. Management of the Hospital is not aware of audits or any material payment withhold by either Medicare or Medicaid.

Private Health Plans and Insurers

Certain private insurance companies contract with hospitals on an “exclusive” or a “preferred” provider basis, and some insurers have plans known as “preferred provider organizations” (“PPOs”). Under such plans, there may be financial incentives for subscribers to use only those hospitals which contract with the plans. Under an exclusive provider plan, which includes most HMOs, private payors limit coverage to those services provided by selected hospitals within the provider plan. With this contracting authority, private payors may direct patients away from nonselected hospitals by denying coverage for services provided by them. In addition, PPOs and HMOs may limit the participation of a provider.

For the fiscal year ended December 31, 2015, payments from commercial insurers (including Blue Cross) represented approximately 56% of the Hospital’s net patient service revenues. To be updated for recent year or remove. Such programs individually negotiate payment terms with the Hospital, which terms include discounted fee-for-service payments or discounted fixed rate per day/case of care payments. There also are additional provisions by which the Hospital shares in the risk associated with the cost of providing health care services. There is no assurance that the Hospital’s exposure to such contracts or arrangements will not increase in the future. Increased participation may maintain or increase the patient base, but the discounts offered to HMOs and PPOs may result in reduced payments and lower net revenue to the Hospital.

Some HMOs are now offering or mandating a “capitation” payment method under which hospitals are paid a predetermined periodic rate for each enrollee in the HMO who is “assigned” to, or otherwise directed to receive care at, a particular hospital. In a capitated payment system, the health care provider assumes an insurance type risk for the cost and scope of care given to the HMO’s enrollees. If payment under an HMO or PPO contract is insufficient to meet the provider’s costs of care, the financial condition of the provider may erode rapidly and significantly. Often, HMO or PPO contracts are enforceable for a stated term, regardless of provider losses. Recently, certain HMOs and PPOs have experienced financial difficulties, and some have resorted to bankruptcy proceedings. It is not possible, at this time, to predict the future of the managed care industry in general in relation to specific HMOs or PPOs with which the Hospital contracts.

Legislative and Regulatory Actions Affecting Health Care Facilities

Federal and state governments have enacted health care fraud and abuse laws to regulate both the provision of services to government program beneficiaries and the methods and requirements for submitting claims for services rendered to those beneficiaries. These laws penalize individuals and organizations for submitting claims for services (i) they did not provide, (ii) that were not medically necessary, (iii) provided by an improper person, (iv) that involved an illegal inducement to utilize or refrain from utilizing a service or product, or (v) billed in a manner that does not comply with applicable government requirements. The scope of certain federal and state fraud and abuse laws has been expanded to include non-governmental, private health care plans.

Federal and state governments have a range of criminal, civil and administrative sanctions available to penalize and remediate health care fraud and abuse, including imposing civil money penalties, suspending payments and excluding the provider from participating in the federal and state health care programs. One or more government entities and/or private individuals can prosecute fraud and abuse cases, and courts and/or regulators can impose more than one of the available penalties for each violation.

Laws governing fraud and abuse apply to virtually all individuals and entities with which a hospital does business, including other hospitals, home health agencies, long term care entities, infusion providers, pharmaceutical providers, insurers, MCOs, PPOs, third party administrators, physicians, physician groups and physician practice management companies. Fraud and abuse prosecutions can have a catastrophic effect on any of these entities, which can result in a material adverse impact on the financial condition of other entities in the same health care delivery system.

Federal Fraud and Abuse Law. In recent years, both the federal and state governments have increased enforcement of laws designed to combat health care fraud and practices that the governments regard as abusive, and additional fraud legislation has been adopted at both federal and state levels. Under the federal Medicare Medicaid Fraud and Abuse Amendments of 1977 to the Social Security Act, as amended (the “Anti-Kickback Law”), it is a felony to knowingly and willfully offer, pay, solicit or receive any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind in order to induce business for which payment is provided, in whole or in part, under a federal health care program, including Medicare and Medicaid. Penalties for each violation of the Anti-Kickback Law include criminal fines and civil monetary penalties. Moreover, some courts have held that a violation of the Anti-Kickback Law may form the basis for a Federal False Claims Act suit (see discussion below). The statute does include some exceptions, and federal regulations establish numerous “safe harbors.” Arrangements that meet the safe harbor requirements are deemed not to be violations of the Anti-Kickback Law. Failure to comply with the safe harbors, however, does not mean that the activity violates the law. Arrangements that fail to qualify for safe harbor protection may or may not violate the Anti-Kickback Law depending on the facts and the intent of the parties.

The scope of the Anti-Kickback Law prohibition is, however, broadly drafted and liberally interpreted by some federal regulators and enforcement authorities. Thus, the Anti-Kickback Law may create liability in connection with a wide range of economic arrangements involving managed care entities, hospitals, physicians and other health care providers, including joint ventures, space and equipment rentals, purchases of physician practices, managed care arrangements, and management and personal services contracts. While Management of the Hospital believes that the Hospital currently complies with the Anti-Kickback Law, the ambiguity and breadth of the law mean that there can be no assurance that enforcement authorities or courts of law would agree.

In the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Congress established a fraud and abuse control program to coordinate federal, state and local health care fraud and abuse activities. HIPAA also creates several new federal health care crimes, many of which are broadly worded and potentially applicable to a wide range of conduct. For example, HIPAA created a general prohibition on knowingly and willfully executing or attempting to execute schemes to defraud any public or private health care benefit program or making any false or fraudulent representations in any matter involving any private or public health care program.

Several federal statutes, including the Social Security Act, the Program Fraud Civil Remedies Act of 1986 and the Federal False Claims Act (the “FCA”) (which is discussed in more detail below), also provide for imposition of civil monetary penalties for knowingly making false or improper claims to federal health care programs. Penalties under these statutes can be severe, ranging up to $25,000 per

claim plus up to three times the amount of damages sustained by the government. In addition, because the Hospital has various relationships with parties located in foreign jurisdictions, the Hospital is subject to certain laws applicable to businesses generally, including the Foreign Corrupt Practices Act and other anti-corruption laws. If the Hospital fails to comply with these or other applicable laws and regulations, it could be subject to penalties or other adverse consequences.

Penalties for noncompliance with the above referenced statutes can be substantial and could include criminal or civil liability and/or exclusion from participation in Medicare, Medicaid and other health programs. Based on their internal processes, the Hospital believes that it is in compliance with the above referenced statutes; however, there can be no assurance that enforcement authorities would agree.

State Anti-Fraud and Abuse Law. In addition to the federal laws prohibiting kickbacks and other types of exchanges of remuneration for referrals of patients, New York law also prohibits such conduct and provides criminal and civil penalties for licensed facilities and individuals who make or receive payments for referrals of patients for health care services. Entities and individuals found to have violated this provision are subject to loss of licensure, fines and/or imprisonment

Federal and State Self Referrals Prohibitions. The Federal Ethics in Patient Referrals Act (known as the “Stark Law”) prohibits the referral of Medicare and Medicaid patients for certain “designated health services” to entities with which the referring physician (or an immediate family member of such physician) has a financial relationship. The statute also prohibits the entity furnishing the “designated health services” from billing the Medicare or Medicaid program for designated health services furnished pursuant to a prohibited referral. The designated health services subject to these prohibitions are clinical laboratory services, physical and occupational therapy services, radiology services (including magnetic resonance imaging, computerized tomography and ultrasound), radiation therapy services and supplies (not including nuclear medicine), durable medical equipment and supplies, parenteral and enteral nutrients (including equipment and supplies), orthotic and prosthetic devices and supplies, speech language pathology, home health services, outpatient prescription drugs and inpatient and outpatient hospital services (not including lithotripsy).

The New York Health Care Practitioner Referral Law (the “State Provisions”) is similar to the Stark Law; however, it covers all patients (irrespective of payor) and prohibits practitioners from referring a patient to a health care provider for clinical laboratory services, x-ray imaging services, radiation therapy services, physical therapy, or pharmacy services if the referring practitioner (or an immediate family member) has a financial interest in the health care provider.

A financial relationship, for purposes of the Stark Law and State Provisions (the Stark Law and State Provisions are hereinafter collectively referred to as “Stark”), is defined as either an ownership or investment interest in the entity or a compensation arrangement between the practitioner (or immediate family member) and the entity. An ownership or investment interest may be through equity, debt, or other means and includes an interest in an entity that holds an ownership or investment interest in an entity providing the designated health services. Many ordinary business practices and economically desirable arrangements with physicians would constitute “financial relationships” within the meaning of Stark.

The Stark provisions provide certain exceptions to these restrictions, but these exceptions are narrow and an arrangement must fully comply with an exception. If the relationship (which would include compensation arrangements such as employment and other professional services relationships, and ownership or investment interests) between a physician/practitioner and the hospital cannot be made to fit within the exceptions, the hospital will not be permitted to accept referrals for designated services from the physician/practitioner who has such financial relationship.

Violations of Stark can result in denial of payment, substantial civil money penalties, and exclusion from the Medicare and Medicaid programs. In certain circumstances, knowing violations may also create liability under the FCA. Enforcement actions for any such violations could have a material adverse impact on the financial condition of a health care provider, including the Hospital.

The Hospital has and may have in the future various relationships with physicians that may be characterized as financial arrangements under the Stark Law and/or the State self-referral statute. The statutes and interpretive regulations contain numerous ambiguities and are subject to varying interpretations. Under these circumstances, it is not possible to ascertain with certainty the effects that the Stark Law or the State self-referral statute may have on the Hospital’s operations or financial results.

The False Claims Act. The criminal False Claims Act (“criminal FCA”) makes it illegal to submit or present a false, fictitious or fraudulent claim to the federal government. Violation of the criminal FCA can result in imprisonment and/or a fine. The civil False Claims Act (“civil FCA”), one of the government’s primary weapons against health care fraud, allows the United States government to recover significant damages from persons or entities that submit fraudulent claims for payment to any federal agency through actions taken by the United States Attorney’s Office or the Department of Justice. The civil FCA also permits individuals to initiate actions on behalf of the government in lawsuits called qui tam actions. These qui tam plaintiffs, or “whistleblowers,” can share in the damages recovered by the government. Recent changes to the civil FCA provide that penalties may apply to persons who do not contract with the federal government but who makes, or causes to be made, a false record or statement material to a false or fraudulent claim paid by the federal government.

Under the civil FCA, health care providers may be liable if they take steps to obtain improper payments from the government by submitting false claims. Civil FCA violations have been alleged solely on the basis of alleged kickbacks or self-referrals or other conduct not in full compliance with applicable legal and regulatory standards. It is impossible to predict with certainty whether courts will uniformly hold that regulatory non-compliance and anti-kickback or self-referral violations are subject to prosecutions as false claims. If a provider, is faced with a civil FCA prosecution based on one of these theories, however, allocation of the funds required to contest or settle the matter could have a material adverse impact on that provider.

Violations of the civil FCA can result in penalties up to triple the actual damages incurred by the government and also monetary penalties.

Federal Civil Monetary Penalty Law. The federal Civil Monetary Penalty Act (“CMPA”) provides for administrative sanctions against health care providers for a broad range of billing and other abuses. These include violations of the fraud and abuse and Stark Law, as noted elsewhere in this discussion. In addition, a health care provider is liable under the CMPA if it knowingly presents, or causes to be presented, improper claims for payment under Medicare, Medicaid and other federal health care programs. A hospital that participates in arrangements known as “gainsharing” by paying a physician to limit or reduce services to Medicare fee-for-service beneficiaries also would be subject to CMPA penalties. A health care provider that provides benefits to Medicare or Medicaid beneficiaries that the provider knows or should know are likely to induce the beneficiaries to choose the provider for their care also would be subject to CMPA penalties. The CMPA authorizes imposition of a civil money penalty and treble damages.

Health care providers may be found liable under the CMPA 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 the Hospital if it

were found to be in violation of CMPA could have a material adverse impact on the Hospital’s financial condition.

The Health Insurance Portability Act and Accountability Act of 1996. HIPAA established 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, securities, premiums, credits, property or other assets of a health care benefit program. A health care provider convicted of health care fraud could be subject to mandatory exclusion from the Medicare program.

HIPAA also required the Department of Health and Human Services (“DHHS”) to adopt national standards for electronic health care transactions, including federal privacy standards for the protection of health information kept by health care providers that conduct certain financial and administrative transactions electronically (the “Privacy Rule”) and standards relating to the security of such health information. Compliance with the requirements of the Privacy Rule and other HIPAA requirements has required the Hospital to develop and use policies and procedures designed to inform patients about their privacy rights and how their protected health information may be used, to keep protected information secure, to train employees so that they understand the privacy procedures and practices of the Hospital and to designate a privacy officer responsible for seeing that privacy procedures are adopted and followed.

HIPAA imposes civil monetary penalties for violations and criminal penalties for knowingly obtaining or using individually identifiable health information. The penalties are in four tiers, the highest of which would impose a fine of $50,000 per violation and up to $1,500,000 for all such violations of an identical requirement or prohibition during a calendar year. A civil monetary penalty is not imposed if the violation was due to reasonable cause and was corrected within 30 days. In addition, under the American Recovery and Reinvestment Act adopted in February, 2009 state Attorneys General are permitted to bring a civil action in federal district court against individuals who violate the HIPAA privacy and security standards, in order to enjoin further such violation and seek damages of up to $100 per violation, capped at $25,000 for all violations of an identical requirement or prohibition in any calendar year. In the event of a successful action, the court would be permitted to award the costs of the action and reasonable attorneys’ fees to the state.

The HITECH Act. Provisions in the 2008 Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”), enacted as part of the economic stimulus legislation, increase the maximum civil monetary penalties for violations of HIPAA and grant enforcement authority of HIPAA to state attorneys general. The HITECH Act also (i) extends the reach of HIPAA beyond “covered entities,” (ii) imposes a breach notification requirement on HIPAA-covered entities, (iii) limits certain uses and disclosures of individually identifiable health information and (iv) restricts covered entities’ marketing communications. Management does not anticipate that compliance with the HITECH Act will have a material effect on the Hospital’s operations.

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. The Medicare and Medicaid EHR incentive programs provide 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 and/or Medicaid payments significantly reduced.

The Office for Civil Rights of HHS (“OCR”) is putting increased emphasis on enforcement. OCR has entered into a number of highly publicized, high value settlements with HIPAA-covered entities stemming from alleged violations of HIPAA. The settlements are also noteworthy because they indicate that OCR is interested in enforcing violations of the HIPAA Security Rule, not just the HIPAA Privacy Rule. There have also been additional cases where state attorneys general, exercising the powers given them under the HITECH Act, have brought actions against covered entities for alleged HIPAA violations seeking significant penalties.

Exclusions from Medicare or Medicaid Participation. The Secretary of DHHS is required to exclude from governmental program participation (including Medicare and Medicaid) for not less than five years any individual or entity who has been convicted of a criminal offense relating to the delivery of any item or service paid 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, felony fraud against any federal, state or locally financed health care program or an offense relating to the illegal manufacture, distribution, prescription or dispensing of a controlled substance. DHHS also may exclude individuals or entities under certain other circumstances, such as an unrelated conviction of fraud, theft, embezzlement, breach of fiduciary duty or other financial misconduct relating either to the delivery of health care in general or to participation in a federal, state or local government program. The New York State Office of the Medicaid Inspector General also has the authority to exclude individuals and entities from participation in Medicaid. Providers are excluded for reasons that may include program-related convictions, patient abuse or neglect convictions, and licensing board disciplinary actions. Exclusion of the Hospital from governmental program participation could have a material, adverse effect on the Hospital.

Enforcement. Enforcement activity against health care providers has increased and enforcement authorities have adopted aggressive approaches. In the current regulatory climate, it is anticipated that many health care providers will be subject to investigation, audit or inquiry regarding the health care fraud laws mentioned above. As with other health care providers, the Hospital may be the subject of Office of the Inspector General, U.S. Attorney General and/or Justice Department investigations, audits or inquiries in the future. Because of the complexity of these laws, the instances in which an alleged violation may arise to trigger such investigations, audits or inquiries is increasing and could result in enforcement action against the Hospital.

Enforcement authorities are in a position to compel settlements by providers charged with kickback, referral, billing practice or false claims violations by imposing or threatening to withhold Medicare, Medicaid and/or similar payments and/or exclusion and/or criminal action. In addition, the cost of defending such investigations or litigation, the time and management attention consumed thereby and the facts of a particular case may dictate settlement. Therefore, regardless of the merits of a particular case or cases, the Hospital could experience materially adverse settlement and/or litigation costs. Prolonged and publicized investigations could be damaging to the reputation, business and credit of the Hospital, regardless of the outcome, and could have material adverse consequences on the financial condition of the Hospital. In addition, the IRS has stated that violations by a tax exempt entity of certain of the fraud and abuse laws may also result in revocation of the entity’s tax-exempt status. 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 often are compounded. Generally these risks are not covered by insurance.

Voluntary Corporate Compliance. The Hospital has adopted and implemented a voluntary corporate compliance program (“Compliance Plan”). The purpose of a Compliance Plan is to detect and deter violations of law. One of the major goals of such a plan is to identify and address issues involving the submission of claims to governmental payers such as Medicare and Medicaid and whether those claims comply with statutes, regulations and other guidance provided by the programs. Integral

components of the Compliance Plan include a code of conduct, adoption of written standards, education, policies and procedures, auditing and monitoring, remediation of identified issues, and encouraging employees to identify potential issues.

It is possible that the Compliance Plan may bring to the attention of the Hospital issues with respect to prior practices and payments. Depending upon the nature of the issue and whether an overpayment has occurred, such a discovery may result in either voluntary or involuntary refunds to governmental payers. Enforcement authorities take into account the existence and efficacy of a provider’s voluntary compliance efforts in assessing the application and severity of penalties for a violation of federal or state rules governing reimbursement to or business relationships among providers of medical services; however, the decision of whether and how much weight to attach to voluntary compliance efforts is solely within the enforcement authorities’ discretion.

The Affordable Care Act requires that all Medicare-certified providers, including hospitals, revalidate their Medicare enrollment records by March 2015 in order for CMS to implement new screening criteria mandated by the Affordable Care Act. The Hospital revalidated its provider arrangement through this process in September 2015.

HIPAA – Administrative Simplification. In addition to provisions governing the portability of health insurance and health care fraud, HIPAA includes administrative simplification provisions (“AS Provisions”) intended to reduce costs and administrative burdens in the health care industry by standardizing the electronic transmission of many administrative and financial transactions that currently are carried out manually on paper or in many different electronic formats. The AS Provisions also impose privacy and security requirements on entities covered by HIPAA (“Covered Entities”) as well as mandate other standards such as national identifiers. Covered Entities are health plans; health care clearinghouses; and health care providers, such as the Hospital, that engage in covered transactions. Additionally, Covered Entities must enter into contracts with their business associates with whom they share protected health information to assure that such information is appropriately safeguarded and that other HIPAA requirements are met.

Under the final transaction and code set regulations promulgated by DHHS, Covered Entities must use the prescribed standards for designated electronic transactions. The final HIPAA privacy regulations impose requirements on the use and disclosure of protected health information, create individual rights, and mandate certain administrative requirements for Covered Entities. Covered Entities were expected to be in compliance with the privacy regulations. Additionally, security regulations require Covered Entities to assess risks and develop and implement appropriate security measures to protect individually identifiable health information, with particular focus on administrative procedures, physical safeguards, technical security services, and technical security mechanisms. Covered Entities such as the Hospital must comply with the security regulations as well.

Penalties for noncompliance with the AS Provisions include civil monetary penalties of up to $100 for any violation not to exceed $25,000 in any calendar year for identical violations. Criminal penalties include up to $50,000 in fines and/or one year imprisonment for wrongful disclosure of individually identifiable health information; $100,000 and/or imprisonment of not more than five years for wrongful disclosure under false pretenses; and up to $250,000 and/or 10 years imprisonment for wrongful disclosure with the intent to sell, transfer, or use individually identifiable health information for commercial advantage, personal gain, or malicious harm.

Licensing, Surveys, Investigations and Audits

On a regular basis, health facilities, including those of the Hospital, are subject to numerous legal, regulatory, professional and private licensing, certification and accreditation requirements. These include, but are not limited to, requirements relating to Medicare and Medicaid participation and payment, State licensing agencies, private payors and The Joint Commission. Renewal and continuance of certain of these licenses, certifications and accreditations are based on inspections, surveys, audits, investigations or other reviews, some of which may require or include affirmative action or response by the Hospital. These activities generally are conducted in the normal course of business of health care facilities. Nevertheless, an adverse determination could result in a loss or reduction in the Hospital’s scope of licensure, certification, or accreditation, or could reduce the payment received or require repayment of amounts previously remitted.

The Hospital’s management currently anticipates no difficulty, renewing or continuing currently held licenses or certifications and no materially adverse change in accreditations. Nevertheless, actions in any of these areas could result in the loss of utilization or revenue or the Hospital’s ability to operate all or a portion of its facilities, and, consequently, could adversely affect the Hospital’s ability to make payments of principal, interest and premium, if any, on the Bonds.

Other Federal, State and Local Legislation

General. The Hospital is subject to a wide variety of federal, state and local regulatory actions and legislative and policy changes that could have a significant impact on the Hospital. Federal, state and local legislative bodies have broad discretion in altering or eliminating programs that contribute significantly to the revenues of the Hospital, including the Medicare and Medicaid programs. In addition, such entities may enact legislation that imposes significant new burdens on the operations of the Hospital. There can be no assurance that such legislative bodies will not make legislative policy changes (or direct governmental agencies to promulgate regulatory changes) that have adverse effects upon the ability of the Hospital to generate revenues or upon the utilization of its facilities.

Certificate of Need. The State employs a certificate of need program, whereby health care facilities are required to obtain approval from the State before undertaking certain projects, including constructing or developing a new health care facility, selling, purchasing or leasing part or all of any existing hospital, changing bed capacity in a manner which increases the total number of licensed beds or redistributes beds, and/or offering a new tertiary health service.

Environmental Laws Affecting Health Care Facilities. Hospitals and other healthcare facilities are subject to a wide variety of federal, state and local environmental and occupational health and safety laws and regulations that address, among other things, hospital operations or facilities and properties owned or operated by hospitals. Among the types of regulatory requirements faced by hospitals are: air and water quality control requirements; waste management requirements; specific regulatory requirements applicable to asbestos, hospital, medical and infectious waste, polychlorinated biphenyls, and radioactive substances; requirements for providing notice to employees and members of the public about hazardous materials handled by or located at the hospital; requirements for worker safety and training employees in the proper handling and management of hazardous materials and waste; and other requirements. In their role as owners and operators of properties or facilities, hospitals may be subject to liability for investigating and remedying any hazardous substances that have come to be located on the property, including any such substances that may have migrated off the property. Typical healthcare operations include, in various combinations, the handling, use, storage, transportation, disposal and discharge of infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants or contaminants. For this reason, healthcare facility operations are particularly susceptible to the practical

financial and legal risks associated with compliance with such laws and regulations. Such risks may result in damage to individuals, property or the environment; may interrupt operations or increase their costs or both; may result in legal liability, damages, injunctions or fines, or may trigger investigations, administrative proceedings, penalties or other government agency actions.

Antitrust. Enforcement of antitrust laws against health care providers is becoming more common, and antitrust liability may arise in a wide variety of circumstances including medical staff privilege disputes, third party contracting, physician relations, employee compensation and joint venture, merger, affiliation and acquisition activities. In some respects, the application of federal and state antitrust laws to health care is still evolving, and enforcement activity by federal and state agencies appears to be increasing. At various times, health care providers may be subject to an investigation by a governmental agency charged with the enforcement of the antitrust laws, or may be subject to administrative or judicial action by a federal or state agency or a private party. Violation of the antitrust laws could be subject to criminal or civil enforcement by federal and state agencies, as well as by private litigants. Among the remedies available against persons found liable of violating antitrust prohibitions are treble damages and payment of plaintiff’s attorney fees, both of which may be significant.

From time to time, the Hospital is or will be involved in a variety of activities which could receive scrutiny under the antitrust laws, and it cannot be predicted when or to what extent liability may arise. With respect to payor contracting, the Hospital may, from time to time, be involved in joint contracting activity with other hospitals or providers. The precise degree to which this or similar joint contracting activities may expose the participants to antitrust risk from governmental or private sources is dependent on a myriad of factual matters which may change from time to time.

Hospitals, including the Hospital, regularly have disputes regarding credentialing and peer review, and may be subject to liability in this area. In addition, hospitals occasionally indemnify medical staff members who are involved in such credentialing or peer review activities, and may also be liable with respect to such indemnity. Court decisions have also established private causes of action against hospitals which use their local market power to promote ancillary health care businesses in which they have an interest. Such activities may result in monetary liability for the participating hospitals under certain circumstances where a competitor suffers business damage.

Indigent Care. Tax exempt hospitals often treat large numbers of indigent patients who are unable to pay in full for their medical care. Typically, urban, inner city hospitals may treat significant numbers of indigents. These hospitals 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 that affect the number of employed individuals who have health coverage affects the ability of patients to pay for their care. Similarly, changes in governmental policy, which may result in coverage exclusions under local, 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 also is 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.

Federal law and regulations reduced the amount of funding available in the future for DSH payments under the Medicare and Medicaid programs under the theory that the Affordable Care Act will result in more insured patients, and therefore, there will be less of a need to make funds available to hospitals that provide care to the uninsured. However, Management cannot predict whether the anticipated increased revenue to the Hospital resulting from more insured patients will offset the loss of DSH payments.

Employment and Labor Issues. As with all large employers, the Hospital bears a wide variety of risks in connection with their employees. These risks include strikes and other related work actions, contract disputes, difficulties in recruitment, discrimination claims, personal tort actions, work related injuries, exposure to hazardous materials, interpersonal torts, risks related to its benefit plans, and other risks that may flow from the relationships between employer and employee or between physicians, patients and employees. Many of these risks are not covered by insurance, and certain of them cannot be anticipated or prevented in advance. Management of the Hospital believes that the Hospital’s retirement plans are in material compliance with the Employee Retirement Income Security Act of 1974, as amended, the Code and other applicable laws.

Increasingly, employees of hospitals and other providers are becoming unionized, and many hospitals and other providers 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 the affected members. In addition, employee strikes or other adverse labor actions may have an adverse impact on the Hospital.

Physician, Nursing and Staff Shortages. In recent years, the health care industry has suffered from a scarcity of physician specialists and sub specialists, nursing personnel, respiratory therapists, pharmacists and other trained health care technicians. A significant factor underlying this trend includes a decrease in the number of persons entering such professions. A further factor is that competition for physicians has intensified in recent years, with frequent recruitment efforts by hospitals both locally and nationally to attract physicians away from competing hospitals in order to bolster admissions and profitability attributable to the patients such physicians frequently bring with them or are able to attract. These factors are expected to intensify in the future, aggravating the general shortage and increasing the likelihood of hospital specific shortages. To the extent that the Hospital is unable to maintain adequate staff levels, utilization and, thus, financial performance may be adversely affected.

In order to recruit and retain professional and nursing staff to strengthen clinical services, the Hospital has offered, and in the future may have to offer, competitive salaries to both newly recruited individuals and existing staff. In some years such salaries have increased, and in the future may be required to increase, more than the rate of inflation. Such increases in the future may exceed increases in the Hospital’s rates of payment.

Competition. Competition from other hospitals may adversely affect revenues. In New York, hospital systems continue to consolidate, increasing competitive pressures on acute care hospitals, including the Hospital. Development of health maintenance and other alternative delivery programs and future medical and scientific advances could result in decreased usage of the Hospital’s facilities. The Hospital further faces and will continue to face increased competition from other hospitals, integrated delivery systems, ambulatory care providers, rehabilitation facilities, urgent care centers, drug stores and other retail businesses offering health care services, freestanding independent diagnostic treatment facilities and increasingly sophisticated physician group practices, among others that offer similar health care services as well as expanded preventive medicine treatment.

Insurers may further encourage competition among hospitals and providers on the basis of price, payment terms and quality. Payors have used the threat of patient steerage, restrictive physician contracting, carve outs and network exclusion to drive provider prices lower. This may lead to increased competition among hospitals based on price where insurance companies attempt to steer patients to the hospitals that have the most favorable contracts.

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 are often filed against health care providers. Insurance does not provide coverage for judgments for punitive damages.

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 if determined or settled adversely.

Many hospitals and health care providers are having difficulty renewing or obtaining all types of commercial insurance, including insurance against malpractice and general liability claims, at reasonable cost. The insurers are mandating lower amounts of coverage, requiring greater deductibles, and charging more in premium.

Cost Increases. In recent years, substantial cutbacks in personnel and other cost-cutting measures have been instituted at hospitals throughout the State. Generally, these cutbacks have been instituted to address the disparity between rising medical costs and State-regulated reimbursement formulas, including those for Medicaid, Blue Cross and Blue Shield, and other third-party payors. Rising health care costs resulted from, among other factors, health care costs exceeding inflation, increased minimum wage, staff shortages, increased pharmaceutical and medical device costs, and the highly technical nature of the industry. The Hospital has been affected by the impact of such rising costs, and there can be no assurance that the Hospital would not be similarly affected by the impact of additional unreimbursed costs in the future.

Maintenance of 501(c)(3) Status

The Hospital has been determined to be a tax-exempt organization described in Section 501(c)(3) of the Code. To maintain such status, such entity must conduct its operations in a manner consistent with representations previously made to the Internal Revenue Service (the “IRS”) and with current and future IRS regulations and rulings governing tax-exempt healthcare facilities.

Compliance with current and future regulations and rulings of the IRS could adversely affect the ability of the Hospital to charge and collect revenues, finance or refinance indebtedness on a tax-exempt basis or otherwise generate revenues necessary to provide for payment of the Bonds. Although the Hospital has covenanted to maintain its status as a tax-exempt organization, loss of tax-exempt status would likely have a significant adverse effect on the Hospital and its operations.

The tax-exempt status of nonprofit corporations, and the exclusion of income earned by them from taxation, has been the subject of review by various federal, state and local legislative, regulatory and judicial bodies. This review has included proposals to broaden and strengthen existing federal tax law with respect to unrelated business income of nonprofit corporations.

There can be no assurance that future changes in the laws and regulations of the federal, state or local governments will not materially and adversely affect the operations and revenues of the Hospital by requiring it to pay income, real estate or other taxes.

Affiliation, Merger, Acquisition and Divestiture

Significant numbers of affiliations, mergers, acquisitions and divestitures have occurred in the health care industry recently. As part of its on-going planning process, the Hospital has considered and will continue to consider the potential acquisition of operations or properties which may become affiliated with or become part of the Obligated Group in the future, as well as the potential disposition of certain existing Obligated Group operations or properties. As a result, it is possible that the organizations and assets which currently make up the Obligated Group may change from time to time, subject to the provisions in the Master Indenture and other financing documents which apply to merger, sale, disposition or purchase of assets, or with respect to joining or withdrawing from the Obligated Group.

Secondary Market

There can be no assurance that there will be a secondary market for the purchase or sale of the Bonds. From time to time there may be no market for them depending upon prevailing market conditions, including the financial condition or market position of firms who may make the secondary market, the evaluation of the Obligated Group’s capabilities and the financial conditions and results of operations of the Obligated Group.

State Budget

In January 2011, Governor Andrew M. Cuomo issued Executive Order No. 5 creating the Medicaid Redesign Team and setting in motion a process of substantial reform of New York's Medicaid program. The Medicaid Redesign Team, comprised of health care professionals, stakeholders in the industry and legislators, was charged with reducing Medicaid costs and improving patient care. On February 24, 2011, the Medicaid Redesign Team issued a report containing findings and recommendations for cost reductions of over $2.3 billion to the Governor for consideration in the budget negotiation process. The majority of these recommendations (so-called “Phase I” proposals) were included in the 2011-12 Enacted Budget. The 2012-13 Enacted Budget included a number of Phase II proposals designed to continue the reformation of Medicaid within New York. The 2013-14 Enacted Budget, the 2014-15 Enacted Budget, and the 2015-16 Enacted Budget, which was passed by the New York legislature on April 1, 2015, each included additional recommendations, described in more detail below.

The 2011-12 Enacted Budget (implementing Phase I) included a series of changes and cost- containment measures such as programmatic reforms to Medicaid payments and program structures; the elimination of annual statutory inflation factors for hospitals, nursing homes and home and personal care providers; a 2% across-the-board rate reduction and other industry-specific measures; the acceleration of certain payments to take advantage of additional enhanced Federal Medical Assistance Percentage payments; mandatory managed care enrollment of previously exempt population; changes in the benefit package and reimbursement for certain overused benefits; and creation of new integrated care models anticipated to save Medicaid dollars in the long run by improving patient care. The 2012-13 Enacted Budget (implementing Phase II) continued the work of the Medicaid Redesign Team and included provisions calling for further redesign of the basic benefit package; additional initiatives to provide integrated care; and a state takeover of Medicaid administration from local governments. The 2013-14 Enacted Budget includes further expansion of eligibility for and the scope of services provided by managed care plans and acceleration of several cost-saving Medicaid Redesign Team initiatives to offset the cost of creating a Mental Hygiene Stabilization Fund. The 2014-15 Enacted Budget includes further provisions implementing the work of the Medicaid Redesign Team, including integration of physical and behavioral health services through Behavioral Health Organizations and Health and Recovery Plans, an increase in funding available for affordable housing, and an increase in payments to essential community

providers. The 2015-16 Enacted Budget creates a new quality pool for hospitals, providing rate add-ons for quality reporting and, in future years, for quality performance.

Each of the Enacted Budgets for 2011-12 through 2015-16 assume a targeted growth rate for Medicaid equal to the ten-year average change in the medical component of the Consumer Price Index (“CPI”) and grant DOH and the State Department of Budget authority to hold Medicaid spending to this rate. The ten-year average change in the medical component of CPI fell from 4.0% in 2011-12 to 3.6% in 2015-16 and is projected to drop to 3.4% in 2016-17 and down to 2.8% by 2019-20. If spending is projected to exceed the budget cap, DOH and the State Division of the Budget are authorized to develop and implement a plan of action to bring spending in line with the cap, which could include modifying or reducing reimbursement methods or program benefits. For the 2011-12 budget year, the budget cap required DOH to achieve savings of $2.2 billion, which grew to $3.3 billion in the 2012-13 budget year. For the 2013-14 budget year, the global spending cap was increased to $16.4 billion; for the 2014-15 budget year, it was further increased to $17 billion, and for the 2015-16 budget year to $17.7 billion. The recently Enacted Budget for 2016-17 sets the global spending cap to $18.5 billion. For each of the first four years of the global spending cap, Medicaid spending has remained below the cap – for the 2011-12 budget year by $14 million, for the 2012-13 budget year by $2 million, for the 2013-14 budget year by $39 million, and for the 2014-15 budget year by $8 million. For the 2015-16 budget year through March 2016, Medicaid spending was $3 million under projected levels. Although successful in meeting the budget cap in the first four years, higher-than-average Medicaid enrollment threatens the ability of DOH to continue to meet the ambitious savings goals in future years.

The effect of' the Medicaid redesign process on the Hospital will depend significantly on participation in new models of integrated care delivery, the ability to collaborate with different types of providers and relationships with Medicaid managed care plans, as those plans will play an increasingly larger role over the next several years. There can be no assurance that the anticipated gap-closing savings will be achieved or that the rate of annual growth in DOH State Funds Medicaid spending will be limited. In addition, many of the cost-saving initiatives are dependent upon timely federal approvals, appropriate amendments to the existing systems and processes and a collaborative working relationship with health care industry stakeholders.

Medicaid 1115 Waiver Amendment

As of April 14, 2014, the New York State Section 1115 Partnership Plan was amended to allow the State to reinvest over a five-year period up to $8 billion of the $17.1 billion in federal savings generated by State Medicaid reforms. Up to $6.42 billion of this amount will be applied to the Delivery System Reform Incentive Payment (“DSRIP”) Program, which has a goal of reducing avoidable Medicaid hospitalizations by 25% over the next five years. The DSRIP payments are to be made to providers who collaborate in some fashion to achieve this goal and are to be paid based on performance. While the Hospital may participate in the DSRIP Program, the impact of the 1115 Waiver and the potentially significant loss in revenue from decreased hospitalizations upon the projected financial performance of the Obligated Group cannot be determined at this time.

New York State Executive Order 38

On January 18, 2012, Governor Cuomo signed Executive Order No. 38 (the “Executive Order”) limiting spending for administrative costs and executive compensation at state-funded service providers. The Hospital may be subject to the limitations contained in the Executive Order. The Executive Order limits reimbursement with State funds for executive compensation to $199,000 annually per executive and requires that 85% of State-authorized payments be directed to direct care or services, rather than

administrative costs. On May 30, 2012, DOH published proposed regulations to implement the Executive Order, effective January 1, 2013.

In April 2014, a New York trial-level court in Nassau County found that the Executive Order violated the New York State Constitution. A trial-level court in Suffolk County in a different case upheld the Executive Order in July 2014. In December 2015, the appellate court with jurisdiction over the trial courts in both of these counties upheld the Executive Order, reversing the decision from the Nassau County court and affirming the decision of the Suffolk County court. A recent decision in the Albany County Supreme Court, also a trial-level court, found the Executive Order to be constitutional, for the most part. The appellate court decision and the decision of the Albany court remain subject to review by higher courts. Accordingly, whether the Executive Order will remain in effect and the way in which the final regulations may impact the Hospital remains unclear. Accordingly, it is impossible at this time to predict what changes in accounting or practices might be required of the Hospital as a result of these regulations.

Enforceability of Remedies

The Bonds are general unsecured obligations of the Obligated Group payable as described in this Offering Memorandum. The practical realization of money from the Obligated Group upon any default will depend upon the exercise of various remedies specified by the Master Indenture. These and other remedies may, in many respects, require judicial actions which are often subject to discretion and delay.

Under existing law, the remedies specified by the Master Indenture may not be readily available or may be limited. A court may decide not to order the performance of the covenants contained in those documents. The legal opinion to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various agreements and other instruments by limitations imposed by State and Federal laws, rulings and decisions affecting remedies and by bankruptcy, reorganization or other laws affecting the enforcement of creditors’ rights generally.

Enforceability of the Master Indenture

Under New York law, a not-for-profit corporation may guarantee the debt of another corporation only if such guaranty is in furtherance of the corporate purposes of such guarantor not-for-profit corporation. In addition, it is possible that the joint and several obligation of a member to make payments due under an Obligation, relating to indebtedness issued for the benefit of another member, may be declared void in an action brought by a third-party creditor pursuant to the New York fraudulent conveyance statutes or may be avoided by a member or a trustee in bankruptcy in the event of the bankruptcy of the member from which payment is requested. An obligation may be voided under the Federal Bankruptcy Code or under the New York fraudulent conveyance statute, if (a) the obligation was incurred without receipt by the obligor of “fair consideration” or “reasonably equivalent value,” and (b) the obligation renders the obligor “insolvent,” as such terms are defined under the applicable statute. Interpretation by the courts of the tests of “insolvency,” “reasonably equivalent value” and “fair consideration” has resulted in a conflicting body of case law. For example, a member’s joint and several obligation under the Master Indenture to make all payments thereunder, including payments in respect of funds used for the benefit of the other members, may be held to be a “transfer” which makes such member “insolvent” in the sense that the total amount due under the Master Indenture could be considered as causing its liabilities to exceed its assets. Also, one of the members may be deemed to have received less than “fair consideration” for such obligation because none or only a portion of the proceeds of the indebtedness is to be used to finance projects occupied or used by such member. While the members may benefit generally from the projects financed from the indebtedness for the other members, the actual cash value of this benefit may be less than the joint and several obligation. The rights under the New York

fraudulent conveyance statutes may be asserted for a period of up to six years from the incurring of the obligations under the Master Indenture.

In addition, the assets of any member may be held by a court to be subject to a charitable trust which prohibits payments in respect of obligations incurred by or for the benefit of others if a member has insufficient assets remaining to carry out its own charitable functions or, under certain circumstances, if the obligations paid by such member were issued for purposes inconsistent with or beyond the scope of the charitable purposes for which the member was organized. The enforceability of similar master trust indentures has been challenged in jurisdictions outside of the State. In the absence of clear legal precedent in this area, the extent to which the assets of any member can be used to pay Obligations issued by or on behalf of others cannot be determined at this time.

In addition, there exists common law authority and authority under state statutes for the ability of the state courts to terminate the existence of a not-for-profit 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 or has taken some action which renders it unable to carry out such 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 common law and statutory power to enforce charitable trusts and to see to the application of their funds to their intended charitable uses.

An action to enforce a charitable trust and to see to the application of its funds could also arise if an action to enforce the obligation to make payments on an Obligation issued for the benefit of another Member of the Obligated Group would result in the cessation or discontinuation of any material portion of the healthcare or related services previously provided by the Hospital from which payment is requested.

Exercise of Remedies under Master Indenture

“Events of Default” under the Master Indenture include the failure of the Obligated Group to make payments on any Obligation Outstanding under the Master Indenture (such as Obligation No. 2) and the occurrence of an event of default under the Bond Indenture. The Master Indenture provides that upon an “Event of Default” thereunder, the Master Trustee may in its discretion, declare the principal of all (but not less than all) Obligations Outstanding thereunder to be due and payable immediately and may exercise other remedies thereunder. However, the Master Trustee is not required to declare amounts under the Master Indenture to be due and payable immediately except as provided in the Master Indenture. Consequently, upon the occurrence of an “Event of Default” under the Bond Indenture with respect to the Bonds and an acceleration of the maturity of the Bonds, the Master Trustee may not be required to accelerate all Obligations Outstanding under the Master Indenture.

Bankruptcy

The rights and remedies of the holders of the Bonds are subject to various provisions of Title 11 of the United States Code (the “Bankruptcy Code”). If the Hospital were to file a petition for relief under the Bankruptcy Code, the filing would automatically stay the commencement or continuation of any judicial or other proceedings against the Hospital and its property. The Hospital would not be permitted or required to make payments of principal or interest under the Obligations, unless an order of the United States Bankruptcy Court were issued for such purpose. In addition, without an order of the United States Bankruptcy Court the automatic stay may serve to prevent the Bond Trustee from applying amounts on deposit in certain funds and accounts held under the Bond Indenture from being applied in accordance with the provisions of the Bond Indenture, and the application of such amounts to the payment of

principal and interest on, the Bonds. Moreover, any motion for an order canceling the automatic stay and permitting such funds and accounts to be applied in accordance with the provisions of the Bond Indenture would be subject to the discretion of the United States Bankruptcy Court, and may be subject to objection and/or comment by other creditors of such Member of the Obligated Group, which could affect the likelihood or timing of obtaining such relief. The automatic stay may also adversely affect the ability of the Master Trustee under to exercise remedies upon default, including the acceleration of all amounts payable by the Hospital, the Master Indenture, and may adversely affect the Master Trustee’s or the Bond Trustee’s ability to take all steps necessary to file a claim under the applicable documents on a timely basis.

The Hospital could file a plan for the adjustment of its debts in a proceeding under the Bankruptcy Code, which plan could include provisions modifying or altering the rights of creditors generally, or any class of them, whether secured or unsecured. The plan, when confirmed by the United States Bankruptcy Court, would bind all creditors who have notice or knowledge of the plan and could discharge all claims against the Hospital provided for in the plan. No plan may be confirmed unless certain conditions are met, among which are that the plan is in the best interests of creditors, is feasible and has been (except as set forth below) 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 allowed claims of the class that are voted with respect to the plan are cast 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.

In the event of bankruptcy of the Hospital, transfers of property by the bankrupt entity, including the payment of debt on or after the date which is 90 days (or, in some circumstances, one year) prior to the commencement of the case in bankruptcy court may be subject to avoidance or recoupment as preferential transfers. Under certain circumstances a court may have the power to direct the use of revenues meet expenses of the Hospital before paying debt service on the Bonds.

Considerations Relating to Additional Debt

The Bond Indenture and the Master Indenture permit the Hospital to incur additional indebtedness unlimited in amount, including Additional Bonds. Such indebtedness would increase the Obligated Group’s debt service and repayment requirements and may adversely affect debt service coverage on the Bonds.

Cybersecurity

Like many other large organizations, the Hospital relies on digital technologies to conduct its customary operations. In the past several years, a number of entities have sought to gain unauthorized access to digital systems of large organizations for the purposes of misappropriating assets or information or causing operational disruption. These attempts include highly sophisticated efforts to electronically circumvent network security as well as more traditional intelligence gathering and social engineering aimed at obtaining information necessary to gain access. The Hospital maintains a network security system designed to stop “cyber-attacks” by third parties, and minimize its impact on operations; however, no assurances can be given that such network security systems will be completely successful.

Other Risk Factors

In the future, the following factors, among others, may adversely affect the operations of health care providers, including the Hospital, or the market value of the Bonds, to an extent that cannot be determined at this time:

• Adoption of legislation that would establish a national or statewide single-payor health program or that would establish national, statewide or otherwise regulated rates.

• Increased unemployment or other economic conditions in the service area of the Obligated Group, which could increase the proportion of patients who are unable to pay fully for the cost of their care.

• Competition in the Obligated Group’s service area could increase from alternative modes of care, including life care, assisted living facilities, and home care.

• Efforts by insurers and governmental agencies to limit the cost of hospital and physician 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 attempts by third- party payors to control or restrict the operations of certain health care facilities.

• Reduced demand for the services of the Obligated Group that might result from decreases in population or innovations in technology.

• Bankruptcy of an indemnity/commercial insurer, managed care plan or other payor.

• The occurrence of a natural or man-made disaster, including but not limited to acts of terrorists, that could damage the facilities of the Obligated Group, interrupt utility service to the facilities, result in an abnormally high demand for health care services or otherwise impair the operations and the generation of revenues from the Obligated Group’s facilities.

• Adoption of a so-called “flat” Federal income tax, a reduction in the marginal rates of Federal income taxation or replacement of the Federal income tax with another form of taxation, any of which might adversely affect the level of charitable donations to the Obligated Group.

• Increases in cost and limitations in the availability of any insurance, such as fire, and/or business interruption, automobile and comprehensive general liability, that the Obligated Group generally carries.

• Developments affecting the Federal or state tax-exempt status of not-for-profit hospitals.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following discussion summarizes certain U.S. federal tax income considerations generally applicable to U.S. Holders (as such term is defined below) of the Bonds that acquire their Bonds in the initial offering. The discussion below is based upon laws, regulations, rulings, and decisions in effect and available on the date hereof, all of which are subject to change, possibly with retroactive effect. Prospective investors should note that no rulings have been or are expected to be sought from the U.S. Internal Revenue Service (the “IRS”) with respect to any of the U.S. federal income tax consequences discussed below, and no assurance can be given that the IRS will not take contrary positions. Further, the following discussion does not deal with all U.S. federal income tax consequences applicable to any given investor, nor does it address the U.S. federal income tax considerations applicable to categories of investors some of which may be subject to special taxing rules (regardless of whether or not such persons constitute U.S. Holders), such as certain U.S. expatriates, financial institutions, real estate investment trusts, grantor trusts, regulated investment companies, insurance companies, tax-exempt organizations, dealers or traders in securities or currencies, partnerships (and other pass-through entities), investors that hold their Bonds as part of a hedge, straddle or an integrated or conversion transaction, constructive

ownership, constructive sale or other risk reduction transaction, investors whose “functional currency” is not the U.S. dollar. Furthermore, it does not address (i) alternative minimum tax, estate tax or gift tax consequences or tax consequences under any state, local or foreign laws or (ii) the indirect effects on persons who hold equity interests in a U.S. Holder. In addition, this summary generally is limited to investors that purchase their Bonds for cash in connection with this offering for the “issue price” within the meaning of Section 1273 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) (i.e., the first price at which a substantial amount of the Bonds are sold to the public for cash) and it does not address the tax consequences to holder who purchase the Bonds after their original issuance. This discussion assumes that the Bonds will be held as capital assets with the meaning of Section 1221 of the Code.

As used herein, “U.S. Holder” means a beneficial owner of a Bond that is an individual citizen or resident of the United States for U.S. federal income tax purposes, a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any state thereof (including the District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust where a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust (or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a domestic trust). As used herein, “Non-U.S. Holder” generally means any owner (or beneficial owner) of a Bond (other than a partnership or other pass-through entity) that is not a U.S. Holder. If a partnership or other pass-through entity holds Bonds, the tax treatment of a partner (or other owner) will generally depend upon the status of the partner (or other owner) and upon the activities of the partnership. Partners of partnerships (and other owners of pass-through entities) holding Bonds should consult their own tax advisors regarding the tax consequences of an investment in the Bonds (including their status as U.S. Holders or Non-U.S. Holders).

BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, PROSPECTIVE HOLDERS OF THE BONDS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR PARTICULAR TAX SITUATIONS AND AS TO ANY FEDERAL, FOREIGN, STATE, LOCAL OR OTHER TAX CONSIDERATIONS (INCLUDING ANY POSSIBLE CHANGES IN TAX LAW) AFFECTING THE PURCHASE, HOLDING AND DISPOSITION OF THE BONDS.

Certain U.S. Federal Income Tax Consequences to U.S. Holders

This section describes certain U.S. federal income tax consequences to U.S. Holders. Non-U.S. Holders should see the discussion under the heading “Certain U.S. Federal Income Tax Consequences to Non-U.S. Holders” for a discussion of certain tax consequences applicable to them.

Interest. Interest on the Bonds (including any amount withheld as backup withholding) generally will be taxable to a U.S. Holder as ordinary interest income at the time such amounts are accrued or received, in accordance with the U.S. Holder’s method of accounting for U.S. federal income tax purposes.

If a Bond is issued at a discount from its stated redemption price at maturity, and the discount is at least equal to the product of one-quarter of one percent (0.25%) of the stated redemption price at maturity of the Bond multiplied by the weighted average maturity of the Bonds, the Bond will be an “OID Bond.” In general, the excess of the stated redemption price at maturity of an OID Bond over its issue price will constitute original issue discount (“OID”) for U.S. federal income tax purposes. The stated redemption price at maturity of a Bond is the sum of all scheduled amounts payable on the Bond (other than qualified stated interest). The term “qualified stated interest” generally means stated interest that is unconditionally in cash or property (other than debt instruments of the Issuer), or that is treated as

constructively received, at least annually at a single fixed rate or, under certain conditions, at a variable rate. U.S. Holders of OID Bonds will be required to include OID in income for U.S. federal income tax purposes as it accrues, in accordance with a constant yield method based on the compounding of interest (which may be before the receipt of cash payments attributable to such income). Under this method, U.S. Holders generally will be required to include in income increasingly greater amounts of OID in successive accrual periods.

If a Bond is issued at a price greater than the principal amount payable at maturity, a U.S. Holder generally will be considered to have purchased the Bond at a premium, and generally may elect to amortize the premium as an offset to interest income otherwise required to be included in respect of the Bond during a taxable year, using a constant-yield method, over the remaining term of the Bond. If a U.S. Holder makes the election to amortize the premium, it generally will apply to all debt instruments held by such U.S. Holder at the time of the election, as well as any debt instruments that are subsequently acquired by such U.S. Holder. In addition, a U.S. Holder may not revoke the election without the consent of the IRS. If such U.S. Holder elects to amortize the premium, such U.S. Holder will be required to reduce its tax basis in the Bond by the amount of the premium amortized during the holding period of the U.S. Holder. If such U.S. Holder does not elect to amortize premium, the amount of premium will be included in its tax basis in the Bond. Therefore, if a U.S. Holder does not elect to amortize premium and holds the Bond to maturity, the premium will decrease the amount of gain or increase the amount of loss otherwise recognized on the disposition of such Bond. Special rules for determining the amount of amortizable bond premium attributable to a debt instrument may be applicable of the debt instrument may be optionally redeemed. These rules are complex and prospective purchasers are urged to consult their own tax advisors regarding the application of the amortizable bond premium rules to their particular situation.

Disposition of the Bonds. Unless a non-recognition provision of the Code applies, the sale, exchange, redemption, retirement (including pursuant to an offer by the Hospital) or other disposition of a Bond, will be a taxable event for U.S. federal income tax purposes. In such event, in general, a U.S. Holder of Bonds will recognize gain or loss equal to the difference between (i) the amount of cash plus the fair market value of property received (except to the extent attributable to accrued but unpaid interest on the Bonds which will be taxed in the manner described above under “Interest”) and (ii) the U.S. Holder’s adjusted tax basis in the Bonds. A U.S. Holder’s adjusted tax basis in a Bond generally will equal the purchase price paid by the U.S. Holder increased by any original issue discount included in income and decreased by the amount of payments, other than qualified stated interest payments, received and amortizable bond premium taken with respect to the Bond. Any such gain or loss generally will generally be long-term capital gain or loss, provided the Bond has been held for more than a year at the time of disposition. The deductibility of capital losses is subject to limitations.

Medicare Tax. An additional 3.8% tax will be imposed on the net investment income (which includes interest, original issue discount and gains from a disposition of a Bond) of certain individuals, trust and estates. Prospective investors in the Bonds should consult their tax advisors regarding the possible applicability of this tax to an investment in the Bonds.

Information Reporting and Backup Withholding. Payments of interest on the Bonds generally will be subject to U.S. information reporting. In addition, under Section 3406 of the Code and applicable Treasury Regulations, a non-corporate U.S. Holder of the Bonds may be subject to backup withholding at the current rate of 28% (subject to future adjustment) with respect to “reportable payments,” which include interest paid on the Bonds and the gross proceeds of a sale, exchange, redemption or retirement of the Bonds. The applicable payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number (“TIN”) to the payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a

“notified payee underreporting” described in section 3406(c) of the Code or (iv) there has been a failure of the payee to certify under penalty of perjury that the payee is not subject to withholding under section 3406(a)(1)(C) of the Code. Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be refunded or credited against the U.S. Holder’s federal income tax liability, if any, provided that the required information is timely furnished to the IRS. Potential investors should consult their tax advisors regarding the applicability of backup withholding in their particular situation, the availability of an exception from backup withholding and the procedure for obtaining such an exemption, if available.

Certain U.S. Federal Income Tax Consequences to Non-U.S. Holders

This section describes certain U.S. federal income tax consequences to Non-U.S. Holders.

Interest. If, under the Code, interest on the Bonds is “effectively connected with the conduct of a trade or business within the United States” by a Non-U.S. Holder, such interest will be subject to U.S. federal income tax in a similar manner as if the Bonds were held by a U.S. Holder, as described above, and in the case of Non-U.S. Holders that are corporations may be subject to U.S. branch profits tax at a rate of up to 30%, unless an applicable tax treaty provides otherwise. Such Non-U.S. Holder will not be subject to U.S. federal withholding taxes, however, if it provides a properly executed From W-8ECI (subject to the discussion below concerning FATCA withholding).

Interest on the Bonds held by other Non-U.S. Holders may be subject to withholding taxes of up to 30% of each payment made to the Non-U.S. Holders unless the “portfolio interest” exemption applies (subject to the discussion below concerning FATCA withholding). In general, interest paid on the Bonds to a Non-U.S. Holder will qualify for the portfolio interest exemption, and thus will not be subject to U.S. federal withholding tax, if (i) such Non-U.S. Holder is not a “controlled foreign corporation” (within the meaning of Section 957 of the Code) related, directly or indirectly, to the Hospital; (ii) the Non-U.S. Holder is not actually or constructively a “10-percent shareholder” under Section 871(h) of the Code; (iii) the Non-U.S. Holder is not a bank receiving interest described in Section 881(c)(3)(A) of the Code; (iv) the interest is not effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States under Section 871(b) or Section 882 of the Code; and (v) either (a) the Non-U.S. Holder who is the beneficial owner of the obligation provides a statement signed by such person under penalties of perjury, on IRS Form W-8BEN (or successor form), certifying that such owner is not a U.S. Holder and providing such owner’s name and address or (b) a securities clearing organization, bank or other financial institution that holds the Bonds on behalf of such Non-U.S. Holder in the ordinary course of its trade or business certifies under penalties of perjury that such an IRS Form W-8BEN (or a successor form) has been received from the beneficial owner and furnishes a copy thereof. A certificate (on Form W-8BEN (or successor form)) is effective only with respect to payments or interest made to the certifying Non-U.S. Holder after issuance of the certificate in the calendar year of its issuance and the two immediately succeeding calendar years. Alternative methods may be applicable for satisfying the certification requirement described above. Foreign trusts and their beneficiaries are subject to special rules, and such persons should consult their own tax advisors regarding the certification requirements.

If a Non-U.S. Holder does not claim, or does not qualify for, the benefit of the portfolio interest exemption, the Non-U.S.-Holder may be subject to a 30% withholding tax on interest payments on the Bonds. However, the Non-U.S. Holder may be able to claim the benefit of reduced withholding tax rate under an applicable income tax treaty between the Non-U.S. Holder’s country of residence and the U.S. Non-U.S. Holders are urged to consult their own tax advisors regarding their eligibility for treaty benefits. The required information for claiming treaty benefits is generally submitted on Form W-8BEN (or successor form). In addition, a Non-U.S. Holder may under certain circumstances be required to obtain a U.S. taxpayer identification number.

Disposition of Bonds. Subject to the discussion below concerning FATCA withholding, a Non- U.S. Holder will generally not be subject to U.S. federal income tax or withholding tax on gain recognized on a sale, exchange, redemption, retirement or other disposition of a Bond. (Such gain does not include proceeds attributable to accrued but unpaid interest on the Bonds, which will be treated as interest.) A Non-U.S. Holder may, however, be subject to U.S. federal income tax on such gain if: (i) the Non-U.S. Holder is a nonresident alien individual who was present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met under Section 871(a)(2) of the Code; or (ii) the gain is effectively connected with the conduct of a U.S. trade or business, as provided by applicable U.S. tax rules (in which case the U.S. branch profits tax may also apply), unless an applicable treaty provides otherwise.

Information Reporting and Backup Withholding. Certain payors must report annually to the IRS and to each Non-U.S. Holder any interest that is subject to U.S. withholding taxes or that is exempt from U.S. withholding taxes pursuant to an income tax treaty or certain provisions of the Code. Copies of these information returns may also be made available under the provisions of a specific tax treaty or agreement with the tax authorities of the country in which the Non-U.S. Holder resides.

A Non-U.S. Holder generally will not be subject to backup withholding with respect to payments of interest on the Bonds as long as the Non-U.S. Holder (i) has furnished to the applicable payor, a valid IRS Form W-8BEN (or successor form) certifying, under penalties of perjury, its status as a non-U.S. person, (ii) has furnished to the applicable payor other documentation upon which it may rely to treat the payments as made to as non-U.S. person in accordance with Treasury regulations, or (iii) otherwise establishes an exemption. A Non-U.S. Holder may be subject to information reporting and/or backup withholding on a sale of the Bonds, through the United States office of a broker and may be subject to information reporting (but generally not backup withholding) on a sale of the Bonds through a foreign office of a broker that has certain connections to the United States, unless the Non-U.S. Holder provides the certification described above or otherwise establishes an exemption. Non-U.S. Holders should consult their own tax advisors regarding their qualification for exemption from backup withholding and the procedures for obtaining such an exemption.

Amounts withheld under the backup withholding rules may be refunded or credited against the Non-U.S. Holder’s U.S. federal income tax liability, if any, provided that the required information is timely furnished to the IRS.

FATCA Withholding. Under legislation commonly referred to as the “Foreign Account Tax Compliance Act” (“FATCA”), a withholding tax of 30% is generally applied to payments of (i) interest on a debt obligation of a U.S. issuer on or after July 1, 2014, and (ii) gross proceeds from the sale or other disposition of such a debt obligation on or after January 1, 2019, in each case made to (a) a foreign financial institution (as beneficial owner or as an intermediary), unless such institution enters into an agreement with the U.S. government (or is required by applicable local law) to collect and provide to the United States or other relevant tax authorities certain information regarding U.S. account holders of such institution or unless the institution is otherwise exempt from FATCA; or (b) a foreign entity that is not a financial institution (as a beneficial owner or as an intermediary), unless such entity provides the withholding agent with a certification that it does not have any substantial U.S. owners or identifying it substantial U.S. owners, which generally includes any specified U.S. person that directly or indirectly owns more than a specified percentage of such entity, or unless such entity is otherwise exempt from FATCA. Investors are encouraged to consult with their own tax advisors regarding the implications of this legislation and the applicable regulations on their investment in a Bond.

THE FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY AND DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT

MAY BE RELEVANT TO A PARTICULAR HOLDER OF BONDS IN LIGHT OF THE HOLDER’S PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO ANY TAX CONSEQUENCES TO THEM FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF BONDS, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.

ERISA CONSIDERATIONS

The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the Code generally prohibit certain transactions between employee benefit plans under ERISA or tax-qualified retirement plans under the Code, (collectively, the “Plans”) and persons who, with respect to a Plan, are fiduciaries or other “parties in interest” within the meaning of ERISA or “disqualified persons” within the meaning of the Code. In addition, each fiduciary of a Plan (a “Plan Fiduciary”) must give appropriate consideration to the facts and circumstances that are relevant to an investment in the Bonds, including the roles that such an investment in the Bonds would play in the Plan’s overall investment portfolio. Each Plan Fiduciary, before deciding to invest in the Bonds, must be satisfied that such investment in the Bonds is a prudent investment for the Plan, that the investments of the Plan, including the investment in the Bonds, are diversified so as to minimize the risk of large losses and that an investment in the Bonds complies with the documents of the Plan and related trust, to the extent such documents are consistent with ERISA. All Plan Fiduciaries, in consultation with their advisers, should carefully consider the impact of ERISA and the Code on an investment in any Series 2016 Bond, including the applicability to such investment of the fiduciary responsibility and prohibited transaction provisions of ERISA and the Code or similar laws.

FINANCIAL ADVISOR

The Hospital has retained Swap Financial Group, LLC, as financial advisor to the Hospital (the “Financial Advisor”) in connection with the issuance of the Bonds. The Financial Advisor has not been engaged, nor has it undertaken, to audit, authenticate, or otherwise verify the information set forth in this Offering Memorandum, or any other related information available to the Hospital, with respect to accuracy or completeness of disclosure of such information. The Financial Advisor has reviewed this Offering Memorandum but makes no guaranty, warranty or other representation respecting accuracy and completeness of the information contained in this Offering Memorandum.

UNDERWRITING

The Bonds are being purchased by Goldman, Sachs & Co. (the “Underwriter”). The Underwriter has agreed to purchase the Bonds at an aggregate purchase price of $______(reflecting an Underwriter’s discount of $______). The purchase contract for the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased. The Underwriter’s obligation to make such purchase is subject to certain terms and conditions set forth in the purchase contract, the approval of certain legal matters by counsel and certain other conditions. The initial public offering price of the Bonds may be changed by the Underwriter.

The Underwriter may offer and sell the Bonds to certain dealers and others at a price lower than the initial offering price; provided, however, that a substantial amount (as such term is used in United States Treasury Regulation § 1.1273-2(a)) of the Bonds shall be sold at the initial offering price. The offering price of Bonds may be changed from time to time by the Underwriter.

The Underwriter and its affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment

management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services.

In the ordinary course of their various business activities, the Underwriter and its affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of the issuer (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with the issuer. The Underwriter and its affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments of the Hospital.

CONTINUING DISCLOSURE

Consistent with the continuing disclosure requirements of SEC Rule 15c2-12 relating to its tax- exempt publicly traded bonds, the Hospital is obligated to file an annual financial report with the Municipal Securities Rulemaking Board (the “MSRB”) pursuant to continuing disclosure agreements relating to such tax-exempt debt offerings. These annual financial reports are currently available from the MSRB. Certain information required by the continuing disclosure agreements was omitted in past years from such annual financial reports. However, the Hospital has put in place new internal controls to make sure that all future filings are made in a complete and timely manner. In addition, the Hospital is obligated to file unaudited financial statements at the end of each fiscal quarter and the Hospital is current with all such required filings. Pursuant to the Bond Indenture, the Hospital has also agreed to file the information described in the following paragraphs at the times and in the manner as described below. Copies of the reports and statements required to be filed with the Bond Trustee pursuant to this Section shall be filed with the Bond Trustee in sufficient quantity to permit the Bond Trustee to mail a copy to each Bondholder who requests it, and, if not made available to the Bond Trustee, on the Hospital’s website or a national repository.

Within 150 days after the end of each fiscal reporting period, the Hospital shall post on its website or a national repository or furnish to the Bond Trustee and to Bondholders requesting the same, (a) an update of the following information contained in APPENDIX A to the Offering Memorandum relating to the Hospital under the headings “Utilization”, “Sources of Patient Service Revenue”, “Summary Statements of Operations and of Financial Position”, “Liquidity”, “Long-Term Debt Service Coverage”, “Capitalization” and “Investments”, (b) copies of the Hospital’s audited financial statements, (c) an update of the following information contained in Appendix B-1 to the Offering Memorandum relating to Lawrence Hospital Center under the headings “Utilization” and “Summary Statements of Operations”, (d) an update of the following information contained in Appendix B-2 to the Offering Memorandum relating to Hudson Valley Hospital Center under the “Utilization” and “Summary Statements of Operations” and (e) an update of the following information contained in Appendix B-3 to the Offering Memorandum relating to NewYork-Presbyterian/Queens under the headings “Utilization” and “Summary Statements of Operations”. Such audited financial statements shall be audited by an independent auditor and prepared in conformity with U.S. generally accepted accounting principles on a consistent basis, except that such audited financial statements may contain such changes as are in accordance with U.S. generally accepted accounting principles, and shall include such statements and narrative explanations as reasonably necessary for a fair presentation of financial position, statement of activity and changes in net assets and cash flows of such fiscal reporting period.

Within 60 days after the end of each of the Hospital’s first three fiscal quarters of each fiscal year, the Hospital shall post on its website or furnish to the Bond Trustee and to Bondholders requesting the same, copies of its unaudited financial statements, consisting of the balance sheet as of the end of such quarter, the statement of operations, changes in the net assets and cash flows, and shall include such statements and narrative explanations as reasonably necessary for a fair presentation of such financial and operating data.

The failure of the Hospital to comply with the covenants under this heading “Continuing Disclosure” shall not be considered an event of default under the Bond Indenture, the Master Indenture or any Supplemental Indenture. As the sole and exclusive remedy for the Hospital’s failure to comply with these covenants the Bond Trustee may (and, at the request of the holders of at least 51% of the aggregate principal amount in the Outstanding Bonds, shall) or any Bondholder or owner of a beneficial interest in a Bond or Bonds may take such actions to seek specific performance by court order and to cause the Hospital to comply with its obligations under this section and no person, including any Holder or any Beneficial Owner of the Bonds, may recover monetary damages.

The foregoing undertakings are intended to set forth a general description of the type of financial information and operating data that will be provided; the descriptions are not intended to state more than general categories of financial information and operating data; and where an undertaking calls for information that no longer can be generated because the operations to which it related have been materially changed or discontinued, a statement to that effect will be provided. Any agreement regarding continuing disclosure, however, may be amended or modified under certain circumstances without the consent of the Holders of the Series 2016 Bonds. Any such agreement when executed by the parties thereto will be on file at the principal office of the Hospital.

APPROVAL OF LEGALITY

Legal matters incident to validity of the Bonds and certain other matters are subject to the approval of the Hospital’s counsel, Dennett Law Offices, P.C., Great Neck, New York and Stroock & Stroock & Lavan LLP, New York, New York. In addition, certain other legal matters will be passed upon for the Underwriter by its counsel, Winston & Strawn LLP, New York, New York.

ABSENCE OF MATERIAL LITIGATION

There is no controversy or litigation of any nature, to the knowledge of its officers, now pending or threatened against the Hospital restraining or enjoining the issuance, sale, execution or delivery of the Bonds, or in any way contesting or affecting the validity of the Bonds. As with most health care organizations, the Hospital is subject to legal actions which, in whole or in part, are not or may not be covered by insurance or self-insurance because of the type of action (such as employee, contract or competition law claims) or remedies requested (such as punitive damages), because of a reservation of rights by an insurance carrier or self-insurance program, or because the action has not proceeded to a stage which permits full evaluation. Since these actions either claim punitive damages which could become a liability of the Hospital and/or state or threaten causes of action which may not be covered by insurance or self-insurance, insurers for the Hospital and the self-insurance program have not provided assurance of coverage, and to the extent any cases have not been served, counsel has not been retained to evaluate them. For a discussion of certain litigation affecting the Hospital, see APPENDIX A – “THE HOSPITAL– Litigation” attached hereto.

INDEPENDENT AUDITORS

The financial statements as of and for the years ended December 31, 2015, 2014 and 2013 included in Appendix C-1 of this Offering Memorandum, have been audited by Ernst & Young LLP, independent auditors, as stated in their reports appearing therein. The information contained in the unaudited interim consolidated financial statements as of and for the for the three (3) month period ended March 31, 2016, included in Appendix C-2 of this Offering Memorandum, is derived from unaudited internal records and should be read in conjunction with the audited financial statements and reports included in Appendix C-1 hereto.

RATINGS

Moody’s Investors Service, Inc. (“Moody’s”) and Fitch Ratings Inc. (“Fitch”), assigned a long- term rating of “___” and “___”, respectively, to the Series 2016 Bonds. Any explanation of the significance of such ratings may only be obtained from Moody’s and Fitch. Generally, rating agencies base their ratings on information and materials furnished and on investigation, studies, and assumptions of their own. The above ratings are not a recommendation to buy, sell or own the Bonds and there is no assurance that the ratings mentioned above will remain in effect for any given period of time or that a rating might not be lowered or withdrawn entirely, if in the judgment of the rating agency maintaining the rating, circumstances so warrant. Any such downward change in or withdrawal of a rating might have an adverse effect on the market price or marketability of the Bonds.

Other credit rating agencies that the Hospital has not engaged to rate the bonds may nevertheless issue unsolicited credit ratings on the Series 2016 Bonds. If any such unsolicited ratings are issued, no assurance can be given that they will not be different from those ratings assigned by Moody's Investors Service, Inc. ("Moody's") or Fitch, Inc. ("Fitch"). The issuance of unsolicited ratings on the Series 2016 Bonds that is different from the ratings assigned by Moody's or Fitch may impact the value of the Series 2016 Bonds.

As part of the process of obtaining ratings for the Series 2016 Bonds, the Hospital had initial discussions with and submitted certain materials to Moody's, Fitch and Standard & Poor's. The Hospital selected Moody's and Fitch to rate the Series 2016 Bonds and not S&P. Had the Hospital selected S&P to rate the Series 2016 Bonds, the Hospital cannot give any assurance as to the rating that S&P would have ultimately assigned to the Series 2016 Bonds.

MISCELLANEOUS

All quotations from and summaries and explanations of the Bond Indenture, the Master Indenture and the Supplemental Indenture and of statutes and other documents contained herein do not purport to be complete, and reference is made to said documents and statutes for full and complete statements of their provisions. Copies of the Bond Indenture, the Master Indenture and the Supplemental Indenture are on file at the offices of the Bond Trustee.

Any statements in this Offering Memorandum involving matters of opinion are intended as such and not as representations of fact. This Offering Memorandum is not to be construed as a contract or agreement between the Hospital and Holders of any of the Bonds.

Information relating to DTC and the book-entry system described herein under the heading “BOOK-ENTRY ONLY SYSTEM” has been furnished by DTC and is believed to be reliable.

The execution and delivery of this Offering Memorandum has been duly authorized by the Hospital.

THE NEW YORK AND PRESBYTERIAN HOSPITAL

By: ______Name: Title:

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APPENDIX A

THE HOSPITAL

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Table of Contents

INTRODUCTION ...... A-1 General ...... A-1 The Obligated Group ...... A-2 Hospital Campuses ...... A-2 HEALTH CARE SYSTEM STRUCTURE ...... A-4 The Hospital ...... A-4 The Health Care System, Regional Hospital Network and the Supporting Corporations ...... A-5 Location of Campuses of the Hospital and Health Care System Entities ...... A-6

THE OBLIGATED GROUP AND THE MASTER TRUST INDENTURE ...... A-8 MISSION, VISION AND VALUES ...... A-9 AWARDS AND DISTINCTIONS ...... A-10 GOVERNANCE AND MANAGEMENT ...... A-10 The Board of Trustees ...... A-10 Committees of the Board of Trustees ...... A-13 Conflict of Interest ...... A-13 Executive Management ...... A-13 PATIENT CARE ACTIVITIES ...... A-17 Certified Bed Complement ...... A-17 Specialized Services and Programs ...... A-18 Community Outreach and Access ...... A-23 ACADEMIC AFFILIATIONS, MEDICAL STAFF AND RESEARCH ...... A-24 Academic Affiliations ...... A-24 Medical Staff ...... A-25 The Medical Schools and Faculty Practices ...... A-27 Research ...... A-28 MARKET INFORMATION ...... A-28 Service Area ...... A-28 Competition and Other Area Hospitals ...... A-29 Patient Satisfaction Measures ...... A-31 STRATEGIC DEVELOPMENTS ...... A-32 System-Wide Organization ...... A-32

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Governance Changes ...... A-32 Service Line Regionalization ...... A-33 NYP Regional Health Collaborative ...... A-33 Capital Plan ...... A-34 FINANCIAL AND OPERATING INFORMATION ...... A-35 Utilization ...... A-35 Sources of Patient Service Revenue ...... A-36 Contracted Payors ...... A-36 Summary Statements of Operations and Financial Positions ...... A-37 Liquidity ...... A-41 Long-Term Debt Service Coverage ...... A-43 Capitalization ...... A-44 Management’s Discussion and Analysis of Utilization ...... A-44 Management’s Discussion and Analysis of Recent Financial Performance ...... A-46 Outstanding Long-Term Indebtedness ...... A-48 Investments ...... A-49 Philanthropy ...... A-50 Fund, Inc...... A-51 Capital Expenditures ...... A-51 Royal Charter Properties ...... A-51 Uncompensated Care and Community Benefit Expense ...... A-52 EMPLOYEES AND EMPLOYEE BENEFITS ...... A-52 LICENSURE AND ACCREDITATION ...... A-53 INSURANCE ...... A-53 LITIGATION ...... A-54

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next page on Footnotes anizational Structure

g New York-Presbyterian Or

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1. In connection with the issuance by the Hospital of its Series 2015 Bonds in February 2015, the Hospital formed an Obligated Group under and as defined in its Master Trust Indenture. Currently, the Hospital is the sole member of the Obligated Group. For a discussion of the Master Trust Indenture, the Obligated Group and the debt covered thereby, see “HEALTH CARE SYSTEM CORPORATE STRUCTURE – The Master Trust Indenture and the Obligated Group” and “FINANCIAL AND OPERATING INFORMATION – Outstanding Long-term Indebtedness” in this Appendix A. 2. For a discussion of the Supporting Corporations, see “HEALTH CARE SYSTEM STRUCTURE – The Health Care System, Regional Hospital Network and the Supporting Corporations” below. 3. The Hospital subsidiaries are those entities under the control of the Hospital or one of its direct subsidiaries. These entities are part of the Hospital’s consolidated group that is reported in the consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles. Entities included in the Hospital’s consolidated financial statements, other than the Hospital and any subsidiaries of the Hospital that may in the future join the Obligated Group, are not legally obligated on the Hospital’s indebtedness. 4. These corporations coordinate membership in the Health Care System (as hereinafter defined). For additional details, see “HEALTH CARE SYSTEM STRUCTURE – The Health Care System, Regional Hospital Network and the Supporting Corporations” below” below. 5. For a discussion of the Corporate Members, see “HEALTH CARE SYSTEM STRUCTURE – The Health Care System, Regional Hospital Network and the Supporting Corporations” below. 6. It is expected that by August 31, 2016 NYP Community Programs, Inc. will submit a certificate of need application to the New York State Department of Health seeking approval to be an “active parent” of The New York Methodist Hospital and will seek implementation of “active parent” status by the end of 2016. See “HEALTH CARE SYSTEM STRUCTURE – The Health Care System, Regional Hospital Network and the Supporting Corporations – The Regional Hospitals under the NYP Active Parent Corporations” below.

Note: The Hospital is the only entity that is obligated with respect to repayment of its indebtedness, including the Series 2015 Bonds and the Series 2016 Bonds offered by this Offering Memorandum. None of the assets or revenue of any of the other entities described above is committed to the repayment of the Hospital’s indebtedness.

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APPENDIX A - THE HOSPITAL

FORWARD-LOOKING STATEMENTS

Certain statements in this Appendix A and elsewhere in this Offering Memorandum that relate to the Hospital are forward-looking statements that are based on the beliefs of, and assumptions made by, the management of the Hospital. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Hospital to be materially different from any expected future results or performance. Such factors include but are not limited to, items discussed in “BONDHOLDERS’ RISKS” in the front part of this Offering Memorandum. * * * * *

PREVIOUSLY REPORTED INFORMATION WITH RESPECT TO PRIOR PERIODS

Certain financial information and utilization data set forth herein with respect to past periods may differ from what the Hospital has previously reported in earlier disclosure documents. This is generally due to changes in accounting standards and related guidance, or the application of relevant accounting standards, that require a reclassification or restatement of certain items and to adjustments in utilization data that occur in the normal course of patient care or as services are billed and coded.

* * * * *

The Information contained in this Appendix A and elsewhere in this Offering Memorandum may include statistics and other data relating to the healthcare industry in the United States that have been derived from third party sources. Such statistics and data are not necessarily reflective of current or future industry and market conditions. While the Hospital has no reason to question the accuracy of such statistics and data, such statistics and data have not been independently verified by the Hospital.

INTRODUCTION

General

The New York and Presbyterian Hospital (the “Hospital”), a New York not-for-profit corporation created as a result of the January 1998 merger of The Society of The New York Hospital (“New York Hospital”) and The Presbyterian Hospital in the City of New York (“Presbyterian Hospital”), operates at six campuses in Manhattan and Westchester County, New York. The Hospital serves as the academic and quaternary care hub of a network of health care providers (the “Health Care System”), which, as of June 1, 2016, included 10 acute care hospitals, 2 long-term care facilities, 2 ambulatory sites, and 2 specialty institutions, located in New York and Connecticut. Over the years the Hospital has developed its relationships with the other members of the Health Care System as part of its strategic goal of providing

A-1 high quality, integrated care throughout the tri-state New York metropolitan area (the “Metropolitan Area”). One of the country’s largest academic medical centers, the Hospital ranked #7 in the 2015-16 U.S. News & World Report1 annual ranking of the best hospitals in the United States, and was the top- ranked hospital in the Metropolitan Area. The Hospital has developed highly specific, patient-centered models of care to treat its diverse patient populations. The Hospital is the primary clinical teaching facility for two of the country’s leading medical colleges: The Joan and Sanford I. Weill Medical College of Cornell University (“Weill Cornell Medical School”) and the Columbia University College of Physicians & Surgeons (“Columbia University Medical School” and, together with Weill Cornell Medical School, the “Medical Schools”). All members of the Attending Medical Staff of the Hospital hold faculty appointments at one of the Medical Schools.

New York Presbyterian Foundation, Inc. (“NYPFI”) is an affiliate that is linked to the Hospital through the Hospital’s Board of Trustees. The Hospital also has several affiliated entities that support the Hospital through fundraising and real estate holdings. These affiliated entities (“Supporting Corporations”) include: (i) New York-Presbyterian Fund, Inc. (“Fund, Inc.”), which solicits, receives, invests and administers philanthropic funds for the Hospital and other charitable organizations approved by the board of directors of Fund, Inc. and (ii) three real estate holding companies: Royal Charter Properties, Inc., Royal Charter Properties – East, Inc., and Royal Charter Properties – Westchester, Inc. (collectively, the “RCP Corporations”). Another affiliated entity, the New York-Presbyterian Healthcare System, Inc. (“NYPHSI”), serves as the corporate link to a number of the hospitals and other entities that are referred to as “Corporate Members” (as further defined below) of the Regional Hospital Network. NYP Community Programs, Inc. (“Community Programs”), a subsidiary of the Hospital, serves as the parent entity of two of the Hospital’s indirect hospital subsidiaries, NYP/Queens and NYP/Hudson Valley, and NYP Community Services, Inc. (“Community Services” and together with Community Programs, the “NYP Active Parent Corporations”), also a subsidiary of the Hospital, serves as the parent entity of a third indirect hospital subsidiary, NYP/Lawrence. These indirect hospital subsidiaries are referred to as the “Regional Hospitals.” Plans are underway for Community Programs to become the parent entity of NYP/Lawrence (as hereinafter defined), replacing Community Services. Subject to regulatory and other approvals, this is expected to occur by the end of 2016.

The Obligated Group

In February 2015, the Hospital entered into a Master Trust Indenture, dated as of January 1, 2015 (the “Master Trust Indenture”), between the Hospital and TD Bank, N.A., as master trustee (the “Master Trustee”), and formed an Obligated Group under and as defined in the Master Trust Indenture. The Hospital was, and continues to be, the sole Member of the Obligated Group under the Master Trust Indenture. For additional information, see “THE OBLIGATED GROUP AND THE MASTER TRUST INDENTURE” below.

Hospital Campuses

The Hospital owns and operates one of the oldest hospitals in the nation. It has a history of over 200 years of providing medical care in the Metropolitan Area, with five of the Hospital’s six campuses having roots dating back more than 120 years.

1 U.S. News & World Report reviews data for nearly 5,000 hospitals and results from surveys of more than 140,000 physicians to determine its rankings of the best centers in 16 adult specialties. Death rates, patient safety and hospital reputation are among the factors considered. Only 137 hospitals were nationally ranked in a specialty for the 2015-16 rankings. The Honor Roll features 15 hospitals that scored near the top in a least six specialties.

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Weill Cornell Campus

Westchester Division

Lower Manhattan Hospital

Columbia Campus

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See the map below under the caption “Location of Campuses of the Hospital and the Health Care Entities.”

HEALTH CARE SYSTEM STRUCTURE

The Hospital

The Hospital is governed by its Board of Trustees, the members of which (other than ex-officio members) are selected from among the individuals who are members of NYPFI. See “GOVERNANCE AND MANAGEMENT – The Board of Trustees” below. NYPFI is a New York not-for-profit corporation that also has a corporate link to certain other members of the Health Care System.

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The Health Care System, Regional Hospital Network and the Supporting Corporations

As of June 1, 2016, the Health Care System included the following members:

Health Care System Entities

Location The Hospital The New York and Presbyterian Hospital New York, New York

Regional Hospitals NewYork-Presbyterian/Queens Queens, New York Lawrence Hospital Center (d/b/a NewYork-Presbyterian/Lawrence Hospital) Westchester, New York Hudson Valley Hospital Center (d/b/a NewYork-Presbyterian/Hudson Valley Hospital) Westchester, New York

Corporate Members New York Society for the Relief of the Ruptured and Crippled, maintaining the Hospital for Special Surgery New York, New York The New York Gracie Square Hospital New York, New York The Rogosin Institute New York, New York The New York Methodist Hospital1 Brooklyn, New York The New York Community Hospital of Brooklyn Brooklyn, New York The Silvercrest Center for Nursing and Rehabilitation Queens, New York

Affiliate Members Stamford Hospital Stamford, Connecticut Winthrop-University Hospital Mineola, New York Helen Hayes Hospital (Rehabilitation) West Haverstraw, New York The Mary Imogene Bassett Hospital Cooperstown, New York The Hebrew Home for the Aged at Riverdale Riverdale, New York Community Healthcare Network Throughout New York City ______

Note: 1. It is expected that by August 31, 2016 Community Programs will submit a certificate of need application to the New York State Department of Health seeking approval to be an “active parent” of The New York Methodist Hospital and will seek “active parent” status by the end of 2016. See discussion below under “The Regional Hospitals under the NYP Active Parent Corporations.”

In addition to the Hospital, the members of the Health Care System are (i) the Regional Hospitals and (ii) health care organizations having either a corporate link to the Hospital through NYPFI (“Corporate Members”) or a contractual relationship through agreements with NYPHSI (“Affiliate Members”). The Regional Hospitals, the Corporate Members and the Affiliate Members are collectively referred to as the “Regional Hospital Network.” Each of the Supporting Corporations is a corporate affiliate of NYPFI. Each of the members of the Health Care System (including the Hospital and each member of the Regional Hospital Network) and each of the Supporting Corporations is a separate nonprofit corporation and is responsible for its own operations, assets and obligations.

The Regional Hospitals under the NYP Active Parent Corporations

In July 2014, Lawrence Hospital Center (d/b/a NewYork-Presbyterian/Lawrence Hospital) (“NYP/Lawrence”) in Bronxville, Westchester County, New York, became the Hospital’s first indirect hospital subsidiary. Hudson Valley Hospital Center (d/b/a NewYork-Presbyterian/Hudson Valley Hospital)(“NYP/Hudson Valley”), also in Westchester, became the second indirect hospital subsidiary

A-5 effective in January 2015, and NewYork-Presbyterian/Queens (“NYP/Queens”) became the third in July 2015. For additional information regarding these three hospital subsidiaries, see Appendix B to this Offering Memorandum. With respect to each of these three hospitals, a direct subsidiary of the Hospital (either Community Programs or Community Services) serves as an “active parent” under Article 28 of New York State Public Health Law (an “Active Parent”). Under New York law, an Active Parent has, with respect to its subsidiary hospital, the power, among others, to appoint or dismiss management and medical staff, and approve operating and capital budgets, strategic plans, operating policies and changes to organizational documents.

It is expected that by August 31, 2016 Community Programs will submit a certificate of need application to the New York State Department of Health seeking approval to be an Active Parent of The New York Methodist Hospital and will seek to implement “active parent” status by the end of 2016. It is expected that the application will be ready for submission in the next fiscal quarter. Plans are also underway for Community Programs to replace Community Services as NYP/Lawrence’s Active Parent. Subject to regulatory and other approvals, this is expected to occur by the end of 2016.

Notwithstanding their status as indirect subsidiaries of the Hospital, NYP/Lawrence, NYP/Hudson Valley and NYP/Queens will not have any obligation with respect to the 2015 Bonds, the 2016 Bonds, Obligation No. 1 or Obligation No. 2, nor will any future subsidiary of the Hospital have any such obligation, except to the extent any such entity becomes a Member of the Obligated Group as described below.

Upon the issuance of the Series 2016 Bonds, the Hospital will be the sole member of the Obligated Group and therefore the only entity obligated to pay the Series 2016 Bonds. None of NYPFI, NYPHSI, the Supporting Corporations, the Regional Hospitals or the other members of the Regional Hospital Network will be obligated with respect to the Series 2016 Bonds when they are issued.

Location of Campuses of the Hospital and Health Care System Entities

The following map shows the locations of the campuses of the Hospital and the other members of the Health Care System, including members of the Regional Hospital Network.

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NewYork-Presbyterian Hospital and Health Care System

8 NYPH Acute Care Facilities NYP Regional Hospitals 1 NYP/Weill Cornell Campus 15 (Indirect Subsidiary) Corporate Members NYP/Columbia Campus 2 Affiliate Members

NYP/Morgan Stanley Children’s 3 Hospital Campus

4 NYP/Lower Manhattan Hospital 13 5 NYP/Allen Hospital 6

6 NYP/Westchester Division

7 NYP/Lawrence Hospital Center 7 8 NYP/Hudson Valley Hospital

9 NYP/Queens 5 10 Hospital for Special Surgery 3 2 11 The New York Methodist Hospital1

12 The New York Community Hospital of Brooklyn 1 10 13 Stamford Hospital, Stamford, CT 9 14

14 Winthrop-University Hospital 4

15 Helen Hayes Hospital2 11

16 Bassett Medical Center3 12 Primary Service Area

Secondary Service Area Note: All hospitals in NY unless specified 1It is expected that a certificate of need application will be submitted to the New York State Department of Health seeking approval for The New York Methodist Hospital to become an “indirect subsidiary” of NYPH by the end of 2016. 2Rehabilitation hospital. 3Located outside map range in Cooperstown, NY. A-7

THE OBLIGATED GROUP AND THE MASTER TRUST INDENTURE

To evidence and secure the obligation of the Hospital with respect to the Series 2016 Bonds, the Hospital will issue its Obligation No. 2, to be dated the date of the issuance of the Series 2016 Bonds, under and pursuant to the Master Trust Indenture and a Supplemental Master Indenture for Obligation No. 2, to be dated as of June 1, 2016 (“Supplemental Indenture No. 2”), between the Hospital and the Master Trustee. See “SOURCES OF PAYMENT FOR THE BONDS – Master Indenture and Obligation No. 2” in the main part of this Offering Memorandum. Obligation No. 2 will be a payment obligation of the Hospital. To the extent one or more other entities become Members of the Obligated Group (as defined in the Master Trust Indenture), such other Members of the Obligated Group will become jointly and severally liable with the Hospital for payment of Obligation No. 1 and Obligation No. 2, subject to the right of a Member to withdraw from the Obligated Group upon meeting certain conditions set forth in the Master Trust Indenture. Pursuant to Supplemental Indenture No. 2, the Hospital will agree not to withdraw from the Obligated Group as long as Obligation No. 2 remains Outstanding. As of the date of issuance of the Series 2016 Bonds, Obligation No. 1 and Obligation No. 2 will be the only Obligations outstanding under the Master Trust Indenture. Obligation No. 2 will rank on a parity as to payment with Obligation No. 1 and any future Obligations that may be issued under the Master Trust Indenture.

The Master Indenture does not impose any financial or other tests as a condition to the issuance of Additional Obligations or other indebtedness by the Hospital or any other Members of the Obligated Group. Such Additional Obligations and other indebtedness may be issued or incurred from time to time without restriction. See “FORM OF THE MASTER INDENTURE – Amount of Indebtedness” in APPENDIX E. The documents for the FHA-Insured Mortgage Loans (as defined below) contain provisions for the benefit of the mortgagees and the mortgage insurer for such loans, some of which impose conditions to and restrictions on the incurrence of additional indebtedness. The terms and provisions of the FHA-Insured Mortgage Loans documents are solely for the benefit of the parties thereto and may be amended or waived in accordance with their terms, without the consent of or notice to the holders of the 2015 Bonds or the 2016 Bonds. See “SOURCES OF PAYMENT FOR THE BONDS – Outstanding Indebtedness” in the front part of this Offering Memorandum.

The Master Trust Indenture does not grant a security interest in or lien on any property or revenue of the Hospital or any future Members of the Obligated Group to secure the Obligations. Accordingly, Obligation No. 1 is, and Obligation No. 2 will be, unsecured. The Master Trust Indenture permits the Members of the Obligated Group to secure Indebtedness, including any Additional Obligations that may be issued in the future, so long as the lien granted is a Permitted Lien under the Master Trust Indenture. See “FORM OF THE MASTER INDENTURE – Limitations on Creation of Liens.

The Hospital has long-term indebtedness outstanding that is not subject to the Master Trust Indenture and not evidenced by an Obligation. This long-term indebtedness totaled approximately $1.0 billion as of March 31, 2016, and includes the Hospital’s FHA-insured mortgage loans (the “FHA-Insured

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Mortgage Loans”) and its obligation to repay a loan funded from proceeds of the sale of Dormitory Authority of the State of New York Secured Hospital Revenue Refunding Bonds, Series 2011 (the “Series 2011 Bonds”). The FHA-Insured Mortgage Loans are secured by mortgages on substantially all of the Weill Cornell Campus, the Columbia Campus, the Morgan Stanley Children’s Hospital, Allen Hospital and the Westchester Division, and a pledge of the Hospital’s revenues and accounts. The Series 2011 Bonds were originally issued for the benefit of New York Downtown Hospital and the obligation to repay them was assumed by the Hospital as a liability in the July 2013 merger. This obligation is secured by a mortgage on the Lower Manhattan Hospital and a pledge of the Hospital’s gross receipts. See “FINANCIAL AND OPERATING INFORMATION – Outstanding Long-term Indebtedness” below and “SOURCES OF PAYMENT FOR THE BONDS – Outstanding Indebtedness” in the front part of this Offering Memorandum. The Hospital will covenant in Supplemental Indenture No. 2 that it will not incur any additional indebtedness under an FHA-Insured Loan other than for purposes of refinancing an existing FHA-Insured Loan.

Possible Additions to the Obligated Group under the Master Trust Indenture

Management of the Hospital is considering the possibility of adding one or more of the Hospital’s indirect subsidiaries and/or other affiliates to the Obligated Group or designating such entities as Designated Affiliates2 under the Master Trust Indenture. See Sections 3.09 and 3.11 of the Master Trust Indenture in Appendix D to this Offering Memorandum for the provisions relating to admitting new Obligated Group Members and designating Designated Affiliates.

As part of its decision-making process, the Hospital is evaluating the regulatory and contractual steps and approvals that would be required to take these actions, which would include obtaining consents under its FHA-Insured Mortgage Loans and certain of its other indebtedness and approvals under New York State Department of Health regulations, among others. Management believes it may be beneficial to the Hospital and the Regional Hospitals for certain of the Hospital’s affiliates to become members of the Obligated Group or Designated Affiliates under the Master Trust Indenture. However, to date no approvals of the Hospital’s Board of Trustees or the governing body of any Hospital affiliate have been obtained for the addition of any affiliates to the Obligated Group or the designation of any Designated Affiliates, and there can be no assurance that the Board will approve any such additions or designations in the future. Moreover, there can be no assurance that the Hospital will secure the regulatory and other approvals that would be required for any affiliate to join the Obligated Group or to become a Designated Affiliate.

MISSION, VISION AND VALUES

The Hospital’s strives to maintain its position among the top academic medical centers in the nation in clinical and service excellence, patient safety, research and education. To achieve this goal, the Hospital is dedicated to the following values: Respect (Every Person Counts), Teamwork (Working Together), Excellence (Exceptional Quality and Service), Empathy (Listen, Understand and Respond), Innovation (Creative Ideas, Cutting Edge Solutions) and Responsibility (Honoring Our Past, Ensuring Our Future). These values support the Hospital’s ultimate goal: “We Put Patients First.” The Hospital strives to make patients the first priority and provide them with the highest quality, safest, and most compassionate care and service.

2 There are currently no Designated Affiliates. A Designated Affiliate is an entity over which an Obligated Group Member maintains control and with regard to which the Obligated Group Member agrees to cause such entity to comply with the terms of the Master Trust Indenture. Designated Members, however, are not directly bound by the Master Trust Indenture.

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AWARDS AND DISTINCTIONS

• In 2015, for the 15th consecutive year, the Hospital was named to the Honor Roll in the annual “America’s Best Hospitals” issue of U.S. News & World Report, ranking 7th nationwide and 1st in New York. • The Hospital is ranked nationally by U.S. News & World Report in 15 of the 16 specialties included in the survey, with six adult specialties ranked in the top 5 – Psychiatry (#1), Cardiology & Heart Surgery (#3), Nephrology (#3), Rheumatology (#3) and Neurology & Neurosurgery (#5). • More than 280 physicians affiliated with the Hospital have been recognized as among the best doctors in the Metropolitan Area in the 2016 edition of New York Magazine’s “Best Doctors” issue. • The Hospital’s transplant programs are among the busiest and largest in the nation, and perform heart, lung, kidney, liver and pancreas transplants. • In May, the NewYork-Presbyterian Ambulatory Care Network (the “Ambulatory Care Network”) received the Center for Plain Language's 2016 Clear Mark Award. The Center for Plain Language is a non-profit organization, created to help government agencies and businesses write clearly. The Ambulatory Care Network won in the category of Best Spanish Brochure for the Diabetes Self-Management Education (DSME) Healthy Eating brochure developed by the Ambulatory Care Network’s Multi-disciplinary Patient Education Committee. The brochure is a useful tool for our Spanish-speaking patients with diabetes to manage one of their biggest challenges: eating a healthy diet. • In November 2014, the Association of American Medical Colleges presented the Hospital the Spencer Foreman Award for Outstanding Community Service in recognition of the Hospital’s Regional Health Collaborative.

GOVERNANCE AND MANAGEMENT

The Board of Trustees

The Hospital, a New York not-for-profit corporation, received a determination letter from the Internal Revenue Service that it is qualified as an exempt organization under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). It is governed by a Board of Trustees elected by the Hospital’s corporate members from among those persons who are corporate members of NYPFI. The Hospital Board currently numbers 86 persons. The Trustees are elected for four-year terms. Those trustees with a considerable record of service to the Hospital have the option of requesting election to “Life Trustee” status. Life Trustees do not have a vote at the Board meetings, but may serve on committees with the right to vote. Two Columbia University trustees and two Cornell University trustees serve on the Hospital Board. The Chief Executive Officer of the Hospital and the President and Vice President of the Medical Staff serve as ex-officio Trustees with the right to vote. The Board meets six times a year at one of the Hospital campuses. Given the size and complexity of the Hospital, much of the work of the Board is first addressed in one of the active standing committees that together cover every aspect of the Hospital’s operation.

In the surveys conducted by The Joint Commission since the 1998 merger that created the Hospital, the Board has received the top grade for governance. Each trustee is required to participate in the orientation and continuing education programs.

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The Board of Trustees consists of individuals with experience in a variety of business disciplines. Many of the Trustees are well known leaders in their respective fields and as a group, the Trustees are particularly knowledgeable about audit and financial matters.

The Trustees as of June 1, 2016, their year of initial appointment to the Board (or predecessor board) and their principal occupations are as follows:

Year First Name/Office Appointed Occupation Lee Sanford Ainslie III 2015 Founder & Managing Partner, Maverick Capital Ltd. Roger C. Altman 2006 Founder & Executive Chairman, Evercore Robert J. Appel 2012 President, Appel Associates Gabrielle Bacon 2015 Trustee, Moore Charitable Foundation Bruce Anthony Beal Jr. 2012 President, The Related Companies, LP Frank A. Bennack Jr. 1979 Executive Vice Chairman of the Board and Chairman of the Chairman Executive Committee, The Hearst Corporation Jessica Bibliowicz 2015 Senior Advisor, Bridge Growth Partners Donald L. Boudreau 1995 Retired Vice Chairman, The Chase Manhattan Bank Luis A. Canela 2006 General Manager, Luis Canela & Associates Iris Cantor 1989 Philanthropist Pamela G. Carlton 1996 President & Co-Founder, Springboard–Partners in Cross Cultural Leadership; Co-Founder, The Everest Project Russell Lloyd Carson 2012 General Partner & Co-Founder, Welsh, Carson, Anderson & Stowe John K. Castle 1996 Chairman & Chief Executive Officer, Castle Harlan, Inc. H. Rodgin Cohen, Esq. 2001 Senior Chairman, Sullivan & Cromwell LLP Stephanie A. Coleman 2013 Philanthropist Steven J. Corwin, M.D.* 2011 President & Chief Executive Officer of the Hospital Richard C. Dresdale 2014 Managing Director & Co-Founder, Fenway Partners Matthew Fink, M.D. 2015 Neurologist-in-Chief, Weill Cornell Medical Center, & Vice President, Medical Board of the Hospital Jay S. Fishman 2012 Chairman & Chief Executive Officer, The Travelers Companies, Inc. Charlotte M. Ford 1979 Author and Philanthropist Kenneth Forde, M.D. 2012 Retired medical doctor Peter A. Georgescu 1996 Chairman Emeritus, Young & Rubicam, Inc. Dennis E. Glazer, Esq. 2014 Retired Partner, Davis Polk & Wardwell LLP Jeffrey W. Greenberg 1998 Chairman, Aquiline Holdings LLC Maurice R. Greenberg 1979 Chairman & Chief Executive Officer, C.V. Starr and Company Inc. Jeffrey A. Harris 2009 Managing Director, Global Reserve Group, LLC Arthur J. Hedge, Jr. 1982 Chairman, Castle Ventures, LLC Marifé Hernandez 1976 President, The Cultural Communications Group Glenn H. Hutchins 2004 Co-Founder, Silver Lake Mitchell L. Jacobson 2005 Chairman, JFI, LLC Winfield P. Jones, Esq. 1994 Retired Chairman, Jones Hirsch Connors & Bull P.C. Peter S. Kalikow 1987 President, H.J. Kalikow & Co., LLC Charles R. Kaye 2016 Co-Chief Executive Officer, Warburg Pincus, LLC Alfred F. Kelly, Jr. 2005 President & Chief Executive Officer, Intersection David H. Koch 1988 Executive Vice President, Koch Industries, Inc. David H. Komansky 2001 Chairman Emeritus, Merrill Lynch & Co., Inc. Philippe Laffont 2012 Founder, Coatue Capital LLC Rochelle B. Lazarus 1995 Chairman Emeritus, Ogilvy & Mather Peter G. Livanos 2015 Chairman, Ceres Monaco S.A.M. John J. Mack 1992 Chairman Emeritus, Morgan Stanley

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Year First Name/Office Appointed Occupation Nancy Marks 2015 Chairman, Deia, LLC and Goods and Services, LLC Ellen R. Marram 1995 Senior Managing Director, Brock Group, LLC Roman Martinez IV 1996 Investor and Financial Advisor Raymond J. McGuire 2002 Managing Director, Co-Head, Global Investment Banking, Citigroup Robert B. Menschel 2003 Senior Director, Goldman Sachs & Co.† John E. Merow, Esq. 1988 Senior Counsel, Sullivan & Cromwell LLP Philip Milstein 2012 Principal, Ogden CAP Properties, LLC Sharmin Mossaver-Rahmani 2006 Managing Director, Goldman, Sachs & Co.† Sarah E. Nash 2001 Retired Vice Chairman of Investment Banking in North America, JPMorgan Chase Alexander Navab 2013 Partner & Co-Head of America Private Equity, Kohlberg Kravis Roberts & Co. Steven O. Newhouse 2003 Chairman, Advance.Net Daniel S. Och 2005 Chief Executive Officer, Och-Ziff Capital Management Group Adebayo Ogunlesi 2006 Chairman & Managing Partner, Global Infrastructure Partners Herbert Pardes, M.D. 2000 Executive Vice Chairman of the Hospital. Gordon B. Pattee 1988 President, Map Capital Corp. Ronald O. Perelman 2007 Chairman & Chief Executive Officer, MacAndrews & Forbes Holdings Inc. Lisa Perry 2002 Owner & Creative Director, Lisa Perry Style Holly Peterson 2016 Journalist and Author Ogden Phipps II 2014 Co-Founding Partner, Snow Phipps Group Michael S. Pritula 1994 Director, McKinsey & Company, Inc. Stephen Robert 2010 Chairman, Source of Hope Foundation Marcos A. Rodriquez 2008 Chairman & Chief Executive Officer, Palladium Equity Partners, LLC Stephen M. Ross 2006 Chairman & Chief Executive Officer, Related Companies Arthur J. Samberg 2004 Managing Member, Hawkes Financial LLC Oscar S. Schafer 2007 Senior Managing Partner, Rivulet Capital Stephen A. Schwarzman 2016 Chairman, Chief Executive Officer & Co-Founder, The Blackstone Group Mark Schwartz 2002 Vice Chairman of the Goldman Sachs, Group Inc., Chairman of Goldman Sachs Asia Pacific† Richard D. Segal 2009 Chairman & Chief Executive Officer, Seavest Investment, Inc. Ivan G. Seidenberg 1996 Retired Chairman & Chief Executive Officer, Verizon Walter V. Shipley 2007 Former Chairman, The Chase Manhattan Corporation Howard Solomon 2003 Partner, Hildred Capital Partners, LLC Jerry I. Speyer 2000 Chairman, Tishman Speyer Properties Robert J. Speyer 2014 President & Chief Executive Officer, Tishman Speyer Properties Joel Stein, M.D.* 2014 President of the Medical Staff; Physiatrist-in-Chief of the Hospital Seymour Sternberg 2004 Retired Chairman & Co-Chief Executive Officer, New York Life Insurance Company Brenda Neubauer Straus 1975 Broker Associate, Sotheby’s International Realty Howard Stringer 1994 Former Chairman & Chief Executive Officer, SONY Corporation of America Steven R. Swartz 2015 President & Chief Executive Officer, Hearst Corporation Vincent Tese, Esq. 1996 Executive Chairman, Florida Community Bank Lenard Tessler 2013 Senior Managing Director, Co-Head Global Private Equity Cerberus Capital Management, LP John A. Thain 2000 Chairman & Chief Executive Officer, The CIT Group Elizabeth Tisch 2015 Co-Founder, Suite 1521 Michael D. Tusiani 2002 Chairman & Chief Executive Officer, Poten & Partners, Inc.

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Year First Name/Office Appointed Occupation John Sidney Weinberg 2000 Senior Director, Goldman, Sachs & Co.† Leonard A. Wilf 2009 Chief Executive Officer, Garden Homes Management Corp. Margaret L. Wolff, Esq. 2005 Retired Partner, Skadden, Arps, Slate, Meager & Flom LLP ______* Ex-offico. † Goldman Sachs & Co. is the underwriter of the Series 2016 Bonds.

Committees of the Board of Trustees

The Board of Trustees has twelve committees: the Executive Committee, the Audit and Corporate Compliance Committee, the Budget and Finance Committee, the Executive Compensation Committee, the Human Resources Committee, the Investment Committee, the Legal Affairs Committee, the Nominating Committee, the Patient Experience Committee, the Quality and Performance Improvement Committee, the Real Estate and Major Facilities Committee, and the System Strategy Committee. The Executive Committee has all of the powers and authority of the Board of Trustees between meetings of the Board of Trustees.

Conflict of Interest

The Hospital’s bylaws provide for compliance with conflict of interest policies as set forth in the New York Not-for-Profit Corporation Law, the rules of The Joint Commission and as established by the Board of Trustees and/or the Audit and Corporate Compliance Committee of the Board. The conflict of interest policy requires any duality of interest or possible conflict of interest on the part of any Board member, officer and key persons to be disclosed to the Board and made a matter of record. If a Board member has a duality of interest or possible conflict of interest on any matter, the Board member may not vote or use personal influence on the matter.

Executive Management

The executive management is responsible for day-to-day operational management of the Hospital. A number of Vice Presidents, Chiefs of Service, Department Directors and Managers all provide support to the executive management. As discussed below, as part of an ongoing restructuring, the Hospital is instituting a management structure that allows for coordination of activities with the Regional Hospitals, with certain functions being centralized and standardized. Accordingly, members of executive management have responsibilities throughout the Health Care System.

The executive management of the Hospital includes:

Steven J. Corwin, M.D., President & Chief Executive Officer (60) - Dr. Corwin was appointed Chief Executive Officer of the Hospital in 2011 and was appointed President in 2015. He is responsible for overseeing Hospital operations, as well as formulating and advancing the Hospital’s strategic initiatives across all six campuses and with the Regional Hospitals. Previously, he held the positions of Executive Vice President and Chief Operating Officer (2005 – 2011), Senior Vice President and Chief Medical Officer (1999 - 2005), Medical Director (1997 - 1999), Director of Critical Care Services (1991 - 1997), and Director of Coronary Intensive Care Unit (1986 - 1991) at Columbia Presbyterian Medical Center. A practicing cardiologist at the Hospital since 1987, Dr. Corwin is an Associate Professor of Clinical Medicine at Columbia College of Physicians and Surgeons and is board certified by the American Board of Internal Medicine and the American College of Cardiology. Dr. Corwin received his Bachelor of Science degree in 1977 and his Medical Doctor degree summa cum laude in 1979 from Northwestern University as part of a six-year honors Medical Program.

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Laura L. Forese, M.D., M.P.H., Executive Vice President & Chief Operating Officer (55) - Dr. Forese was appointed Executive Vice President & Chief Operating Officer of the Hospital in 2015 and is responsible for overall operations of the Hospital, the Regional Hospitals, Physician Services, Community & Population Health and Corporate Services. She has also served as President of NYP Health Care System since 2013. She joined the full-time faculty at Columbia University in 1993, specializing in pediatric orthopedic surgery. She retains an appointment as Associate Clinical Professor. She served as Chief of Surgical and Anesthesia Services at Helen Hayes Hospital in West Haverstraw, New York (1993 - 1997); was Vice Chair in the Department of Orthopedic Surgery at Columbia University (1998 - 2002); was Vice President for Medical Affairs at the Hospital (2002 - 2005); and was Senior Vice President of the NYP/Weill Cornell Medical Center (2005 – 2011). Dr. Forese received her Bachelor of Arts degree summa cum laude, Phi Beta Kappa from Princeton University in 1983 and her Doctor of Medicine degree Alpha Omega Alpha from Columbia University Medical School in 1987. She also obtained a degree in health services management from the Columbia School of Public Health in 1995.

Phyllis R. Lantos, Executive Vice President, Chief Financial Officer and Treasurer, NYP Hospital and NYP Healthcare System (64) - Ms. Lantos was appointed Executive Vice President, Chief Financial Officer and Treasurer, NYP Healthcare System in 2013, and was appointed to the comparable positions at the Hospital in January 2015. She is responsible for all financial services at the Hospital and NYPHSI. She joined the Hospital in July 2000 as the Senior Vice President, Chief Financial Officer and Treasurer. Prior to joining the Hospital, Ms. Lantos was the Deputy Chief Operating Officer, Yale University School of Medicine, Yale University, New Haven, Connecticut (1999 - 2000). Prior to her tenure at Yale, Ms. Lantos was the Vice President, Financial Management Services (1989 – 1999), Associate Vice President Financial Planning & Analysis (1987 – 1989), Director of Financial Projects and Planning (1983 – 1987) and Manager of Financial Analysis, Projects and Budgets (1978 – 1983) at Montefiore Medical Center, Bronx, New York. From 1974 to 1978, Ms. Lantos served in the New York City Office of Management & Budget as a financial analyst assigned to health agencies. She received her Master of Science degree in Management (1974) and her Bachelor of Science degree in Mathematics (1972), both from the Massachusetts Institute of Technology.

Maxine Frank, Esq. Executive Vice President, Chief Legal Officer & General Counsel (63) – Ms. Frank joined the Hospital as Senior Vice President, Chief Legal Officer & General Counsel in 1999. Her responsibilities include providing legal advice to the President and Board of Trustees, supervising the Office of Legal Affairs and Risk Management and directing all outside counsel relationships. She was a Partner at Stroock & Stroock & Lavan LLP (1998-1999) and Senior Vice President, General Counsel at Health Insurance Plan of Greater New York (1988-1998) prior to joining the Hospital. Ms. Frank received her Juris Doctor summa cum laude from Brooklyn Law School in 1980 and her Bachelor of Arts degree summa cum laude from Brooklyn College (CUNY) in 1974.

Michael P. Breslin, C.P.A., Senior Vice President, Finance (52) – Mr. Breslin joined the Hospital in 2015. As Senior Vice President, Finance, he works closely with his colleagues across the institution to oversee financial operations and develop strategies that help ensure the Hospital’s financial strength. He joined the Hospital from The New York Methodist Hospital, a Corporate Member of the Regional Hospital Network, where he served as Senior Vice President, Finance. Prior to that, he served as Chief Financial Officer at both Lenox Hill Hospital and Richmond University Medical Center, where he was promoted to Chief Executive Officer. Mr. Breslin was a partner at the accounting firm of Ernst & Young and worked with the Hospital in that capacity. Mr. Breslin holds his Bachelor of Science in Accounting from Manhattan College and is a Certified Public Accountant, licensed in New York State.

Gary J. Zuar, Senior Vice President, Finance (62) – Mr. Zuar is Senior Vice President, Finance for the Hospital. Since joining the Hospital in 2003, he has been the lead finance executive for the Regional Hospital Network. His other responsibilities include financial planning, cost accounting, and

A-14 decision support. Mr. Zuar has over 30 years of experience in health care finance, including public accounting at Deloitte and various senior financial management positions. Prior to joining the Hospital, he served for 15 years as the Chief Financial Officer at a major teaching hospital in New York City. He currently serves on the Board of Directors of The New York Methodist Hospital, NYP/Queens, NYP/Lawrence, and NYP/Hudson Valley. Mr. Zuar received a Bachelor of Business Administration from Pace University and is a Certified Public Accountant in New York State.

Richard S. Liebowitz, M.D., M.H.S., Senior Vice President and Chief Medical Officer (61) – Dr. Liebowitz was appointed Senior Vice President and Chief Medical Officer of the Hospital in 2011. In this role, he is responsible for the Hospital’s service lines, clinical program development, and physician recruitment. He joined the Hospital in 2006, and prior to his current appointment served as Chief Medical Officer of the Columbia Campus and Vice President of Medical Affairs. Prior to joining the Hospital, Dr. Liebowitz was the Medical Director of Strategic Initiatives and Network Business Development at Duke University Health System. He also served as the section chief of General Medicine at the University of Arizona College of Medicine. Dr. Liebowitz completed his residency in internal medicine at the University of Massachusetts. He obtained his medical degree from Rutgers Medical School, as well as a master’s degree in clinical research from a combined program between Duke University and the National Institutes of Health.

Emme Deland, Senior Vice President & Chief Strategy Officer (62) – As Senior Vice President & Chief Strategy Officer for the Hospital, Ms. Deland is responsible for developing clinical and corporate strategies for the Hospital and the Regional Hospitals, and for identifying, disseminating, and commercializing new innovation. She also serves on the board of the NewYork-Presbyterian Health Policy Center. Ms. Deland joined the Hospital in 2000. Previously, she worked at Mount Sinai Medical Center and the Brigham and Women’s Hospital in Boston. Prior to joining the health care field, she was an international banker at Chemical Bank. Ms. Deland graduated magna cum laude from Harvard College with a Bachelor of Arts in East Asian Studies and obtained her Master of Business Administration from Columbia University’s Graduate School of Business. She is a fellow of the New York Academy of Medicine, a Director of the Kornfeld and Zeitz Foundations, a board member of Library of America, The American Memorial Hospital in Rheims, France, The Orchestra of St. Luke’s, and The Helsinn Corporation.

Michael Nochomovitz, M.D., Senior Vice President, Chief Clinical Integration & Network Development Officer (65) – Dr. Nochomovitz joined the Hospital in 2015 as Senior Vice President, Chief Clinical Integration & Network Development Officer for the Hospital. In this role, he leads the new Physician Services division of the Regional Hospital Network, including clinical service deployment in collaboration with Columbia Doctors and Weill Cornell Medical Associates in the Regional Hospitals, and oversight of the NYP Medical Groups and the NewYork-Presbyterian Physician Services Organization. He supports clinical services at the Regional Hospitals and is responsible for the clinical integration among the Hospital, the Regional Hospitals, the physicians, and the Medical Schools. Nationally recognized for his leadership at the University Hospital System in Cleveland, Ohio, Dr. Nochomovitz served as President of the University Hospitals (UH) Physician Services before joining the Hospital in 2015. Dr. Nochomovitz earned his medical degree at the University of Cape Town in South Africa and completed his internal medicine and pulmonary critical care training at the University Hospitals/Case Western Reserve University. He served on the Board of Directors of the Medical Group Management Association and the American College of Chest Physicians, testified in the U.S. Senate’s Health Education Labor and Pensions committee hearings on health care reform, and participated in the Centers for Medicare and Medicaid committees, which resulted in new payment methodologies for Medicare.

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William Lee, Senior Vice President and Chief Investment Officer (58) – Mr. Lee joined the Hospital on June 1, 2016. Prior to that, he was at Kaiser Permanente, where he served as Chief Investment Officer and Vice President of Foundation and Pension Investments (2004 – 2016). From 2001 to 2004, he worked for Levi Strauss & Co., where he was the Chief Investment Officer for Global Pensions and the Levi Strauss Foundation. He also worked at Bank of America for many years in a number of key roles, including Chief Investment Officer and Senior Vice President for Pensions and Investments. Mr. Lee holds both a Bachelor of Science and a Master of Business Administration in Finance from California State University.

Maurice E. LaBonne, Senior Vice President, Facilities and Real Estate (66) – Mr. LaBonne joined the Hospital in 2015 and is responsible for overseeing facilities/capital planning & design, facility operations, environmental health & safety, security and emergency medical services. Prior to joining the Hospital, he was a lead partner at Hudson Medical Properties, a developer of medical properties. He also served as a special advisor to the NYC Special Initiative for Rebuilding & Resiliency formed by Mayor Bloomberg after Superstorm Sandy. Prior to that, Mr. LaBonne spent a decade as Senior Vice President of Facilities Services at North Shore-Long Island Jewish Health System, managing $3 billion of projects under active design and construction. He also worked for 15 years as Vice President for Real Estate and Facility Development at Montefiore Medical Center. Mr. LaBonne holds a Bachelor of Arts in Political Science and Sociology and studied Urban Planning at New York University.

Shaun E. Smith, Senior Vice President & Chief Human Resources Officer (47) – Mr. Smith, is responsible for leading all aspects of human resources operations, including talent acquisition, training and organizational development, compensation and benefit services, employee and labor relations, and workforce health and safety services. Mr. Smith joined the Hospital in 2012 as Vice President of Human Resources at the Weill Cornell Campus, and then assumed responsibility for providing human resources strategic direction and oversight for the Regional Hospitals. Mr. Smith has over 20 years of human resources, legal, and health care management experience, including leadership roles at Memorial-Sloan Kettering Cancer Center and Champlain Valley Physicians Hospital in Plattsburgh, New York. Mr. Smith received his undergraduate degree in Business Administration as well as his law degree from Pace University. He was an adjunct professor of Human Resources Management at the State University of New York in Plattsburgh and also serves on a number of health care industry boards.

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PATIENT CARE ACTIVITIES

Certified Bed Complement

As of June 1, 2016, the Hospital’s certified beds were allocated among the following services at the six campuses:

Certified Bed Complement

Lower Weill Cornell Westchester Manhattan Columbia Allen Campus Division Hospital Campus MS-CHONY Hospital Total Medical/Surgical1 593 - 148 694 - 140 1,575 Pediatric2 53 - - - 141 - 194 NICU 50 - 8 - 58 6 122 Maternity 68 - 24 - 70 20 182 Psychiatric 36 251 - 25 - 30 342 Burn/Rehabilitation 45 - - 16 - - 61 Chemical Dependency3 17 19 - 3 - - 39 Total 862 270 180 738 269 196 2,515

1. Includes AIDS, bone marrow transplant, coronary care and intensive care beds. 2. Includes pediatric intensive care and neonatal continuing, intensive and intermediate care beds. 3. Includes rehabilitation and detoxification beds.

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Specialized Services and Programs

The Hospital provides inpatient and outpatient services in substantially all medical and surgical specialties, including services noted in the following table.

Medical Services Surgical Services • Allergy, Immunology and Pulmonology • Anesthesiology • Breast Surgery • Cancer (Oncology) • Cardiothoracic Surgery • Cancer Screening and Awareness • Colon and Rectal Surgery • Cardiology • Dental, Oral and Maxillofacial Surgery • Dermatology • Endocrine Surgery • Diabetes and Endocrinology • General Surgery • Digestive Diseases • Hand Surgery • Ear, Nose, and Throat (Otolaryngology) • Head and Neck Surgery • Geriatrics • Lung Volume Reduction Surgery • Hematology • Neurological Surgery • Infectious Diseases/International Medicine • Ophthalmological Surgery • Internal Medicine • Orthopedic Surgery and Trauma Service • Nephrology • Pediatric Surgery • Neurology and Neuroscience • Plastic Surgery • Obstetrics and Gynecology • Thoracic Surgery • Ophthalmology • Transplantation • Pain Medicine • Urology • Pathology • Vascular • Pediatrics • Weight Loss Surgery • Preventive Medicine and Nutrition Emergency Care • Psychiatry and Mental Health • Radiation Oncology • Critical Care • Radiology • Emergency Medicine • Rehabilitation Medicine • The Burn Center • Rheumatology • Trauma and Injury Prevention • Women's Health

The Weill Cornell Campus, Columbia Campus, Lower Manhattan Hospital and Allen Hospital provide 24-hour per day emergency services. Ambulatory services are provided on all campuses, as well as certain off-campus locations.

Weill Cornell Campus

The Weill Cornell Campus provides numerous specialized programs, including those noted below.

• The Minimal Access Surgery Center, established within the Digestive Diseases service line, is at the forefront of laparoscopic and robotic techniques for treating digestive disorders.

• The Neuroscience Center provides advanced treatments and clinical trials for adult and pediatric neurological disease. Areas of expertise and particular focus include stroke/cerebrovascular disease, epilepsy, multiple sclerosis, Alzheimer’s, peripheral nerve and spinal disorders.

• The New York Weill Cornell Cancer Center offers diagnostic modalities and advanced therapies for all types of cancer. Areas of expertise and focus include prostate, thoracic, colorectal and hematologic cancers.

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• The Weill Cornell Transplant Program, in cooperation with the Rogosin Institute, was the first kidney transplant program established in New York State over 50 years ago. With over 200 kidney transplants performed each year since 2006, the program is among the largest in the country and offers the very latest transplant management protocols and surgical interventions. Pancreas and liver transplants are also done through this program.

• The Komansky Center for Children’s Health, which opened in 2005, is a “children’s hospital within a hospital.” It features a pediatric emergency department, a neonatal intensive care unit, pediatric intensive care unit, pediatric floor and an operating room procedure suite. The Perinatal Center, an internationally recognized facility specializing in fetal diagnosis and counseling, provides multidisciplinary care for families when a fetus with a genetic or anatomic birth defect has been identified. For the past eight years, the Hospital has ranked in more pediatric specialties than any other hospital in the Metropolitan Area in the U.S. News & World Report’s Best Children’s Hospitals, with national rankings in the following specialties: cancer, cardiology and heart surgery, diabetes and endocrinology, gastroenterology and gastrointestinal surgery, neonatology, nephrology, neurology and neurosurgery, orthopedics, and pulmonology.

• The Jay Monahan Center, a collaboration between the Hospital and Weill Cornell Medical School, offers educational outreach and cutting-edge treatments for gastrointestinal illnesses. Founded in memory of Jay Monahan, late husband of Yahoo News Global Anchor and New York Times best-selling author Katie Couric, the center is one of only a few comprehensive cancer and wellness centers dedicated to gastrointestinal health. Ms. Couric joined with the Hospital and Weill Cornell Medical College to establish a place where patients would have access to services, treatments, education and experts in all necessary specialties in one location. The center takes a multidisciplinary approach to patient care that allows for coordination of all necessary health and support services. Providers from subspecialties, including gastroenterology, surgery, oncology, pain management and radiology, work collaboratively in teams to treat patients.

• The David H. Koch Ambulatory Center is currently under construction at the Weill Cornell Campus on York Avenue between 68th and 69th Streets. Designed as a 500,000-square-foot leading edge technological patient-centered ambulatory care facility, it will house clinical services such as digestive diseases, oncology, endoscopy, radiation oncology, ambulatory surgery, and interventional and diagnostic imaging. Completion is anticipated in 2018.

• The Alexandra & Steven Cohen Hospital for Women and Newborns will comprise 246,500 square feet on the top six floors of the David H. Koch Ambulatory Center. When completed, it is expected to be the first of its kind in the Metropolitan Area, offering patients advanced care from their first appointment through their final postpartum follow-up, including treatment for the most complex maternal-fetal and neonatal conditions. All rooms will be private.

Westchester Division

The Westchester Division provides inpatient and outpatient psychiatric and behavioral health services. Inpatient services include psychiatry and alcohol detoxification. Outpatient services include the following: personality disorder continuing day treatment; schizophrenia services continuing day treatment; children’s day hospital; adult psychiatric clinic; eating disorders clinic; geriatric clinic; anxiety and depression clinic; alcohol disorders program; occupational health therapy; family planning; physical therapy and children’s outpatient clinic. In addition, the Westchester Division manages clinical and

A-19 research programs in geriatric psychiatry. The Westchester Division also offers three programs designed to meet the needs of the following specialized populations:

• The Retreat at Westchester, an adult inpatient program for patients with chemical dependency and dual diagnosis (i.e, underlying root causes of dependency, including mental health issues), emphasizes a discreet approach to recovery. The Retreat’s intensive treatment program focuses on recovery from alcoholism and/or other drug dependencies, and is staffed by a multi-disciplinary team that has expertise in dealing with dually diagnosed patients.

• The Haven at Westchester is an inpatient facility for adults in need of treatment for all major psychiatric disorders, including affective, psychotic, dual diagnosis and personality disorders. The Haven provides specialized inpatient psychiatric treatment targeted to the unique needs of professionals, including clergy, business executives, medical professionals, attorneys, teachers and others.

• The Women’s Program is a program tailored to meet the needs of women who may respond better to treatment in a single-gender environment.

• The Center for Autism and the Developing Brain is a state-of-the-art facility on the Hospital’s Westchester Campus which opened in 2013 and serves children, adults, and families dealing with autism spectrum disorders. The Center provides comprehensive care in a single setting for individuals living with autism spectrum disorders and other developmental disorders of the brain. It is a collaborative program among the Hospital and the Medical Schools in partnership with New York Collaborates for Autism.

Lower Manhattan Hospital

Lower Manhattan Hospital is a community hospital located in Downtown Manhattan, an area with a growing residential population and a substantial numbers of workers who commute into the area daily. It is the only hospital south of 14th Street in Manhattan. Lower Manhattan Hospital became part of the Hospital when New York Downtown Hospital was merged into the Hospital in July 2013. New York Downtown Hospital’s relationship with the Hospital dates back to 2006. Lower Manhattan Hospital is certified as a designated Stroke Center by the New York State Department of Health, and has centers of excellence in cardiology, obstetrics and gynecology, joint replacement and revision surgery, spine surgery, wound care and vascular surgery.

• In 2015, the Hospital, together with Weill Cornell Medical Associates, opened the NewYork- Presbyterian/Lower Manhattan Cancer Center, a freestanding radiation oncology center located at 21 West Broadway. The new center, which is the only one of its kind in Lower Manhattan, offers the surrounding community access to the cancer care currently available at the Stich Radiation Oncology Center at Weill Cornell Campus.

• In December 2015, the Birth Center at Lower Manhattan Hospital opened. It provides expectant parents with a home-like environment for labor, delivery, and a short stay recovery period.

Columbia Campus

The Columbia Campus, which has been designated as a psychiatric emergency receiving facility by the New York City Department of Mental Health, offers several specialized services and programs for treatment of complex clinical conditions. Some of those services are noted below.

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• In October 2015, an automated Core Laboratory opened on the third floor of the Harkness Pavilion. The newly renovated and consolidated lab provides improved turnaround times. It has automated pre-analytical and archiving processes for hematology, chemistry coagulation, and special chemistry. Services, which used to be available only during the week, are now available around-the-clock, 7 days a week, every day of the year.

• The Barbara Walters Acute Care Treatment Center, which opened in October 2014, provides access to specialized treatment for critically ill patients from Washington Heights, Inwood and the surrounding communities, as well as patients from throughout the Metropolitan Area. The Center, which is integrated with the Morgan Stanley Adult Emergency Department, includes 15 individual patient rooms and is designed to allow physicians to provide rapid diagnosis and treatment for patients with acute conditions such as heart attacks and strokes.

• The Center for Advanced Cardiac Care provides comprehensive clinical services for adults and children, including open heart surgery.

• The Heart Failure and Transplant Program is one of the largest and most active programs in the nation. Physician-researchers in this program have made advances in medical therapies, surgical techniques, immunologic therapies, imaging methods and device development. The program’s innovations include the first successful pediatric heart transplant in 1984, the development of third-generation left ventricular assist device (LVAD) therapies, the improvement of immunosuppressant regimens, the implementation of extended criteria organ transplantation to improve access to the procedure, and the use of gene therapy in the treatment of heart failure. Surgeons from this program and The Center for Lung Disease and Transplantation (see next bullet point) collaborate to perform combination heart and lung transplants.

• The Center for Lung Disease and Transplantation provides comprehensive, coordinated, multidisciplinary care to adults and children with every type of lung disease. The Hospital is a leader in advancing techniques and patient selection criteria for lung transplants in adults and children with cystic fibrosis, and has the largest cystic fibrosis lung transplant program in the Metropolitan Area.

• The Specialized Center of Research in Arteriosclerosis is a multi-disciplinary program of clinical activities and research in the field of arteriosclerosis.

• The Herbert Irving Comprehensive Cancer Center is one of the two National Cancer Institute designated comprehensive cancer centers in New York City.

• The Eleanor and Lou Gehrig ALS Center is one of the largest comprehensive amyotrophic lateral sclerosis research and care centers in the nation.

• The Regional Health Collaborative is based at the Columbia Campus. See “Community Outreach and Access - Regional Health Collaborative” below for additional details.

The Morgan Stanley Children’s Hospital of NewYork-Presbyterian

MS-CHONY provides comprehensive care for the full range of medical and surgical specialties for pediatric patients. As noted above, for the past eight years, the Hospital has ranked in more pediatric specialties than any other hospital in the Metropolitan Area in the U.S. News & World Report’s Best Children’s Hospitals. Specialized services and programs include those noted below.

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• The Center for Prenatal Pediatrics was established in 2004 to diagnose and treat women with high-risk pregnancies such as multiple births, congenital heart disease, fetal chest anomalies and genetic syndromes.

• The Surgical Day Stay Center at MS-CHONY provides same day surgery to children. The Center has eight operating rooms, private consultation rooms, a new pre-operative anesthesia area, and a second-stage recovery area with eight private treatment areas. Special features include a large wait-and-play area, family lockers, and a parent waiting room with internet access.

• Through its Allergy and Asthma Programs, the Hospital participates in the American Lung Association’s Open Airways Program, which has been adopted in over 800 New York City elementary schools and in nearly 35 percent of elementary schools nationwide. The Hospital also sponsors allergy and asthma screenings in community organizations and local schools.

• MS-CHONY is one of a small group of facilities in the United States to be awarded a five-year grant by the Anne E. Dyson Community Pediatrics Training Initiative to incorporate community-based medicine and advocacy training in its pediatric residency program curriculum. The goal of this initiative is to expand the practice of pediatrics from caring for individual children in the office setting to one that encompasses working with whole communities to address healthy lifestyles, safe environments and nurturing families in a way that affects the health of the broader community.

Allen Hospital

The Allen Hospital is a 196-bed community hospital located at the northern tip of Manhattan. It provides medical and surgical services, intensive care, coronary care, maternity, psychiatric, neonatal, pulmonary, neurology, gastroenterology, hematology/oncology, obstetrics/gynecology, orthopedics, vascular surgery, geriatrics, ophthalmology, radiology and emergency services as well as outpatient clinics and ambulatory surgery. Specialized services and programs at the Allen Hospital include:

• The Spine Hospital at NYP/Allen opened in 2015. This facility is the Hospital’s newest resource for patient-centered spine care. The Spine Hospital at NYP/Allen is part of the Hospital’s comprehensive spine health initiative with ColumbiaDoctors, a faculty practice plan of the Columbia University Medical School, and builds on the Hospital’s strong foundation in orthopedics and neurosurgery, offering comprehensive spine care to adult and pediatric patients.

• Acute Care for the Elderly is a specialized unit which focuses on restoring elderly patients to their optimal level of functioning as quickly as possible. The Geriatric Service Line has implemented a number of facility improvements designed to make the environment “geriatric friendly.” These included changing the size and distance of doorways, availability and location of ramps, heights of counters, speed of elevators, and colors.

• Health Outreach is a senior membership program established in the late 1980’s and located at both the Allen Hospital and the Weill Cornell Campus.

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Community Outreach and Access

Ambulatory Care Network

The NewYork-Presbyterian Ambulatory Care Network (the “Ambulatory Care Network”) provides primary care to children and families in communities throughout Manhattan. It is composed of fourteen primary care practice sites and more than fifty specialty care clinics. The goal of the Ambulatory Care Network is to improve the health and quality of life for residents in New York City’s underserved communities by providing high-quality, affordable, patient-friendly care, with an emphasis on preventive health care and wellness. Each site provides comprehensive and affordable healthcare to individuals throughout the surrounding communities of the Columbia Campus, the Weill Cornell Campus, and the Allen Hospital. Additionally, through the Ambulatory Care Network, the Hospital provides care to patients presenting from all of the boroughs of New York City. Services include internal medicine, obstetrics and gynecology, pediatrics, geriatrics, family medicine, infusion services, and specialty care and include practices specializing in comprehensive HIV care. The Ambulatory Care Network also provides care through its UrgiCare Center, Family Planning Practice, Young Men’s Clinic, Methadone Maintenance Clinic, four Women, Infants, and Children (WIC) sites (a Federally-funded nutrition program), seven School-Based Health Centers and ten School-Based Mental Health clinics.

In addition to primary care services, the Ambulatory Care Network includes many specialty programs for children and adolescents, including those listed below.

• Community Health and Education is a community and school-based health center program providing comprehensive medical, mental health, and health education services to medically underserved adolescents and adults.

• CHALK (Choosing Healthy & Active Lifestyles for Kids) is a program designed to reduce the prevalence of childhood obesity in northern Manhattan and to promote a healthy lifestyle.

• The Family PEACE (Promoting Education, Advocacy, Collaboration and Empowerment) Program is dedicated to improving the safety and well-being of mothers and children who have been exposed to violence in their homes.

• The Lang Youth Medical Program is a six-year science enrichment, mentoring, internship, and college preparatory program for talented ethnic minority youth who aspire to become future scientists and healthcare professionals.

• Health for Life is a comprehensive weight management program for overweight pre-adolescents and adolescents.

• Project K.I.S.S. (Know Your Status, Inform your Partner(s), Stay Safe) engages young people ages 13-24 through innovative health education, HIV/AIDS awareness, safer sex products, HIV prevention counseling, and rapid HIV testing.

• Project STAY (Services to Assist Youth) provides HIV counseling and testing and comprehensive services to high-risk medically underserved adolescents and young adults at risk for or living with HIV.

• Reach Out and Read is a hospital-based program that links reading aloud with giving books to children aged six months to five years during their primary healthcare visits.

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• Turn 2 Us is a collaboration between Public Schools 128M and 4M, MS-CHONY, and Derek Jeter's Turn 2 Foundation to encourage healthy lifestyle behaviors among elementary school students.

• Washington Heights-Inwood Network (WIN) for Health is a program designed to strengthen the existing community-wide network of care and to improve the health of children with asthma and adults with type 2 diabetes.

Regional Health Collaborative

The Regional Health Collaborative is a health care program based at the Columbia Campus that is designed to address the specific needs of the residents of the Washington Heights-Inwood community. This program connects medical homes, providers and community resources to the same information technology infrastructure, and incorporates care management for high-risk patients with complex conditions. It has helped to reduce emergency department visits, hospitalizations and 30-day readmissions.

The Regional Health Collaborative plays a significant role in the Washington Heights-Inwood region and beyond. This collaborative effort among the Hospital, Columbia University Medical Center, and other local providers, such as the Visiting Nurse Service of New York, and independent physicians, aims to measurably improve the health of the Washington Heights-Inwood population. It is a patient centered, regional effort to provide access and coordinate care for a largely immigrant Hispanic population of 240,000 across the continuum of health services. The many Ambulatory Care Network wellness and prevention community outreach programs are designed to align with the Hospital’s clinical programs and all the collaborators to build a “Medical Village” where all come together to improve the health of the population.

ACADEMIC AFFILIATIONS, MEDICAL STAFF AND RESEARCH

Academic Affiliations

The Hospital’s Weill Cornell Campus serves as the primary clinical teaching center of the Weill Cornell Medical School based on an affiliation created in 1927. The Hospital’s Columbia Campus serves as the primary clinical teaching center of Columbia University Medical School based on an affiliation created in 1921. All members of the Hospital’s Medical Staff are employed by and have faculty appointments at one of the Medical Schools (see “Medical Staff” below). The Medical Schools conduct a substantial portion of their clinical and translational research at Hospital facilities (see “Research” below).

Weill Cornell Medical School

The agreement between the Hospital and Weill Cornell Medical School creates a relationship which is intended to be close, mutually beneficial and perpetual. To receive an appointment to the Medical Staff serving the Weill Cornell Campus, a physician must also have a faculty appointment to the Weill Cornell Medical School. The Weill Cornell Campus operates residency training programs in anesthesiology, dermatology, internal medicine, neurological surgery, neurology, obstetrics and gynecology, ophthalmology, pathology, pediatrics, physical medicine, plastic surgery, psychiatry, radiology (diagnostic), rehabilitation, radiation oncology, general surgery, thoracic surgery, urology, oral surgery and primary care medicine. These programs provide training to approximately 780 residents and fellows and are fully accredited by the Accreditation Council for Graduate Medical Education.

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Columbia University Medical School

The Alliance Agreement with Columbia University similarly creates a relationship which is intended to be close, mutually beneficial and perpetual. To receive an appointment to the Medical Staff serving the Columbia Campus, a physician must also have a faculty appointment to the Columbia University Medical School.

In addition to providing training facilities for students of medicine and allied health professions, providing specialized treatment of complex diseases and disorders and conducting advanced medical research, the Columbia Campus sponsors many post-graduate medical education programs. The Columbia Campus administers programs in the following specialties and subspecialties: allergy/immunology, anesthesiology, dermatology, family practice, internal medicine, neurological surgery, neurology, nuclear medicine, obstetrics/gynecology, ophthalmology, orthopedic surgery, otolaryngology, anatomic/clinical pathology, pediatrics, pediatric cardiology, pediatric gastroenterology, pediatric hematology/oncology, neonatal/perinatal medicine, pediatric pulmonology, pediatric rheumatology, physical medicine/rehabilitation, psychiatry, child and adolescent psychiatry, geriatric psychiatry, diagnostic radiology, neuroradiology, nuclear radiology, pediatric radiology, vascular/interventional radiology, radiation oncology, surgery-general, urology, dentistry/general practice and oral surgery, dentistry/pediatric and advanced education dental program. These programs provide training to over 900 residents and fellows each year.

Other Educational Programs

In addition to its academic affiliation with Weill Cornell Medical School, the Weill Cornell Campus also provides clinical training to nursing students through affiliations with educational institutions located in New York, Connecticut, New Jersey and Pennsylvania and clinical training in radiation technology to students through an affiliation with New York City Technical College.

In addition to its academic affiliation with Columbia University Medical School, the Columbia Campus provides clinical training to nursing and other students in medical related fields through affiliations with educational institutions located in New York, Connecticut and Pennsylvania.

Medical Staff

As of June 6, 2016, there were 4,953 physician and dentist members of the Medical Staff of the Hospital, including 4,939 Attending Staff members and 14 Emeritus members. The Medical Staff is presently organized into 24 clinical services: anesthesiology, cardiothoracic surgery, dentistry, dermatology, emergency medicine, family medicine, medicine, neurological surgery, neurology, obstetrics and gynecology, ophthalmology, orthopedic surgery, otolaryngology, pathology, pediatrics, psychiatry, public health, radiation oncology, radiology, rehabilitation medicine, reproductive medicine, surgery, transplantation medicine, and urology. The clinical services include approximately 65 medical specialties and sub-specialties. As of June 6, 2016, approximately 82% of the Medical Staff members were board certified in one or more of their specialties and the average ages of the Medical Staff was approximately 50 years. Since 2010, the Medical Staff has grown by approximately 10%.

The members of the Medical Staff are not employed by Hospital. However, as noted, to receive an appointment to the Medical Staff a physician must also have a faculty appointment at the Medical School aligned with the campus at which the physician practices.

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The following table shows the number of Hospital Medical Staff physicians by clinical service and academic affiliation.

Medical Staff of the Hospital by Clinical Service and Academic Affiliation

as of June 6th, 2016

Specialty Columbia Weill Cornell Total

Anesthesiology 95 90 185 Cardiothoracic Surgery1 21 32 53 Dentistry 58 67 125 Dermatology 130 72 202 Emergency Medicine 67 99 166 Family Medicine 38 - 38 Medicine 613 811 1,424 Neurological Surgery 25 21 46 Neurology 104 75 179 Obstetrics & Gynecology 96 121 217 Ophthalmology 83 52 135 Orthopedic Surgery 33 139 172 Otolaryngology 21 41 62 Pathology 59 50 109 Pediatrics 365 289 654 Psychiatry 277 315 592 Public Health - 5 5 Radiation Oncology 7 16 23 Radiology 65 109 174 Rehabilitation Medicine 50 36 86 Surgery1 93 124 217 Urology 22 67 89 Total 2,322 2,631 4.953 ______1. Transplant Medicine is included under Surgery and Reproductive Medicine is included under Obstetrics and Gynecology

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The following table is a summary of inpatient discharges by major specialty groupings for the Hospital for the calendar years 2015, 2014 and 2013, and for the three-month periods ended March 31, 2016 and 2015.

HOSPITAL DISCHARGES BY MAJOR SPECIALTY GROUPINGS

Three-Month Period Ended March 31, Year ended December 31, Specialty Grouping 2016 2015 2015 2014 2013 Medical-Surgical1 18,795 18,008 74,766 75,374 79,570 Obstetrics/Gynecology 4,130 3,995 16,781 16,915 17,051 Psychiatry 1,719 1,657 7,019 6,582 5,946 Pediatrics 2,392 1,992 8,261 8,411 7,062 Rehabilitative Medicine 261 226 1,027 972 1,009 Burn 188 241 756 852 827 Alcohol Rehabilitation 89 84 354 376 316 Subtotal 27,574 26,203 108,964 109,482 111,781 Newborn 3,837 3,461 14,846 14,318 14,600 Total 31,411 29,664 123,810 123,800 126,381

______(1) Includes Coronary Care Unit, Epilepsy Unit, HIV Care, Intensive Care Unit (“ICU”), Medical ICU, Neonatal ICU, Neurological ICU, Pediatric ICU, Surgical – Cardiac ICU and Surgical ICU.

The Medical Schools and Faculty Practices

The Hospital works closely with the Weill Cornell and Columbia University Medical Schools in recruiting nationally and internationally renowned practitioners to the Medical Staff and Medical School faculties. The Medical Schools also work with the Hospital to develop plans to grow specialty programs, integrate the Regional Hospitals, and expand patient access to a broader geographic region.

The faculty practices of the Medical Schools operate at numerous locations in the Metropolitan Area and beyond. Physicians practicing at these locations, many of whom are on the Hospital’s Medical Staff, provide patients with enhanced access to the Hospital’s services. Weill Cornell Medical Associates is the primary care practice of the Weill Cornell Physician Organization, the full-time faculty practice of Weill Cornell Medical School. Weill Cornell Medical Associates operates at multiple locations on the Upper East Side and Upper West Side of Manhattan and at a site in lower Manhattan. Each practice location is staffed by 10 to 15 physicians. ColumbiaDoctors is a multi-specialty faculty practice organization comprising the physicians, surgeons, dentists and advanced practice nurses of Columbia University Medical School. It operates at multiple locations throughout Manhattan and in Westchester, Rockland and Orange Counties, New York. Its midtown location near Rockefeller Center is staffed by more than 225 doctors, dentists, and nurse practitioners in a wide range of specialties, and encompasses 125,000 square feet with more than 125 exam rooms and more than 30 rooms for a wide range of procedures. There is also a full-service laboratory and walk-in practice which offers same-day visits in a variety of specialties. Also on the premises is a primary and immediate care center. The electronic medical records of the faculty practices are integrated with the Hospital’s medical records systems.

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Research

Columbia University Medical School is ranked #7 in the U.S. News and World Report’s 2017 Best Medical Schools – Research, and received approximately $907.1 million in research grants from the National Institutes of Health (“NIH”) from 2014 to 2016. Weill Cornell Medical School is ranked #18 by U.S. News and World Report, and received approximately $432.5 million in NIH grants over this period.

Clinical trials and translational research are conducted by Medical Staff physicians through their academic positions at Weill Cornell Medical School or Columbia University Medical School. The Hospital collaborates with the Medical Schools with much of the clinical trials and research taking place at Hospital facilities and involving Hospital staff and equipment. The Irving Center for Clinical and Translational Research at the Columbia Campus and The Weill Cornell Medical College Clinical and Translational Science Center are dedicated to transforming the way clinical and translational research is conducted, enabling medical investigators to develop new treatments faster and delivering those treatments to patients more efficiently and effectively.

MARKET INFORMATION

Service Area

The Hospital serves a geographic area with diverse communities across the New York Metropolitan Area. Its primary service area includes four of the five boroughs of New York City (Manhattan, Bronx, Brooklyn and Queens) and Westchester County. Its secondary service area includes Staten Island, as well as the New York State counties of Nassau, Suffolk, Dutchess, Rockland and Orange; the New Jersey counties of Bergen, Hudson, Essex, and Monmouth; and the Connecticut county of Fairfield. As the primary quaternary and tertiary referral center for the Regional Hospital Network, the Hospital draws patients from the service areas of members of the Regional Hospital Network located in the Metropolitan Area.

The following table shows for the fiscal year ended December 31, 2015, the Hospital’s inpatient discharges, including newborns, by county of residence within its primary and secondary service areas, and by state of residence for all other discharges.

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Hospital Inpatient Discharges by County

Location Discharges Percentage Primary Service Area New York County, NY 46,635 37.7% Bronx County, NY 18,740 15.1% Kings County, NY 15,566 12.6% Queens County, NY 11,370 9.2% Westchester County, NY 6,219 5.0% Subtotal 98,530 79.6%

Secondary Service Area Nassau County, NY 2,534 2.0% Bergen County, NJ 2,379 1.9% Rockland County, NY 2,060 1.7% Richmond County, NY 1,812 1.5% Suffolk County, NY 1,809 1.5% Hudson County, NJ 1,709 1.4% Orange County, NY 1,345 1.1% Fairfield County, CT 1,044 0.8% Essex County, NJ 806 0.7% Monmouth County, NJ 749 0.6% Dutchess County, NY 463 0.4% Subtotal 16,710 13.5%

Other Areas New Jersey Other Counties 2,893 2.3% New York Other Counties 1,349 1.1% Connecticut Other Counties 269 0.2% Other States 2,833 2.3% International 1,226 1.0% Subtotal 8,570 6.9%

Grand Total 123,810 100.0%

Competition and Other Area Hospitals

The Metropolitan Area is home to a number of academic medical centers offering tertiary and quaternary care services similar to those offered at the Hospital. Although this environment offers intellectual and professional advantages to the Hospital and its physicians, there is intense competition between the Hospital and similar institutions to recruit admitting physicians and to provide optimum facilities for patient care and academic research. Further, suburban medical care facilities have been upgrading their facilities in an effort to become more attractive to physicians and patients and to capture patients formerly referred to facilities such as the Hospital. Insurers and other third-party payors, such as

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Medicare, have undertaken efforts to reduce hospital utilization, further intensifying competitive pressures.

The Hospital competes with several academic medical centers and other large health care systems in the region. It also competes with suburban hospitals for patients referred from the secondary service area. Some of these facilities, which have benefited from less challenging environments than the Hospital, have undertaken extensive construction programs in recent years and have engaged in physician recruitment and other programs that have maintained or enhanced their competitive position.

Major private competitors include Montefiore Medical Center, Mount Sinai Health System (“Mount Sinai”), New York University Langone Medical Center (“NYU Langone”), and Northwell Health (f/k/a North Shore-Long Island Jewish Health System) (“Northwell”). The New York City Health and Hospitals Corporation (“NYC Health and Hospitals”), which is the City of New York’s public health care system, owns and operates 11 acute care hospitals.

The following table shows the market share for the fiscal years ended December 31, 2014, 2013 and 2012, for the Hospital, other members of the Health Care System (acute care hospitals only), other major health care systems in the area and all other hospitals. Market share is measured by inpatient discharges of patients who reside in New York City or Westchester County, New York.

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Market Share by Inpatient Discharges – New York City and Westchester County Fiscal years ended December 31, 2014, 2013 and 2012

Organization 2014 2013 2012

New York-Presbyterian Hospital 8.7% 8.5% 8.2%

Regional Hospitals1 NYP/Queens 2.5% 2.6% 2.7% NYP/Lawrence 0.9% 1.0% 1.0% NYP/Hudson Valley 0.5% 0.5% 0.4%

Corporate Members of the Regional Hospital Network1 New York Methodist Hospital 3.2% 3.2% 2.9% Community Hospital of Brooklyn 0.6% 0.7% 0.6% Hospital for Special Surgery 0.5% 0.5% 0.5% Total Hospital, Regional Hospitals and Corporate Members2 17.1% 16.9% 16.3%

Other Systems3 NYC Health and Hospitals 16.4% 15.9% 15.9% Northwell 14.1% 13.8% 13.6% Mount Sinai 13.4% 13.8% 13.9% Montefiore Medical Center 9.4% 9.1% 9.2% NYU Langone4 4.7% 4.4% 4.3% Others 24.9% 26.1% 26.8%

Total2 100.0% 100.0% 100.0%

Source: For the Hospital, internal Hospital records. For other facilities, Truven (Statewide Planning and Research Cooperative System - SPARCS - Data). 1. Includes for all periods the entities that are Regional Hospitals and acute care hospitals that are Corporate Members of the Regional Hospital Network as of set forth above under “The Health Care System and the Supporting Corporations.” 2. Totals may not foot due to rounding. 3. Includes for all periods facilities that are currently part of the identified systems. 4. The main hospital facility at NYU Langone was severely damaged in Superstorm Sandy in October 2012. The inpatient facility was closed for nearly two months, reopening in late December 2012. The emergency room remained closed until April 2014.

Patient Satisfaction Measures

The Hospital ranks above New York State averages and near or above national averages for two key patient satisfaction measures reported by the Centers for Medicare & Medicaid Services Hospital Compare Date on its website (https://data.medicare.gove/data/hospital-compare).

For the question “Would You Recommend the Hospital to Friends and Family?”, 76% of respondents for the Hospital survey replied “Yes, I Would Definitely Recommend the Hospital.” The New York State average was 66%, and the national average was 71%. The Hospital’s major competitors ranged from 68% to 79%.

For the question “How Do You Rate the Hospital Overall?”, 70% of respondents for the Hospital survey gave a rating of 9 out of 10 or better. The New York State average was 64%, and the national average was 71%. The Hospital’s major competitors ranged from 64% to 74%.

Patient survey responses received by the Hospital for the months January through April 2016, but not yet submitted to CMS, show an increase in patient satisfaction over compare periods in 2015.

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STRATEGIC DEVELOPMENTS

System-Wide Organization

Beginning in late 2015, the Hospital announced certain organizational changes to support the Hospital’s ongoing growth and strategic direction and its relationship with the Regional Hospitals. The activities of the Hospital and the Regional Hospitals are now described as four major divisions: (i) the Hospital, which serves as the academic hub of the organization and its activities; (ii) the Regional Hospital Network; (iii) NewYork-Presbyterian Physician Services; and (iv) NewYork–Presbyterian Community and Population Health.

NewYork-Presbyterian Physician Services is intended to broaden and expand healthcare delivery in the Metropolitan Area by establishing a network for physicians not employed by the Hospital who have privileges at the Hospital or at the Regional Hospitals. NewYork-Presbyterian Physician Services has the following key responsibilities: (i) facilitating specialty physicians from ColumbiaDoctors and Weill Cornell Medical Associates to provide services to the Regional Hospitals and the NYP Medical Groups3; (ii) the NYP Physician Services Organization, which provides physician practice management and administrative infrastructure for the NYP Medical Groups; (iii) the development of clinical programs at the Regional Hospitals; and (iv) clinical integration to promote a continuum of care among the Hospital, the Regional Hospitals and aligned physician organizations.

The New York-Presbyterian Community and Population Health division brings together various activities of the Hospital and the Regional Hospitals relating to community and population health, comprising ambulatory care network sites and operations, community programs and initiatives, and healthcare quality programs, including New York Quality Care, an Accountable Care Organization (“ACO”) jointly established in 2015 by the Hospital and the Medical Schools.

Governance Changes

The Hospital is in the process of instituting governance arrangements designed to facilitate integration of the activities of the Hospital and the Regional Hospitals by clearly defining the roles and responsibilities of the Hospital’s Board of Trustees and the respective roles and responsibilities of the boards of the NYP Active Parent Corporations and the Regional Hospitals. Under these arrangements, some of which are subject to various approvals before they can be fully implemented, the Hospital’s Board of Trustees will be responsible for overall strategic vision and oversight of the activities of the Hospital and the Regional Hospitals. The board of each of the NYP Active Parent Corporations will make strategic decisions and establish objectives and approve budgets for the Regional Hospitals under their control, among other responsibilities. The board of each Regional Hospital, in turn, will monitor the implementation of steps to maximize and improve quality of care, engage the local community, and address matters relating to quality and credentialing. Plans are underway to consolidate the Regional Hospitals under Community Programs, thereby having just one NYP Active Parent Corporation.

Along with these governance changes, certain functions of the Hospital and the Regional Hospitals are being centralized and standardized. Similarly, the Hospital is taking steps, through an effort coordinated by both physician and administrative management, to reorganize service lines to ensure

3 NYP Medical Groups is the term used by the Hospital for certain physician group practices established as captive professional corporations affiliated with the Regional Hospitals. Each of the NYP Medical Groups is headed by a physician that is a full time employee of one of the Regional Hospitals. NYP Medical Groups include several hundred physicians across multiple offices in New York City and Westchester County, New York.

A-32 consistent high quality care at the Hospital and the Regional Hospitals. For example, in cardiac care, activities are being integrated and coordinated with a goal of enabling patients at the Hospital and each of the Regional Hospitals to receive comprehensive, multidisciplinary care from top cardiac specialists.

Service Line Regionalization

In order to maintain a consistent standard of care across the Hospital and the Regional Hospitals, the Hospital is regionalizing key service lines through protocol development, service standards, quality metrics, technology, clinical trials, and physician expertise. Regionalization is designed to enable the Hospital and its affiliates to provide the highest quality patient centered care while improving the health and wellbeing of patients, addressing community needs, aligning physician leadership, and enhancing access to innovative programs and clinical trials throughout their service areas.

The regionalization of the Hospital’s care is supported by the recruitment of physicians through NYP Medical Groups in collaboration with the faculty practices of the Medical Schools. NYP Medical Groups consists of several hundred physicians across multiple practice locations in New York City and Westchester. NYP Medical Groups utilize an integrated information technology system and are supported by the practice management, human resources, legal and other services provided through the NYP’s physician service organization.

Furthermore, the Hospital is using technology to support its efforts to regionalize care. Telehealth capabilities are enabling the Hospital to bring the expertise of academic clinicians to patients in all of the communities that its serves. Through the first peer-to-peer teleconsult programs in New York, the Hospital has reduced psychiatrist access times at the Regional Hospitals’ emergency departments from 24 hours to 2 hours. The recent launch of the country’s largest digital second opinion service is designed to enable patients in New York, across the country and around the globe to obtain access to the right expertise of the Hospital and its specialists for their conditions in a few days – rather than the weeks it may have taken in the past.

The Hospital’s upcoming digital urgent care program is designed to enable its patients to reduce visits to the emergency department, when medically appropriate, and to improve wait times for those patients already in the emergency department. The Hospital is also building New York’s first telestroke ambulance – enabling critical stroke care to be delivered as soon as emergency medical technicians reach the patient. The Hospital’s televisit program – which is expected to be the first in New York State - will enable many patients to conduct follow-up visits with their physicians from their home.

NYP Regional Health Collaborative

In 2008, the Hospital joined with Columbia University Medical School and community-based providers and collaborators to form the Regional Health Collaborative. The Regional Health Collaborative set out to document the priority health needs of the Washington Heights-Inwood community in order to target high prevalence conditions while integrating longstanding community services into the fabric of the healthcare systems and processes.

The centerpiece of the first generation of the Regional Health Collaborative was the conversion of seven ambulatory care centers located in the community into a network of Patient Centered Medical Homes (“PCMHs”). The PCMHs achieved Level 3 recognition from the National Committee for Quality Assurance, the highest level available.

The Regional Health Collaborative initially targeted those conditions identified as major health problems in the community: diabetes, asthma, heart failure, depression, and childhood obesity. Many

A-33 more chronic physical and behavioral primary and co-morbidity conditions are tracked at the PCMHs and the central registry now numbers about 54,000 patients. The development and implementation of the Regional Health Collaborative was reported under “Innovations in Care” in the October 2011 Health Affairs issue on Disparities in Health and Health Care. A subsequent 2014 Health Affairs article reported three year outcomes for a cohort of 5,852 patients which experienced emergency department and inpatient hospitalization reductions of 29.7% and 28.5%, respectively. In 2014, the Regional Health Collaborative was presented the Spencer Foreman Award for Outstanding Community Service by the Association of American Medical Colleges.

The Hospital continues to build upon the success of the Regional Health Collaborative through its participation in New York State Medicaid’s Delivery System Reform Incentive Payment (“DSRIP”) Program. DSRIP seeks to fundamentally restructure the Medicaid health care delivery system with a primary goal of reducing avoidable hospital use by 25% over five years. New York State has allocated $7.4 billion dollars to the DSRIP program with payouts to Performing Provider Systems (PPS) based upon achieving predefined results in system transformation, clinical management and population health.

The Hospital is the lead applicant in the NYP Performing Provider System (“NYP PPS”), a network based on the Regional Health Collaborative model. NYP PPS is made up of the Hospital, its PCMHs and 95+ providers and community-based service organizations that are jointly committed to improving the health and wellbeing of the community they serve and reducing unnecessary hospital and emergency department use. Nearly 90,000 Medicaid beneficiaries have been assigned to the NYP PPS and ten DSRIP-specific projects are underway. The projects include a 30-day transition of care program aimed at reducing readmissions as well as a patient navigation program at four local emergency departments to promote the use of PCMHs instead of the emergency department for ambulatory care sensitive conditions.

A similar model has been used to support the Hospital’s participation in NewYork Quality Care (“NYQC”), a Medicare Shared Savings Program Accountable Care Organization (“ACO”) established in January 2015 together with the Medical Schools. NYQC was attributed 30,000 beneficiaries in 2015 with preliminary results showing a performance level that beat the CMS benchmark for the ACO. In addition NYQC completed the quality reporting necessary to qualify for the maximum level of shared savings should the preliminary results hold true through the CMS reconciliation process.

The Hospital’s participation in the Regional Health Collaborative, the NYP PPS, and NYQC, is allowing it to develop capabilities and obtain experience managing the health of populations and to prepare for the migration of certain reimbursement to value-based payments.

Capital Plan

The Hospital’s 2012-2019 Capital Plan includes projects with costs totaling approximately $3.9 billion. The Capital Plan contemplates that the Hospital will finance approximately $2.4 billion of this from operations, approximately $975 million in philanthropy and the remainder (approximately $500 million) with debt incurred in 2013. Approximately $1.4 billion has been expended through 2015, with the balance to be expended through 2020. Projects include the following:

o Construction and equipping of the new 500,000 square-foot The David H. Koch Ambulatory Center at the Weill Cornell Campus. o Construction and equipping of the new 250,000 square-foot The Alexandra & Steven Cohen Hospital for Women and Newborns at the Weill Cornell Campus.

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o Expansion, renovation and equipping of the Morgan Stanley Adult Emergency Department at the Columbia Campus, which is scheduled for completion in December 2017 and will double the size of the emergency department at this Campus. o Renovation of key inpatient units at the Columbia Campus. o New capacity and efficiency projects and inpatient bed unit enhancements at all campuses. o Major new investments in information technology and infrastructure.

FINANCIAL AND OPERATING INFORMATION

Utilization

A summary of historical utilization data for the fiscal years ended December 31, 2015, 2014 and 2013 and the three-month periods ended March 31, 2016 and 2015 for the Hospital is presented in the following table:

HISTORICAL UTILIZATION OF THE HOSPITAL

Three Months ended March 31, Year ended December 31, 2016 2015 2015 2014 2013 Certified Beds (at end of period) 2,515 2,508 2,515 2,478 2,478 Staffed Beds (at end of period) 2,381 2,328 2,380 2,364 2,364 Discharges1 27,574 26,203 108,964 109,482 111,781 Patient Days1 186,485 177,490 713,946 716,782 713,157 Staffed Bed Days Available 216,671 209,520 868,700 862,860 862,860 Average Length of Stay (days)2 6.29 6.20 6.10 5.99 5.81 Case Mix Index – Medicare 2.09 1.95 2.04 2.02 1.97 Case Mix Index - Hospital wide3 1.62 1.62 1.62 1.60 1.58 Average Occupancy (%)4 86.1% 84.7% 82.2% 83.1% 82.7% Emergency Room Visits 5 73,028 66,187 276,067 262,252 253,406 Outpatient Clinic Visits 163,509 157,507 659,726 669,878 691,128 Ambulatory Surgery Procedures 25,084 22,962 98,936 93,494 90,942 Mental Health Clinic Visits 29,615 29,039 114,559 115,240 111,080 ______Source: Hospital records.

1 Excludes newborns. 2 Excludes psychiatry, rehabilitation, normal newborn, uncoded and LOS greater than 300 days. 3 Hospital wide CMI is calculated using the payor specific cost weight (APR, AP or MSDRG). 4 Occupancy percentages based on staffed bed days available. 5 Includes only patients seen in the emergency room and not admitted.

Sources of Patient Service Revenue

The majority of patient services revenue received by the Hospital is derived from programs that are either insured or administered by third-party organizations. The following table reports the

A-35 percentage of net patient service revenue by payor source for each of the three fiscal years ended December 31, 2015, 2014 and 2013 and for the three-month periods ended March 31, 2016 and 2015. Percent of Hospital’s Net Patient Service Revenue by Payor Source

Three Months ended March 31, Year ended December 31, 2016 2015 2015 2014 2013 Payor Medicare 26.0% 26.7% 25.5% 28.1% 28.5% Medicaid 17.6% 18.8% 17.6% 17.8% 17.8% Commercial 55.9% 53.9% 56.4% 53.4% 52.3% Self Pay & Other 0.5% 0.6% 0.5% 0.7% 1.4% 1 Total 100.0% 100.0% 100.0% 100.0% 100.0% Source: Hospital records 1. Totals may not foot due to rounding.

All revenue, statistics and reimbursement information in this Appendix A represent historical data and may not be indicative of future activity. The Hospital cannot assess or predict the ultimate effect on its operations which may result from existing or future reimbursement legislation or regulations or other changes in law or market conditions.

Contracted Payors

The Hospital has stable relationships with each of its contracted payors and direct access to their senior management, including chief executive officers and staff that oversee operations, legal, medical management, marketing, sales and financial services. The Hospital is an in-network participating provider with all major commercial payors that operate in the Metropolitan Area, for all the services the Hospital is licensed to and does provide.

The Hospital has contracted with Empire Blue Cross Blue Shield, United Healthcare, Aetna, GHI, HIP, CIGNA, Multiplan and MagnaCare, among others. In addition to commercial lines of business, the Hospital has agreements with payors that operate Medicare Advantage (“MA”) and Medicaid Prepaid Health Service Plan (“Medicaid PHSP”) lines of business and collectively cover a substantial majority of enrollees, as outlined below.

• Medicare Advantage: Payors that collectively represent more than 92% of enrollees in New York City (as of May 2016).

• Medicaid PHSP: Payors that collectively represent more than 85% of enrollees in New York City (as of May 2016).

Enrollees covered by MA and Medicaid PHSP payors that are not contracted with the Hospital account for approximately 2,400 annual inpatient admissions (based on first quarter 2016 data annualized) either admitted directly via the emergency departments or otherwise admitted for medically necessary and covered pre-certified services.

The rates of payment for all contracted payors are based on agreed upon rates and terms and conditions as set forth in the agreements between the Hospital and each of the respective payors.

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Summary Statements of Operations and of Financial Position

The following summary statements of operations and summary statements of financial position as of and for each of the three years ended December 31, 2015, 2014 and 2013 are derived from the Hospital’s audited consolidated financial statements. The consolidated financial statements of the Hospital as of December 31, 2015, 2014 and 2013, and for the years then ended, together with the reports of independent auditors, are included in Appendix C-1 to this Offering Memorandum. The unaudited information in the summary statement of operations for the three-month period ended March 31, 2016 and in the summary statement of financial position at March 31, 2016 are derived from unaudited consolidated interim financial statements that are included in Appendix C-2 to this Offering Memorandum. The unaudited information in the summary statement of operations for the three-month period ended March 31, 2015 is derived from the Hospital’s accounting records. Such unaudited consolidated information includes all adjustments, consisting of normal recurring accruals, which the Hospital considers necessary for a fair presentation of the financial position and the results of operations for these periods. The results for the three-month period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2016. This information should be read in conjunction with the financial statements and related notes included in Appendix C-1 of this Offering Memorandum.

Effective July 1, 2014, Community Services, and its subsidiary, NYP/Lawrence, became subsidiaries of the Hospital. Effective January 26, 2015, Community Programs and its subsidiary, NYP/Hudson Valley Hospital, became subsidiaries of the Hospital, and effective July 1, 2015, NYP/Queens became another subsidiary of Community Programs and the Hospital. From those respective dates the financial results of each of these subsidiaries are reflected in the consolidated financial statements of the Hospital, except that the financial results of NYP/Queens are reflected from January 1, 2014. However, the financial results and utilization data of these subsidiaries are not reflected in the information presented in this Appendix A. Community Services, Community Programs, NYP/Lawrence, NYP/Hudson Valley and NYP/Queens are not Members of the Obligated Group. None of these entities has any financial or operating obligation under the Master Trust Indenture or the Bond Indenture, and none of their assets or revenue is legally committed to the repayment of the Series 2015 Bonds, the Series 2016 Bonds, Obligation No. 1 or Obligation No. 2.

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SUMMARY STATEMENTS OF OPERATIONS OF THE HOSPITAL (in thousands)

Three months ended March 31, Year ended December 31, 2016 2015 2015 2014 2013

Operating Revenues Net patient service revenue $1,238,771 $1,082,973 $4,586,660 $4,263,145 $4,050,632 Provision for bad debts (15,300) (14,577) (80,921) (56,914) (54,081) Net patient service revenue, less provision for bad debts 1,223,471 1,068,396 4,505,739 4,206,231 3,996,551 Other revenue 70,748 63,369 263,969 259,369 267,959 Total operating revenues 1,294,219 1,131,765 4,769,708 4,465,600 4,264,510

Operating Expenses Salaries and wages 570,180 521,609 2,170,025 2,032,992 1,945,813 Employee benefits 159,102 149,895 596,226 570,326 551,330 Supplies and other expenses 391,084 348,343 1,450,447 1,337,887 1,270,885 Interest and amortization of deferred financing fees 16,213 15,088 65,799 45,981 39,022 Depreciation and amortization 67,858 64,276 262,098 256,527 255,297 Total operating expenses 1,204,437 1,099,211 4,544,595 4,243,713 4,062,347

Operating income 89,782 32,554 225,113 221,887 202,163

Investment return (loss) 20,492 38,012 (28,591) 63,326 153,945

Excess of revenue over expenses before net medical resident tax refund 110,274 70,566 196,522 285,213 356,108 Net medical resident tax refund - - - - 214

Excess of revenues over expenses 110,274 70,566 196,522 285,213 356,322

Other changes in unrestricted net assets: Transfer of property, buildings and equipment (to) from Royal Charter Properties, Inc. - - (10,748) (16,160) 3,191 Distributions from New York-Presbyterian Fund, Inc. for the purchase of fixed assets 31,214 43,998 105,460 83,186 77,785 Net assets transfer to related parties (2,078) - (16,812) - - Change in pension and postretirement benefit liabilities to be recognized in future periods (94,184) (31,271) (8,752) (154,524) 157,787

Change in unrestricted net assets $ 45,226 $ 83,293 $ 265,670 $ 197,715 $ 595,085

______Source: Audited Financial Statements of the Hospital for years ended December 31, 2015, 2014 and 2013 and Hospital records

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SUMMARY STATEMENTS OF FINANCIAL POSITION OF THE HOSPITAL (in thousands)

December 31, March 31, 2016 2015 2014 2013 Assets Current assets: Cash and cash equivalents $ 244,962 $ 227,515 $ 190,038 $ 152,982 Short-term investments 1,098,113 1,087,581 1,068,740 882,499

Patient accounts receivable, net 556,017 516,992 498,094 559,638 Other current assets 131,035 114,249 78,675 71,252 Assets limited as to use - current portion 27,158 29,640 29,856 28,390 Professional liabilities insurance recoveries receivable and related deposit - current portion 69,322 69,322 63,462 60,812 Beneficial interest in net assets held by related organizations - current portion 63,900 73,635 78,699 68,420 Due from related organizations - net 11,450 7,427 - - Total current assets 2,201,957 2,126,361 2,007,564 1,823,993

Assets limited as to use - noncurrent 2,076,210 2,120,717 1,522,192 1,490,430 Property, buildings and equipment - net 2,666,763 2,546,518 2,300,906 2,169,218 Other noncurrent assets - net 3,029 3,029 3,309 3,590 Professional liabilities insurance recoveries receivable and related deposit - noncurrent 171,702 171,702 166,396 165,350 Beneficial interest in net assets held by related organizations - noncurrent 1,632,266 1,659,973 1,698,169 1,684,944

Total assets $ 8,751,927 $ 8,628,300 $ 7,698,536 $ 7,337,525

______Source: Audited Financial Statements of the Hospital for years ended December 31, 2015, 2014 and 2013 and Hospital records

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SUMMARY STATEMENTS OF FINANCIAL POSITION OF THE HOSPITAL (continued) (in thousands)

December 31, Liabilities and net assets March 31, 2016 2015 2014 2013 Current liabilities: Long-term debt - current portion $ 53,520 $ 55,375 $ 72,966 $ 109,201 Accounts payable and accrued expenses 421,652 390,604 388,309 334,479 Accrued salaries and related liabilities 206,325 216,114 202,196 175,823 Due to related organizations - net - - 2,412 4,671 Pension and postretirement benefit liabilities - current portion 16,014 16,014 11,686 12,112 Professional liabilities and other - current portion 69,322 69,322 63,462 60,812 Other current liabilities 185,328 182,351 158,573 120,879 Total current liabilities 952,161 929,780 899,604 817,977

Long-term debt 1,641,378 1,651,884 965,323 1,034,244 Professional liabilities and other 310,688 309,468 315,325 331,170 Pension liability 271,551 182,432 173,368 38,633 Postretirement benefit liability 23,833 23,846 26,025 24,823 Deferred revenue 2,077 2,266 2,985 3,770 Other noncurrent liabilities 303,513 289,682 299,374 291,595 Total liabilities 3,505,201 3,389,358 2,682,004 2,542,212

Net assets: Unrestricted 3,550,560 3,505,334 3,239,664 3,041,949 Temporarily restricted - held by related organizations 1,453,141 1,486,642 1,527,247 1,507,968 Permanently restricted - held by related organizations 243,025 246,966 249,621 245,396 Total net assets 5,246,726 5,238,942 5,016,532 4,795,313

Total liabilities and net assets $ 8,751,927 $ 8,628,300 $ 7,698,536 $ 7,337,525

______Source: Audited Financial Statements of the Hospital for years ended December 31, 2015, 2014 and 2013 and Hospital records

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Liquidity

The following table sets forth the Hospital’s days cash on hand based on unrestricted cash and investments and average daily operating expenses derived from the Hospital’s audited financial statements as of December 31, 2015, 2014 and 2013 and for the years then ended.

DAYS CASH ON HAND OF THE HOSPITAL

($ in thousands)

As of December 31 2015 2014 2013

Unrestricted cash and $2,942,478 $2,160,637 $1,869,954 investments (1) Average daily operating 11,733 10,924 10,430 expenses (2) Days cash on hand(3) 250.8 197.8 179.3 ______( 1) Includes all cash and cash equivalents, short-term investments, funded depreciation investments, board designated funds required by the Department of Housing and Urban Development to be set aside for completion of the Hospital’s 2013 FHA-insured mortgage loan and investments made with proceeds of the Series 2015 Bonds, but excluding any donor restricted funds and other third party restricted funds. (2) Total operating expenses for the period less depreciation and amortization, divided by 365. (3) Unrestricted cash and investments divided by average daily operating expenses.

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The following table sets forth the Hospital’s unrestricted cash and investments to long-term debt as of December 31, 2015, 2014 and 2013 derived from its audited financial statements as of and for the years then ended and as of March 31, 2016 derived from its unaudited internal financial statements as of and for the three-month periods then ended.

CASH TO DEBT OF THE HOSPITAL

($ in thousands)

December 31,

March 31, 2016 2015 2014 2013

Unrestricted cash and investments (1) $2,979,254 $2,942,748 $2,160,637 $1,869,954

Long-term debt: Bonds $1,693,427 1,706,659 1,019,497 $1,115,829 Other long-term debt(2) 53,415 53,608 45,482 60,967 Total long-term debt 1,746,842 1,760,267 1,064,979 1,176,796 Less: Current portion of long-term debt(2) (58,007) (59,923) (77,631) (113,411) Net long-term debt 1,688,835 1,700,344 987,348 1,063,385

Unrestricted cash and investments to 176.4% 173.1% 218.8% 175.8% Long-term debt ______1. Includes all cash and cash equivalents, short-term investments, funded depreciation investments, board designated funds required by the Department of Housing and Urban Development to be set aside for completion of the Hospital's 2013 FHA-insured mortgage loan and investments made with proceeds of the Series 2015 Bonds, but excluding any donor restricted funds and other third party restricted funds. 2. Includes capitalized leases and excludes deferred financing costs which are reported net in current and long-term debt.

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Long-Term Debt Service Coverage

The following table sets forth the debt service coverage based on historical Maximum Annual Debt Service and the debt service coverage based on pro-forma Maximum Annual Debt Service for the Hospital for the years ended December 31, 2015, 2014 and 2013.

LONG-TERM DEBT SERVICE COVERAGE OF THE HOSPITAL

Year ended December 31, ($ in thousands) 2015 2014 2013 Income available for debt service1: Change in unrestricted net assets $ 265,670 $ 197,715 $ 595,085 Depreciation and amortization 262,098 256,527 255,297 Interest expense (including receipts and payments related to derivative instruments) 65,799 45,981 39,022 Net assets received from Fund, Inc. for the purchase of fixed assets (105,460) (83,186) (77,785) Gain or (loss) from sale or disposition of assets not in the ordinary course of business 10,748 16,160 (3,191) Gain or (loss) from pension termination settlements or curtailments 283 143 (13) Change in unrealized gains and losses on investments 73,778 10,591 (39,576) Equity in income on alternative investments 18,856 (29,674) (85,627) Change in pension liability to be recognized in future periods 8,752 154,524 (157,787) Total $ 600,524 $ 568,781 $ 525,425

Historical Maximum annual debt service 142,197 142,197 142,197 Historical Coverage1 4.2x 4.0x 3.7x

Pro-Forma Maximum annual debt service ______Pro-Forma Coverage1 ___x ___x ___x

______

Notes: 1. Income available for debt service is determined in accordance with the Master Trust Indenture. Line items not relevant to these periods are omitted.

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Capitalization

The following table sets forth the historical capitalization of the Hospital as of December 31, 2015, 2014 and 2013 and March 31, 2016, and the pro-forma capitalization as of March 31, 2016.

CAPITALIZATION OF THE HOSPITAL

Pro-Forma December 31, ($ in thousands) March 31, 2016 March 31, 2016 2015 2014 2013 Long-term debt: Bonds $ 1,693,427 $ 1,706,659 $ 1,019,497 $ 1,115,829 Other long-term debt(1) 53,415 53,608 45,482 60,967 Total long-term debt 1,746,842 1,760,267 1,064,979 1,176,796 Less: Current portion of (58,007) (59,923) (77,631) (113,411) long-term debt(1) Net long-term debt(1) 1,688,835 1,700,344 987,348 1,063,385

Unrestricted net assets 3,550,560 3,505,334 3,239,664 3,041,949

Total capitalization 5,239,395 5,205,678 4,227,012 4,105,334

Long-term debt to total capitalization 32.2% 32.7% 23.4% 25.9 % ______(1) Includes capitalized leases, and excludes deferred financing costs which are reported net in current and long-term debt.

Management’s Discussion and Analysis of Utilization

Three-month period ended March 31, 2016 compared to three-month period ended March 31, 2015

For the three months ended March 31, 2016, the Hospital’s inpatient discharges increased 1,371 cases or 5.2% compared to the same period in 2015. This is partially attributable to the new physician recruits across various programs and the addition of new programs at various campuses.

Emergency Room visits increased 6,841 visits or 10.3% compared to the same period in 2015 primarily due to the completion of the first phase of a multi-phase renovation and expansion of the Milstein Emergency Department at the Columbia Campus, increase in flu related volume and increase in psychiatric volume.

Outpatient Clinic visits increased 6,002 or 3.8% compared to the same period in 2015 primarily due to extended hours at the Weill Cornell Campus rehabilitation clinic and increased volume at the offsite primary care clinics associated with the Columbia Campus.

Ambulatory Surgery procedures increased 2,122 cases or 9.2% compared to the same period in 2015 primarily due to an increase in outpatient cardiac catheterization volume, resulting from the opening of a new catheterization lab in Westchester County. In addition, there were increased ambulatory surgery volumes at the Columbia Campus and Lower Manhattan Campus as a result of new physician recruits across various programs.

Mental Health Clinic visits increased 576 visits or 2.0% compared to the same period in 2015 was driven primarily by the increase in the psychiatric clinic visits at the Westchester Division and the pediatric psychiatric visits at the Columbia Campus.

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Year ended December 31, 2015 compared to year ended December 31, 2014

For the year ended December 31, 2015, the Hospital inpatient discharges decreased 518 cases or 0.5% compared to the same period in 2014. This is partially attributable to the implementation of the two midnight census rule by CMS in October 2013. Under the rule, surgical procedures, diagnostic tests and other treatments are generally classified as admissions only if the hospital stay is expected to cross at least two midnights and if the physician admits the patient based upon that expectation. The utilization of the two midnight rule continues to lead an industry-wide shift from inpatient to outpatient status. However, CMS has continued to refine this rule to accept physician judgment in determining inpatient status, if appropriately documented.

Emergency Room visits increased 13,815 visits or 5.3% compared to the same period in 2014 primarily due to the mid-year completion of the first phase of a multi-phase renovation and expansion of the Milstein Emergency Department at the Columbia Campus.

Outpatient Clinic visits decreased 10,512 visits or 1.5% compared to the same period in 2014 primarily due to decreased volumes at primary care and school-based clinics related to the difficulty recruiting primary care doctors.

Ambulatory Surgery procedures increased 5,442 cases or 5.8% compared to the same period in 2014 primarily due to an increase in outpatient cardiac catheterization volume, in part due to opening of a new catheterization lab in Westchester County. In addition, there were increased ambulatory surgery volumes at the Columbia Campus, Morgan Stanley Children’s Hospital and Lower Manhattan Hospital as the result of new physician recruits across all programs and the application of the two midnight rule.

Mental Health Clinic visits decreased 681 visits or 0.6% compared to the same period in 2014 primarily due to the closure of the Westchester Division Day Hospitalization program.

Year ended December 31, 2014 compared to year ended December 31, 2013

For the year ended December 31, 2014, the Hospital inpatient discharges decreased 2,299 cases or 2.1% compared to the same period in 2013. This is partially attributable to the implementation of the two midnight census rule by CMS in October 2013. Under the rule, surgical procedures, diagnostic tests and other treatments are generally classified as admissions only if the hospital stay is expected to cross at least two midnights and if the physician admits the patient based upon that expectation. The utilization of the two midnight rule continues to lead an industry-wide shift from inpatient to outpatient status.

Emergency Room visits increased 8,846 visits or 3.5% compared to the same period in 2013 primarily due to increased volume at the Columbia campus and Allen Hospital emergency departments.

Outpatient Clinic visits decreased 21,250 visits or 3.1% compared to the same period in 2013 primarily due to decreased volumes at the primary care and offsite clinics related to the difficulty recruiting doctors as a result of the shortage in primary care physicians. In addition, one of the Hospital’s oncology clinics transferred to the Columbia University Medical School.

Ambulatory Surgery procedures increased 2,552 cases or 2.8% compared to the same period in 2013 primarily due to an increase in cardiac catheterization procedures, orthopedic surgeries at the Allen Hospital, interventional radiology procedures at the Cornell campus and the application of the two midnight rule.

Mental Health Clinic visits increased 4,160 visits or 3.7% compared to the same period in 2013 primarily due to the due to opening of the Center for Autism and the Developing Brain at the Westchester Division.

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Management’s Discussion and Analysis of Recent Financial Performance

Three-month period ended March 31, 2016 compared to three-month period ended March 31, 2015

For the three months ended March 31, 2016, the Hospital had operating income of $89.8 million, a $57.2 million or 175.8 % increase over the same period in 2015. Excess of revenues over expenses was $110.3 million, which represented a $39.7 million or 56.3% increase over the same period in 2015.

For the three months ended March 31, 2016, net patient service revenue, less provision for bad debt, increased $155.1 million or 14.5% over the same period the previous year. This increase was driven primarily due to higher utilization across most of the inpatient services, realizing higher rates, a higher case mix and increased outpatient activity across most outpatient services.

For the three months ended March 31, 2016, other revenue increased $7.4 million or 11.6% over the same period in 2015, due primarily to increased distributions from provider owned plans.

For the three months ended March 31, 2016, total operating expenses increased $105.2 million or 9.6% compared with the same period in the previous year. Salaries and benefits increased $57.8 million or 8.6% over the same period in the previous year. This increase is primarily a function of having 1,065 more full time equivalents to accommodate increased patient days, investments in care coordination, population health improvements, information technology and innovation, expanded emergency services and new clinical initiatives, most notably the spine programs at the Allen Hospital and Lower Manhattan Hospital, coupled with the corresponding increase in benefits and wage increases.

For the three months ended March 31, 2016, supplies and other expenses increased $42.7 million or 12.3% over the previous year. This increase was primarily due to an increase in medical and surgical supplies resulting from higher outpatient activity and surgical procedures and pharmaceuticals resulting from more ambulatory oncology visits. Interest and amortization of deferred fees increased by $1.1 million or 7.5%, primarily due to the Hospital issuing $750.0 million of taxable debt in February 2015. Depreciation expense increased $3.6 million or 5.6% reflecting the completion of a number of Hospital capital projects.

Year ended December 31, 2015 compared to year ended December 31, 2014

For the year ended December 31, 2015, the Hospital had operating income of $225.1 million, a $3.2 million or 1.5% increase over the same period in 2014. Excess of revenues over expenses was $196.5 million at December 31, 2015, an $88.7 million or 31.1% decrease from the same period in 2014. The decrease was primarily due to a loss on investments of $28.6 million compared to an investment return of $63.3 million for the same period in 2014.

For the year ended December 31, 2015, net patient service revenue, less provision for bad debt, increased $299.5 million or 7.1% over the same period the previous year. This increase was driven primarily by realizing higher rates, a more favorable payor mix and increased outpatient activity in ambulatory surgery procedures and ancillary services, offset to some extent by an increase in provision for bad debt as a result of the recognition of additional reserves related to an insurance carrier based on the New York State health insurance exchange.

For the year ended December 31, 2015, total operating expenses increased $300.9 million or 7.1% compared with the same period in the previous year. Salaries and benefits increased $162.9 or 6.3% over the prior year. This increase is primarily a function of having 631 more full time equivalents to accommodate investments in care coordination, population health improvements, information technology

A-46 and innovation, expanded emergency services and new clinical initiatives, including the spine programs at the Allen Hospital and Lower Manhattan Hospital, coupled with the corresponding increase in benefits and wage increases.

For the year ended December 31, 2015 supplies and other expenses increased $112.6 million or 8.4% over prior year. The increase was primarily due to an increase in expenses related to pharmaceuticals resulting from more ambulatory oncology visits, more repairs and maintenance, the higher consumption of utilities and more operating leases, including the costs associated with a new ambulatory oncology center, offset by a decrease in insurance expenses. Interest and amortization of deferred fees increased by $19.8 million or 43.1% primarily due to the Hospital issuing $750.0 million of taxable debt in February 2015. Depreciation and amortization increased $5.6 million or 2.2% reflecting the completion of a number of Hospital capital projects.

Year ended December 31, 2014 compared to year ended December 31, 2013

For the year ended December 31, 2014, the Hospital had operating income of $221.9 million, a $19.7 million or 9.8% increase over the same period in 2013. Excess of revenues over expenses was $285.2 million at December 31, 2014, a $71.1 million or 20.0% decrease from the same period in 2013. The decrease was primarily due to investment return of $63.3 million compared to an investment return of $153.9 million for the same period in 2013.

For the year ended December 31, 2014, net patient service revenue, less provision for bad debt, increased $209.7 million or 5.2% over the same period the previous year. This increase was driven primarily by realizing higher rates, increased case mix, a more favorable payor mix and increased outpatient activity in emergency room visits, mental health clinic visits, ambulatory surgery procedures and ancillary services.

For the year ended December 31, 2014, total operating expenses increased $181.4 million or 4.5% compared with the same period in the previous year. Salaries and benefits increased $106.2 or 4.3% over the prior year. This increase is primarily a function of having 277 more full time equivalents, coupled with the corresponding increase in benefits and wage increases.

For the year ended December 31, 2014 supplies and other expenses increased $67.0 million or 5.3% over prior year. The increase was primarily due to utilizing more medical and surgical supplies as a result of servicing more acutely ill patients, increase in pharmaceuticals resulting from more ambulatory oncology visits, more repairs and maintenance and higher consumption of utilities, offset by a decrease in insurance expenses as a result of the reduction in the Hospital’s malpractice tail liability. Interest and amortization of deferred fees increased by $7.0 million or 17.8% primarily due to the Hospital financing of $500.0 million of taxable debt in September 2013.

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Outstanding Long-term Indebtedness

A summary of long-term indebtedness of the Hospital as of December 31, 2015 and March 31, 2016 is set forth in the following table.

OUTSTANDING LONG-TERM INDEBTEDNESS OF THE HOSPITAL (in thousands)

Outstanding at March 31, December 31 Indebtedness Maturity Date 2016 2015

FHA-Insured Mortgage Loan (fixed rate, taxable) 2025 $ 213,755 $ 218,404 Mortgage Loan (fixed rate, taxable) 2035 235,030 237,341 Mortgage Loan (fixed rate, taxable) 2038 471,347 474,359

MTI – Series 2015 Bonds (fixed rate, taxable) 2045 750,000 750,000

Lower Manhattan Hospital Dormitory Authority of the State of New York Secured Hospital Revenue Refunding Bonds, Series 2011 (fixed rate, tax-exempt) 2022 23,295 26,555

Other Capitalized leases 53,415 53,608

Total $ 1,746,842 $ 1,760,267

Add: Unamortized fair value adjustment related to NYP/Lower Manhattan acquisition 1,199 1,289 Less: Deferred financing cost, net of accumulated amortization 53,143 54,297

Total $ 1,694,898 $ 1,707,259

The Hospital has a $100.0 million committed unsecured line of credit agreement with a bank that expires on June 30, 2017. No amounts have been drawn on this facility. This is a 364-day line of credit that is generally renewed annually.

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Investments

The following is a summary table of the Hospital’s cash and investment assets, including the Hospital’s beneficial interest in net assets held by related organizations as of March 31, 2016:

CASH AND INVESTMENT ASSETS OF THE HOSPITAL

Total Beneficial Hospital Investment Assets Interest Assets Total (in billions) $4.7 $1.3 $3.4

Cash 8% 1% 10% Treasuries 18 10 20 Public Equity 27 37 24 Private Equity 8 17 5 Real Estate 4 6 3 Natural Resources 4 8 3 Hedge Funds 10 21 6 Credit 21 0 29 100% 100% 100% ______Source: Hospital records.

The Investment Committee of the Board provides ongoing oversight and management of all the investment assets of the Hospital. These investment assets include long-term funds for capital and future projected needs, current investments of the Hospital, and specialized assets such as escrow and mortgage reserve funds. The asset allocation of the funds is determined by the Investment Committee, based on consideration of the purpose of the funds and an assessment of risk and return, and the asset allocation is reviewed periodically by the Investment Committee. In addition, the Investment Committee limits concentration of investments. The retention of investment managers and review of their performance is under the purview of the Investment Committee. The Hospital and Fund Inc. Boards of Trustees have adopted Investment Committee Charters which set forth guidance for the Investment Committee as to how to implement their investment responsibilities.

The Hospital’s Chief Investment Officer (“CIO”) and his staff provide oversight to the investment program. The CIO, along with the Investment Staff, provides professional investment analysis and recommendations to the Investment Committee concerning asset allocation and investment manager selection and retention, as well as evaluation of performance of the funds. Additionally, the Director of Investment Operations produces risk management reports for the CIO and the Investment Committee.

For long-term funds, the Hospital has adopted a return-oriented, well-diversified asset allocation strategy. Results for the investment funds have outperformed benchmarks.

The above table detailing the Hospital’s investment assets, including the Hospital’s beneficial interest in net assets held by related organizations comprises the majority of the investment assets under the purview of the Investment Committee and Investment Staff. The Hospital component includes investments limited as to use, including funded depreciation, funds held under loan agreements, and funded self-insurance. The Hospital component also includes short-term and cash equivalent investments maintained for purposes of operations and other needs of the Hospital, escrow funds, and other assets. The beneficial interest component is almost entirely comprised of the Hospital’s beneficial interest in

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Fund, Inc. The table does not include investments for the Hospital’s pension plan, which is invested similar to other long-term assets.

The following table shows, as of March 31, 2016, the liquidity of the Hospital’s investment portfolio, with 78% or $3.7 billion of assets accessible within one month. Pension assets are not included.

LIQUIDITY OF HOSPITAL’S INVESTMENT PORTFOLIO

Hospital Hospital Long-Term Fund Current Investments Total 1-5 Days 40% 100% 72% 6-31 Days 13 N/A 6 1-6 Months 10 N/A 5 7-12 Months 5 N/A 2 1-3 Years 3 N/A 2 3+ Years 29 N/A 13 Total 100% 100% 100% ______Source: Hospital records.

The following table shows (i) the amount of investment assets of the Hospital under management as of December 31, 2012, 2013, 2014 and 2015, and as of March 31, 2016, and (ii) the investment performance of the long-term portfolio through March 31, 2016.

As of As of December 31, March 31, 2012 2013 2014 2015 2016 Investment Assets Under Management $ 3.0 $ 3.8 $ 4.1 $ 4.8 $ 4.7 (in billions)

5 Year 3 Year 1 Year Long-Term Portfolio Performance through 4.7% 4.4% -2.7% 3/31/16 ______Source: Hospital records.

Philanthropy

In 2007, after completing a $1.0 billion campaign three years ahead of schedule, the Hospital, through Fund, Inc., began the Quiet Phase of a $2.0 billion campaign. This campaign was publicly launched in 2012. As of March 31, 2016, over $862.0 million in pledges and gifts have been made towards this campaign since its public launch date. When considering pledges and gifts received during the Quiet Phase of the campaign, as of December 31, 2015 the Hospital has received pledges and gifts of $1.6 billion against the $2.0 billion campaign. An additional campaign has been launched to raise $300 million for the Cohen Hospital for Women and Children. As of April 30, 2016, the Hospital has received pledges and gifts of $77.9 million for this campaign. The collection rate for pledges, based on recent history, has been close to 100%.

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Fund, Inc.

Fund, Inc. was incorporated in December 1982 with the stated corporate purpose of soliciting, receiving and administering funds to be applied exclusively for charitable, educational, and scientific purposes of New York Hospital and any other health-care related charitable organization approved by the board of directors of the Fund, Inc. After the merger with Presbyterian Hospital, Fund, Inc.’s corporate charter was amended to refer to the Hospital as the successor corporate entity to New York Hospital. In addition to the historical ties between Fund, Inc. and the Hospital, the two entities are affiliated by virtue of overlapping board membership; the members of the Board of Directors of Fund, Inc. all serve ex- officio and consist of the corporate members of NYPFI who serve on the Board of Trustees of the Hospital.

Despite the historical and corporate links between Fund, Inc. and the Hospital, the Board of Directors of Fund Inc. has complete discretion within its stated corporate purposes with respect to the distribution of its unrestricted assets. Historically, the Hospital has received all or substantially all of such distributions. During the fiscal years ended December 31, 2015, 2014 and 2013, Fund Inc. distributed approximately $105.5 million, $83.2 million and $77.8 million, respectively, for the purchase of fixed assets to the Hospital. There is, however, no legal or contractual requirement that Fund Inc. continue to make distributions of unrestricted assets to the Hospital. Fund, Inc. also holds certain assets on behalf the Hospital that are restricted and may only be used for the benefit of the Hospital.

Capital Expenditures

In 2015, 2014 and 2013, the Hospital incurred capital expenditures of $492.7 million, $402.4 million and $319.1 million, respectively, for acquisition of plant, property and equipment (net of disposals). These expenditures were funded from internally generated cash flow, donations and proceeds of loans. In 2015, 2014 and 2013, Fund, Inc. on behalf of the Hospital received approximately $184.5 million, $148.4 million and $306.7 million, respectively, in new gifts and pledges from individual, foundation and corporate donors for capital acquisitions and other purposes. See “STRATEGIC DEVELOPMENTS – Capital Plan” above for information regarding the Hospital’s 2012-2019 Capital Plan.

Royal Charter Properties

The RCP Corporations were incorporated in 1983 under the New York Not-for-Profit Law, to develop and manage real estate for the benefit of health-related charitable organizations including the Hospital. Each of the RCP Corporations has the power to acquire and hold real estate, collect income from such real estate and turn over the income therefrom, less expenses and reasonable reserves, to any qualified health related charitable organization approved by its board of directors. For the fiscal year ended December 31, 2015, the RCP Corporations had an aggregate net operating income of approximately $50.3 million. Historically, on an annual basis, each of the RCP Corporations has turned over its excess of revenue over expenses (“Excess Revenue”) to the Hospital. For the fiscal year ended December 31, 2015, 2014 and 2013, these amounts totaled $46.6 million, $45.0 million and $50.5 million, respectively, and are included in other operating revenue in the Statement of Operations of the Hospital. However, the board of directors of each of the RCP Corporations has complete discretion within its stated corporate purposes with respect to the distribution of its Excess Revenue; there is no legal or contractual requirement that these amounts be distributed to the Hospital.

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Uncompensated Care and Community Benefit Expense

The Hospital provides services to special populations such as minorities, the elderly, persons with disabilities, the mentally ill, persons with AIDS and poor persons (“Special Populations”), as well as to the broader community. Services provided to such Special Populations include services provided to persons who cannot afford health care because of inadequate resources and who are uninsured or underinsured. The Hospital provides quality medical care regardless of race, creed, sex, sexual orientation, national origin, handicap, age or ability to pay. Although reimbursement for services rendered is critical to the operations and stability of the Hospital, the Hospital recognizes that not all individuals have the ability to pay for medically necessary services and, furthermore, the Hospital’s mission is to serve the community with respect to health care. Therefore, in some instances the Hospital provides uncompensated care through medical care to the indigent for free or discounted prices (charity care/financial aid) and care to persons covered by governmental programs that pay the Hospital less than the full cost of services provided. In addition, the Hospital provides significant community benefit activities which include wellness programs, community education programs, health screenings and a broad variety of community support services, health professionals’ education, school based programs and subsidized health services. The costs related to uncompensated care and community benefit activities of the Hospital for the year ended December 31, 2015, 2014 and 2013 were $729.7 million, $646.2 million and $597.0 million, respectively.

EMPLOYEES AND EMPLOYEE BENEFITS

As of December 31, 2015, the Hospital employed approximately 22,950 FTEs, of which approximately 6,602 were nursing staff, including advanced practice nurses, registered nurses, technicians, nursing aides and licensed practical nurses. Of these, approximately 5,603 FTEs were registered nurses. In recent years the Hospital has been able to recruit an adequate number of nursing staff, although recruitment has become more difficult recently.

The following table shows the breakdown of FTEs of the Hospital as of December 31, 2015:

HOSPITAL EMPLOYEES – FTEs

Columbia Lower Campus, MS- Weill Manhattan Hospital CHONY and Cornell Westchester Allen Hospital Campus Division Total Registered Nurses FTEs 3,092 2,048 303 159 5,603 Other Nursing FTEs 522 369 71 37 999 Non-Nursing FTEs 7,960 6,942 796 650 16,348 Total 11,575 9,359 1,170 846 22,950

Benefits offered to eligible employees include: health insurance covering hospitalization, major medical expenses and dental treatment; life insurance; short and long term disability insurance; a defined benefit pension plan and a 403(b) tax deferred contributions plan.

The Hospital has collective bargaining agreements with respect to certain employees at the Columbia Campus and Lower Manhattan Hospital. The New York State Nurses Association represents approximately 3,200 employees and Local 1199, National Health and Human Service Employees Union (“Local 1199”), represents approximately 5,300 employees. The agreement with Local 1199 is a multiemployer agreement and expires September 30, 2018. The agreement with the New York State Nurses

A-52

Association (“NYSNA”) expires December 31, 2018. The remaining collective bargaining agreements are with: Occupational Therapy Association (expired on November 30, 2015; pending negotiations), Physical Therapy Collective Negotiations Committee (expired November 30, 2015, currently in negotiations), Professional Dieticians of New York (expired January 31, 2016; new Memorandum of Agreement pending ratification by members, will expire on January 31, 2019 if ratified) and Communication Workers of America, AFL-CIO (expires November 30, 2018). Benefits to Hospital employees who are covered by collective bargaining agreements are governed by the terms of the respective contracts and jointly administered trust funds. Benefits offered to eligible nursing employees include: health insurance covering hospitalization and major medical expenses, and life insurance.

The Hospital provides pension and similar benefits to its employees through several plans, including various multi-employer plans for union employees, a qualified noncontributory defined benefit plan primarily for eligible nonunion employees of the Hospital and certain of its related organizations, and a nonqualified defined benefit plan for certain executives. The Hospital also provides pension and similar benefits to certain employees through a defined contribution plan. The Hospital funds the noncontributory defined benefit plans in accordance with the minimum funding requirement of the Employee Retirement Income Security Act of 1974 (“ERISA”), plus additional amounts that the Hospital may deem appropriate from time to time. Amounts contributed to the defined benefit plans are based on actuarial valuations. Contributions to union plans are based on union employee gross salary levels and rates required under union contractual arrangements. Contributions to the Hospital’s defined contribution plan are generally based on percentages of annual salaries. For a statement as to funding of pension obligations, see Note 9 of the audited financial statements of the Hospital for the fiscal years ended December 31, 2015, 2014 and 2013 set forth in Appendix C-1.

LICENSURE AND ACCREDITATION

The Hospital has operating certificates from the New York State Department of Health and the New York State Office of Mental Health (“OMH”). The State of New York Division of Alcoholism and Alcohol Services (now Office of Alcoholism and Substance Abuse Services) issued operating certificates for inpatient alcohol rehabilitation and outpatient alcoholism treatment for the Westchester Division. The Hospital was most recently accredited by The Joint Commission in 2014; accreditation is valid for three years.

INSURANCE

The Hospital maintains comprehensive all-risk form property insurance, workers’ compensation insurance that complies with all statutory requirements, and general liability and hospital professional liability coverage. Property insurance is purchased from commercial carriers and is subject to deductibles. General liability and professional liability insurance is secured through a reciprocal risk retention group in which the Hospital is a member/shareholder. The Hospital insures for workers’ compensation claims through the New York State Insurance Fund.

In 1978, the Hospital, in conjunction with other unrelated healthcare entities, participated in the formation of a captive insurance company (the “Captive”) to provide professional liability and general liability insurance to its participants. In 2014, the Captive, in order to better serve its member/shareholders, modified its corporate structure to become a reciprocal risk retention group. Premiums are actuarially determined based upon the loss experience of the member/shareholder and the risk retention group itself. The professional liability tower provides coverage in excess of $270 million to the Hospital.

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The Hospital maintains primary professional liability insurance coverage for employed physicians and other employed health care professionals, including interns and residents, providing access to the full excess of liability noted above. All non hospital-employed Medical Staff members with admitting privileges are required to maintain professional liability insurance coverage in amounts not less than $1.0 million per occurrence and $3.0 million in the aggregate.

LITIGATION

The Hospital is subject to claims and litigation in the ordinary course of its operations. As of June 16, 2016, the Hospital has no litigation, including medical malpractice litigation, or proceedings pending or, to its knowledge, threatened against it except: (i) litigation being defended by insurance companies on behalf of the Hospital, the probable recoveries in which and the estimated costs and expenses of defense of which, in the opinion of counsel to the Hospital for such matters or of the applicable insurance carrier, will be entirely within the Hospital’s applicable insurance policy limits (subject to applicable deductibles); and (ii) litigation, the probable recoveries in which and the estimated costs and expenses of defense of which, in the opinion of counsel to the Hospital for such matters and Hospital management, will not materially and adversely affect the Hospital’s operations or financial condition.

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APPENDIX B

SELECT INFORMATION REGARDING THE HOSPITAL SUBSIDIARIES

None of the Hospital subsidiaries is a Member of the Obligated Group. None of these entities has any financial or operating obligation under the Master Trust Indenture or the Bond Indenture, and none of their assets or revenue is committed to the repayment of the Bonds or Obligation No. 2.

[THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX B-1

SELECT INFORMATION REGARDING LAWRENCE HOSPITAL CENTER

Neither NYP/Lawrence Hospital nor its direct parent corporation, NYP Community Services, is a Member of the Obligated Group. Neither of these entities has any financial or operating obligation under the Master Trust Indenture or the Bond Indenture, and none of their assets or revenue is committed to the repayment of the Bonds or Obligation No. 2.

INTRODUCTION

Lawrence Hospital Center (d/b/a NewYork-Presbyterian/Lawrence Hospital) (“NYP/Lawrence”), which owns and operates a 288-bed acute care hospital located in Bronxville, Westchester County, New York, joined the Health Care System in July 2014, becoming the Hospital’s first indirect hospital subsidiary. See “HEALTH CARE SYSTEM STRUCTURE – The Health Care System, Regional Hospital Network and the Supporting Corporations – The Regional Hospitals under the NYP Active Parent Corporations” in Appendix A for additional information.

NYP Community Services is the sole corporate member of NYP/Lawrence and serves as its “active parent” under Article 28 of New York State Public Health Law. As such, NYP Community Services has the power, among other things, to appoint or dismiss management and medical staff, and approve operating and capital budgets, strategic plans, operating policies and changes to organizational documents. NYP Community Services is a direct subsidiary of the Hospital, its sole corporate member.

B-1

SELECT FINANCIAL AND OPERATING INFORMATION

Utilization

The table below sets forth certain utilization data for NYP/Lawrence for the three months ended March 31, 2016 and 2015 and for the fiscal years ended December 31, 2015 and 2014.

UTILIZATION STATISTICS

Three Months ended Year Ended March 31, December 31, 2016 2015 2015 2014 Certified Beds (at end of period) 288 288 288 288 Staffed Beds (at end of period) 187 187 187 187 Discharges1 2,521 2,553 10,203 10,256 Patient Days1 12,454 13,164 47,933 48,678 Staffed Bed Days Available 17,017 16,830 68,255 68,255 Average Length of Stay (days) 4.9 5.2 4.7 4.7 Case Mix Index – Medicare 1.3 1.3 1.3 1.3 Case Mix Index - Hospital wide2 0.9 0.9 1.1 1.1 Average Occupancy (%)3 73.2% 78.2% 70.2% 71.3% Emergency Room Visits 4 9,592 8,561 36,955 36,092 Ambulatory Surgery Procedures 1,214 1,120 5,220 4,992 ______Source: Hospital records.

1 Excludes newborns. 2 Hospital wide CMI is calculated using the payor specific cost weight (APR, AP or MSDRG). 3 Occupancy percentages based on staffed bed days available. 4 Includes only patients seen in the emergency room and not admitted.

Note: Community Services became the active parent of NYP/Lawrence effective July 1, 2014. The amounts presented above for the year ended December 31, 2014 represent the aggregation of the activity for the period January 1, 2014 to June 30, 2014 (the predecessor company period) and for the period July 1, 2014 to December 31, 2014.

B-2 Summary Statements of Operations

The following summary statement of operations for the year ended December 31, 2015 for NYP/Lawrence is derived from the supplementary information included with the Hospital’s audited consolidated financial statements as of and for the years ended December 31, 2015 and 2014. The consolidated financial statements of the Hospital as of December 31, 2015 and 2014 and for the years then ended, together with the report of independent auditors, are included in Appendix C-1 of this Offering Memorandum.

The following summary statement of operations for the year ended December 31, 2014 is derived from the audited consolidated financial statements of NYP/Lawrence as of and for the year ended December 31, 2014.

The unaudited information in the summary statement of operations for the three-month period ended March 31, 2016 is derived from supplementary information included with the unaudited consolidated financial statements of the Hospital that are included in Appendix C-2 of this Offering Memorandum. Such unaudited consolidated information includes all adjustments, consisting of normal recurring accruals, which the Hospital considers necessary for a fair presentation of the financial position and the results of operations for this period. The results for the three-month period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2016. This information should be read in conjunction with the financial statements and related notes included in Appendix C-1 of this Offering Memorandum.

The unaudited information in the summary statement of operations for the three-month period ended March 31, 2015 is derived from the Hospital’s accounting records.

B-3

SUMMARY STATEMENTS OF OPERATIONS (in thousands)

Three Months ended Year Ended March 31, December 31, 2016 2015 2015 2014

Operating Revenues Net patient service revenue, less provision for bad debts $64,434 $56,960 $245,197 $219,682 Other revenue 1,219 1,145 4,251 6,790 Total operating revenues 65,653 58,105 249,448 226,472

Operating Expenses Salaries and wages 32,202 29,922 124,241 115,156 Employee benefits 10,055 8,599 35,244 29,888 Supplies and other expenses 22,744 20,650 92,353 58,657 Interest and amortization of deferred financing fees 110 124 506 584 Depreciation and amortization 2,409 2,253 7,146 7,794 Total operating expenses 67,520 61,548 259,490 212,079

Operating (loss) income (1,867) (3,443) (10,042) 14,393

Investment return 143 575 1,446 154

(Deficiency) excess of revenue over expenses $ (1,724) $ (2,868) $ (8,596) $ 14,547

______

Management’s Discussion and Analysis of Utilization

Three-month period ended March 31, 2016 compared to three-month period ended March 31, 2015

For the three-month period ended March 31, 2016, NYP/Lawrence inpatient discharges decreased 32 cases or 1.3% compared to the same period in 2015.

Emergency Room visits increased 1,031 visits or 12.0% compared to the same period in 2015.

Ambulatory Surgery procedures increased 94 cases or 8.4% compared to the same period in 2015 as a result of services provided by additional physicians in OB/Gyn, orthopedics, and urology.

Year ended December 31, 2015 compared to year ended December 31, 2014

For the year ended December 31, 2015, NYP/Lawrence inpatient discharges decreased 53 cases or 0.5% compared to the same period in 2014.

B-4 Emergency Room visits increased 863 visits or 2.4% compared to the same period in 2014.

Ambulatory Surgery procedures increased 228 cases or 4.6% compared to the same period in 2014 as a result of additional physicians to provide OB/Gyn and orthopedic services.

Management’s Discussion and Analysis of Recent Financial Performance

Three-month period ended March 31, 2016 compared to three-month period ended March 31, 2015

For the three-month period ended March 31, 2016, NYP/Lawrence had an operating loss of $1.9 million, a $1.6 million or 45.8% decrease over the same period in 2015. Deficiency of revenue over expenses was $1.7 million, which represented a $1.1 million or 39.9% decrease over the same period in 2015.

For the three-month period ended March 31, 2016, net patient service revenue, less provision for bad debt, increased $7.5 million or 13.1% over the same period the previous year. This increase was primarily due to realizing higher reimbursement, increased outpatient services, and increased medical group visits as a result of the onboarding of new physicians.

For the three-month period ended March 31, 2016, other revenue increased $0.1 million or 6.5% over the same period in 2015 primarily driven by increased rental income and rebates.

For the three-month period ended March 31, 2016, total operating expenses increased $6.0 million or 9.7% compared with the same period in the previous year. Salaries and benefits increased $3.7 million or 9.7% over the same period in the previous year. This increase is a function of having 81 more full time equivalents resulting from investment in a new Cancer Center.

For the three-month period ended March 31, 2016, supplies and other expenses increased $2.1 million or 10.1% over the previous year. This increase was primarily due to expenses related to medical service agreements with Columbia University and the physician services organization.

Year ended December 31, 2015 compared to year ended December 31, 2014

For the year ended December 31, 2015, NYP/Lawrence had an operating loss of $10.0 million, a $24.4 million or 169.8% decrease over the same period in 2014. Deficiency of revenue over expenses was $8.6 million, which represented a $23.1 million or 159.1% decrease over the same period in 2014.

For the year ended December 31, 2015, net patient service revenue, less provision for bad debt, increased $25.5 million or 11.6% over the same period the previous year. This increase was driven primarily by realizing higher reimbursement, increased outpatient and emergency service activity, and new program revenue from the physician medical group.

For the year ended December 31, 2015, other revenue decreased $2.5 million or 37.4% over the same period the previous year. This decrease was primarily due to lower contributions and grants.

For the year ended December 31, 2015, total operating expenses increased $47.4 million or 22.4% compared with the same period in the previous year. Salaries and benefits increased $14.4 million or 10.0% over the same period in the previous year. This increase is primarily a function of having 52 more full time equivalents resulting from investment in nursing and the medical group physicians for new programs.

B-5 For the year ended December 31, 2015, supplies and other expenses increased $33.7 million or 57.4% over the previous year. This increase was primarily due to incremental malpractice insurance expense over 2014. Insurance expense for the period ended year ended December 31, 2014 experienced a decrease in professional liability expense as a result of a retroactive premium reduction from a captive insurance company. There were also additional medical service agreements with Columbia University attributing to the increase in supplies and other expenses.

B-6 APPENDIX B-2

SELECT INFORMATION REGARDING HUDSON VALLEY HOSPITAL CENTER

Neither NYP/Hudson Valley nor its direct parent corporation, NYP Community Programs, is a Member of the Obligated Group. Neither of these entities has any financial or operating obligation under the Master Trust Indenture or the Bond Indenture, and none of their assets or revenue is committed to the repayment of the Bonds or Obligation No. 2.

INTRODUCTION

Hudson Valley Hospital Center (d/b/a NewYork-Presbyterian/Hudson Valley Hospital) (“NYP/Hudson Valley”), which owns and operates a 128-bed acute care hospital located in Cortlandt Manor, Westchester County, New York, joined the Health Care System in January 2015, as the Hospital’s second indirect hospital subsidiary. See “HEALTH CARE SYSTEM STRUCTURE – The Health Care System, Regional Hospital Network and the Supporting Corporations – The Regional Hospitals under the NYP Active Parent Corporations” in Appendix A for additional information.

NYP Community Programs is the sole corporate member of NYP/Hudson Valley and serves as its “active parent” under Article 28 of New York State Public Health Law. As such, NYP Community Programs has the power, among other things, to appoint or dismiss management and medical staff, and approve operating and capital budgets, strategic plans, operating policies and changes to organizational documents. NYP Community Programs is a direct subsidiary of the Hospital, its sole corporate member.

B-7

SELECT FINANCIAL AND OPERATING INFORMATION

Utilization

The table below sets forth certain utilization data for NYP/Hudson Valley for the three months ended March 31, 2016 and 2015 and for the fiscal year ended December 31, 2015.

UTILIZATION STATISTICS

Three Months ended Year Ended March 31, December 31, 2016 2015 2015 Certified Beds (at end of period) 128 128 128 Staffed Beds (at end of period) 117 117 117 Discharges1 2,050 1,797 7,476 Patient Days1 8,600 7,962 31,389 Staffed Bed Days Available 10,647 10,530 42,705 Average Length of Stay (days) 4.2 4.4 4.2 Case Mix Index – Medicare 1.4 1.4 1.4 Case Mix Index - Hospital wide2 1.3 1.3 1.3 Average Occupancy (%)3 80.8% 75.6% 73.5% Emergency Room Visits 4 8,323 8,115 33,785 Ambulatory Surgery Procedures 1,204 1,160 4,796 ______Source: Hospital records.

Note: Community Programs became the active parent of NYP/Hudson Valley on January 26, 2015. The amounts presented above for the three-months ended March 31, 2015 are derived from accounting records of NYP/Hudson Valley and include the activity for the period January 1, 2015 to January 25, 2015 (the predecessor company period). Also, the amounts presented above for the year ended December 31, 2015 include the activity for the period January 1, 2015 to January 25, 2015 (the predecessor company period).

Summary Statements of Operations

The following summary statement of operations for the year ended December 31, 2015 for NYP/Hudson Valley is derived from the audited consolidated financial statements of NYP/Hudson Valley as of and for the year ended December 31, 2015.

B-8 The unaudited information in the summary statement of operations for the three-month period ended March 31, 2016 is derived from supplementary information included with the unaudited consolidated financial statements that are included in Appendix C-2 of this Offering Memorandum. Such unaudited consolidated information includes all adjustments, consisting of normal recurring accruals, which the Hospital considers necessary for a fair presentation of the financial position and the results of operations for this period. The results for the three-month period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2016. This information should be read in conjunction with the financial statements and related notes included in Appendix C-1 of this Offering Memorandum.

Information with respect to the fiscal year ended December 31, 2014 is not presented, given that NYP/Hudson Valley was not affiliated with the Hospital during this period. The audited consolidated financial statements of NYP/Hudson Valley as of and for the years ended December 31, 2014 and 2013 are on file at www.dacbond.com.

B-9 SUMMARY STATEMENTS OF OPERATIONS (in thousands)

Three Months ended Year Ended March 31, December 31, 2016 2015 2015

Operating Revenues Net patient service revenue, less provision for bad debts $49,469 $42,953 $180,570 Other revenue 1,132 1,313 5,651 Total operating revenues 50,601 44,266 186,221

Operating Expenses Salaries and wages 22,579 19,235 80,585 Employee benefits 5,379 4,952 20,237 Supplies and other expenses 16,018 15,183 62,717 Interest and amortization of deferred financing fees 614 856 2,619 Depreciation and amortization 2,969 3,118 10,216 Total operating expenses 47,559 43,344 176,374

Operating income 3,042 922 9,847

Investment return 88 596 1,295

Excess of revenue over expenses $ 3,130 $ 1,518 $ 11,142

______Note 1: Community Programs became the active parent of NYP/ Hudson Valley Hospital on January 26, 2015. The amounts presented above for the three-months ended March 31, 2015 are derived from accounting records of NYP/Hudson Valley and include the activity for the period January 1, 2015 to January 25, 2015 (the predecessor company period). Also, the amounts presented above for the year ended December 31, 2015 include the activity for the period January 1, 2015 to January 25, 2015 (the predecessor company period).

Note 2: In the summary statement of operations for the year ended December 31, 2015, financial activities for a physician practice with revenues of approximately $1,626,000 and expenses of approximately $1,889,000 for the period from January 1, 2015 through January 25, 2015 are not included. Such amounts, however, are included in the three months ended March 31, 2015.

Management’s Discussion and Analysis of Utilization

Three-month period ended March 31, 2016 compared to three-month period ended March 31, 2015

For the three-month period ended March 31, 2016, NYP/Hudson Valley’s inpatient discharges increased 253 cases or 14.1% compared to the same period in 2015. This is attributable to an investment in additional physicians within orthopedics, internal medicine and bariatrics.

Emergency Room visits increased 208 visits or 2.6% compared to the same period in 2015.

B-10 Ambulatory Surgery procedures increased 44 cases or 3.8% compared to the same period in 2015. This increase is due to increased services provided by the additional surgeons in bariatrics and orthopedics.

Management’s Discussion and Analysis of Recent Financial Performance

Three-month period ended March 31, 2016 compared to three-month period ended March 31, 2015

For the three-month period ended March 31, 2016, NYP/Hudson Valley Hospital had operating income of $3.0 million, a $2.1 million or 229.9% increase over the same period in 2015. Excess of revenues over expenses was $3.1 million, which represented a $1.6 million or 106.2% increase over the same period in 2015.

For the three-month period ended March 31, 2016, net patient service revenue, less provision for bad debt, increased $6.5 million or 15.2% over the same period the previous year. This increase was driven primarily due to higher utilization across most of the inpatient services, realizing higher reimbursement, and increased outpatient activity across most outpatient services.

For the three-month period ended March 31, 2016, other revenue decreased $0.2 million or 13.8% over the same period the previous year.

For the three-month period ended March 31, 2016, total operating expenses increased $4.2 million or 9.7% compared with the same period in the previous year. Salaries and benefits increased $3.8 million or 15.6% over the same period in the previous year. This increase is primarily a function of having 70 more full time equivalents to accommodate increased patient days, emergency services and ambulatory procedures.

For the three-month period ended March 31, 2016, supplies and other expenses increased $0.8 million or 5.5% over the previous year. This increase was primarily due to an increase in expenses related to services and pharmaceuticals. Interest and amortization of deferred financing fees decreased $0.2 million or 28.3%, due to the amortization of the fair value adjustment of the long term debt assessed as of the effective date that NYP Community Programs became the active parent of NYP/Hudson Valley.

B-11 APPENDIX B-3

SELECT INFORMATION REGARDING NEWYORK-PRESBYTERIAN/QUEENS

Neither NYP/Queens nor its direct parent corporation, NYP Community Programs, is a Member of the Obligated Group. Neither of these entities has any financial or operating obligation under the Master Trust Indenture or the Bond Indenture, and none of their assets or revenue is committed to the repayment of the Bonds or Obligation No. 2.

INTRODUCTION

NewYork-Presbyterian/Queens (“NYP/Queens”), which owns and operates a 535-bed acute care hospital located in Flushing, Queens, New York, has been a part of the Health Care System since 1993, and become the Hospital’s third indirect hospital subsidiary in July 2015. See “HEALTH CARE SYSTEM STRUCTURE – The Health Care System, Regional Hospital Network and the Supporting Corporations – The Regional Hospitals under the NYP Active Parent Corporations” in Appendix A for additional information.

NYP Community Programs is the sole corporate member of NYP/Queens and serves as its “active parent” under Article 28 of New York State Public Health Law. As such, NYP Community Programs has the power, among other things, to appoint or dismiss management and medical staff, and approve operating and capital budgets, strategic plans, operating policies and changes to organizational documents. NYP Community Programs is a direct subsidiary of the Hospital, its sole corporate member.

SELECT FINANCIAL AND OPERATING INFORMATION

Utilization

The table below sets forth certain utilization data for NYP/Queens for the three months ended March 31, 2016 and 2015 and for the fiscal years ended December 31, 2015 and 2014.

B-12 UTILIZATION STATISTICS

Three Months Ended Year Ended March 31, December 31, 2016 2015 2015 2014 Certified Beds (at end of period) 535 535 535 535 Staffed Beds (at end of period) 454 454 454 433 Discharges1 6,536 6,594 27,078 27,099 Patient Days1 36,133 37,523 154,676 146,493 Staffed Bed Days Available 41,314 40,860 165,710 158,045 Average Length of Stay (days) 5.5 5.7 5.7 5.4 Case Mix Index – Medicare 1.8 1.8 1.8 1.8 Case Mix Index - Hospital wide2 1.3 1.3 1.3 1.3 Average Occupancy (%)3 87.5% 91.8% 93.3% 92.7% Emergency Room Visits 4 24,620 23,259 97,300 98,551 Outpatient Clinic Visits 33,305 33,611 137,162 140,303 Ambulatory Surgery Procedures 3,376 3,479 14,892 15,090 ______Source: Hospital records.

Summary Statements of Operations

The following summary statements of operations for the years ended December 31, 2015 and 2014 of NYP/Queens are derived from NYP/Queens’ audited consolidated financial statements as of and for the years ended December 31, 2015 and 2014.

The unaudited information in the summary statement of operations for the three-month period ended March 31, 2016 of NYP/Queens is derived from supplementary information included with the unaudited consolidated financial statements that are included in Appendix C-2 of this Offering Memorandum. Such unaudited consolidated information includes all adjustments, consisting of normal recurring accruals, which the Hospital considers necessary for a fair presentation of the financial position and the results of operations for this period. The results for the three-month period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2016. This information should be read in conjunction with the financial statements and related notes included in Appendix C-1 of this Offering Memorandum.

The unaudited information in the summary statement of operations for the three-month period ended March 31, 2015 is derived from the Hospital’s accounting records.

B-13

SUMMARY STATEMENTS OF OPERATIONS (in thousands)

Three Months ended Year Ended March 31, December 31, 2016 2015 2015 2014

Operating Revenues Net patient service revenue, less provision for bad debts $179,349 $164,848 $699,439 $658,632 Other revenue 8,816 8,682 34,503 27,527 Total operating revenues 188,165 173,530 733,942 686,159

Operating Expenses Salaries and wages 90,673 80,222 345,713 328,405 Employee benefits 27,687 27,960 105,423 102,120 Supplies and other expenses 61,450 55,891 246,325 214,014 Interest and amortization of deferred financing fees 2,461 2,513 9,117 9,292 Depreciation and amortization 6,327 6,398 25,420 26,815 Total operating expenses 188,598 172,984 731,998 680,646

Operating (loss) income (433) 546 1,944 5,513

Investment return 2,146 2,650 (541) 7,411

Excess of revenue over expenses $ 1,713 $ 3,196 $ 1,403 $ 12,924

Management’s Discussion and Analysis of Utilization

Three-month period ended March 31, 2016 compared to three-month period ended March 31, 2015

For the three-month period ended March 31, 2016, NYP/Queens’ inpatient discharges decreased 58 cases or 0.8% compared to the same period in 2015. The three-month period ended March 31, 2016, yielded 29 lower obstetrical cases and a decrease is in general surgery and orthopedics volume partially offset by increased medical admissions from the emergency department.

Emergency Room visits increased 1,361 visits or 5.9% compared to the same period in 2015. Of this increase, 70% is attributable to adults and 30% to pediatrics.

Outpatient Clinic visits decreased 306 or 0.9% compared to the same period in 2015 primarily attributable to weather-related closures in late January.

Ambulatory Surgery procedures decreased 103 cases or 3.0% compared to the same period in 2015 as a result of decreased volume in orthopedics, urology and vascular.

Year ended December 31, 2015 compared to year ended December 31, 2014

For the year ended December 31, 2015, NYP/Queens’ inpatient discharges decreased 21 cases or 0.07% compared to the same period in 2014.

B-14 Emergency Room visits decreased 1,251 visits or 1.3% compared to the same period in 2014 primarily attributable to a reduction in pediatric visits due to a milder incidence of respiratory-related illness.

Outpatient Clinic visits decreased 3,141 or 2.2% compared to the same period in 2014 primarily due to decreased volumes in the Family Health Center. In addition, there were decreased volumes in the Eye Center and the OB Center as a result of medical provider vacancies in such clinics.

Ambulatory Surgery procedures decreased 198 cases or 1.3% compared to the same period in 2014 primarily due to a decrease in endoscopy volume as well as a reduction in gynecological surgeries due to surgeon turnover.

Management’s Discussion and Analysis of Recent Financial Performance

Three-month period ended March 31, 2016 compared to three-month period ended March 31, 2015

For the three-month period ended March 31, 2016, NYP/Queens had an operating loss of $0.4 million, a $1.0 million or 179.3% decrease over the same period in 2015. Excess of revenues over expenses was $1.7 million, which represented a $1.5 million or 46.4% decrease over the same period in 2015.

For the three-month period ended March 31, 2016, net patient service revenue, less provision for bad debt, increased $14.5 million or 8.8% over the same period the previous year. This increase was primarily due to realizing higher reimbursement, increased outpatient services and increased medical group visits as a result of new, additional operationalized physician practices.

For the three-month period ended March 31, 2016, other revenue increased $0.1 million or 1.5% over the same period in 2015.

For the three-month period ended March 31, 2016, total operating expenses increased $15.6 million or 9.0% compared with the same period in the previous year. Salaries and benefits increased $10.2 million or 9.4% over the same period in the previous year. This increase is primarily a function of having 232 more full time equivalents resulting from investment in nursing, support/general, financial services and physicians.

For the three-month period ended March 31, 2016, supplies and other expenses increased $5.6 million or 9.9% over the previous year. This increase was primarily due to an increase in expenses related to medical service agreements with Cornell University as well as increased software maintenance and service contract costs.

Year ended December 31, 2015 compared to year ended December 31, 2014

For the year ended December 31, 2015, NYP/Queens had operating income of $1.9 million, a $3.6 million or 64.7 % decrease over the same period in 2014. Excess of revenues over expenses was $1.4 million, which represented a $11.5 million or 89.1% decrease over the same period in 2014.

For the year ended December 31, 2015, net patient service revenue, less provision for bad debt, increased $40.8 million or 6.2% over the same period the previous year. This increase was driven primarily by realizing higher reimbursement.

B-15 For the year ended December 31, 2015, other revenue increased $7.0 million or 25.3% over the same period the previous year. This increase was primarily due to increased contributions/grants and additional rental income.

For the year ended December 31, 2015, total operating expenses increased $51.4 million or 7.5% compared with the same period in the previous year. Salaries and benefits increased $20.6 million or 4.8% over the same period in the previous year. This increase is primarily a function of having 187 more full time equivalents resulting from investment in nursing, support/general, financial services and physicians.

For the year ended December 31, 2015, supplies and other expenses increased $32.3 million or 15.1% over the previous year. This increase was primarily due to an increase in malpractice insurance expense. In addition, there were additional medical service agreements with Cornell University.

B-16

APPENDIX C-1

CONSOLIDATED FINANCIAL STATEMENTS OF THE HOSPITAL AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 AND DECEMBER 31, 2014 AND 2013 WITH REPORTS OF INDEPENDENT AUDITORS

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C ONSOLIDATED F INANCIAL S TATEMENTS AND S UPPLEMENTARY I NFORMATION

The New York and Presbyterian Hospital Years Ended December 31, 2015 and 2014 With Report of Independent Auditors

Ernst & Young LLP

The New York and Presbyterian Hospital

Consolidated Financial Statements and Supplementary Information

Years Ended December 31, 2015 and 2014

Contents

Report of Independent Auditors...... 1

Consolidated Financial Statements

Consolidated Statements of Financial Position ...... 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

Supplementary Information

Consolidating Statement of Financial Position ...... 69 Consolidating Statement of Operations ...... 71

Ernst & Young LLP Tel: +1 212 773 3000 5 Times Square Fax: +1 212 773 6350 New York, NY 10036-6530 ey.com

Report of Independent Auditors

The Board of Trustees The New York and Presbyterian Hospital

We have audited the accompanying consolidated financial statements of The New York and Presbyterian Hospital, which comprise the consolidated statements of financial position as of December 31, 2015 and 2014, 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 Financial Statements

Management is responsible for the preparation and fair presentation of these 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 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 financial statements are free of 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.

1 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 The New York and Presbyterian Hospital at December 31, 2015 and 2014, and the consolidated results of its operations, changes in its net assets, and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating details appearing in conjunction with the consolidated statements of financial position and operations as of and for the year ended December 31, 2015, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. April 29, 2016

A member firm of Ernst & Young Global Limited 2 The New York and Presbyterian Hospital

Consolidated Statements of Financial Position

December 31 2015 2014 (As Adjusted) (In Thousands) Assets Current assets: Cash, cash equivalents and short-term investments: Cash and cash equivalents $ 276,147 $ 217,863 Short-term investments (Note 13) 1,175,753 1,127,485 Total cash, cash equivalents and short-term investments 1,451,900 1,345,348

Patient accounts receivable, less allowance for uncollectibles (2015 – $252,638; 2014 – $225,754) 659,763 605,987 Other current assets 142,535 96,598 Assets limited as to use – current portion (Notes 3, 5, 8, and 13) 43,502 43,502 Professional liabilities insurance recoveries receivable and related deposit – current portion (Note 8) 71,745 66,362 Beneficial interest in net assets held by related organizations – current portion (Note 7) 73,635 78,699 Due from related organizations – net 72 – Total current assets 2,443,152 2,236,496

Assets limited as to use – noncurrent (Notes 3, 5, 8, and 13) 2,359,209 1,762,497 Property, buildings, and equipment – net (Note 4) 3,080,559 2,685,591 Other noncurrent assets – net 20,953 15,056 Professional liabilities insurance recoveries receivable and related deposit – noncurrent (Note 8) 201,672 178,564 Beneficial interest in net assets held by related organizations – noncurrent (Note 7) 1,659,973 1,698,169

Total assets $ 9,765,518 $ 8,576,373

December 31 2015 2014 (As Adjusted) (In Thousands) Liabilities and net assets Current liabilities: Long-term debt – current portion (Note 5) $ 72,300 $ 84,180 Accounts payable and accrued expenses 480,644 473,669 Accrued salaries and related liabilities 256,030 225,226 Pension and postretirement benefit liabilities – current portion (Note 9) 16,822 12,834 Professional liabilities and other – current portion (Note 8) 81,264 72,520 Other current liabilities (Note 2) 192,266 167,013 Due to related organizations – net – 5,697 Total current liabilities 1,099,326 1,041,139

Long-term debt (Note 5) 1,931,625 1,182,204 Professional liabilities and other (Note 8) 437,370 414,301 Pension liability (Note 9) 330,090 321,471 Postretirement benefit liability (Note 9) 50,602 55,815 Deferred revenue (Note 5) 2,266 2,985 Other noncurrent liabilities (Note 2) 398,535 405,424 Total liabilities 4,249,814 3,423,339

Commitments and contingencies (Notes 2, 5, 6, 8, 9, 10, and 12)

Net assets: Unrestricted 3,749,026 3,341,999 Temporarily restricted: NYP/Lawrence Hospital 14,136 18,675 NYP/Hudson Valley 1,543 – NYP/Queens 1,927 1,708 Held by related organizations 1,486,642 1,527,247 Total temporarily restricted 1,504,248 1,547,630 Permanently restricted: NYP/Lawrence Hospital 4,684 4,684 NYP/Hudson Valley 1,675 – NYP/Queens 9,105 9,100 Held by related organizations 246,966 249,621 Total permanently restricted 262,430 263,405 Total net assets 5,515,704 5,153,034 Total liabilities and net assets $ 9,765,518 $ 8,576,373

See accompanying notes.

4 The New York and Presbyterian Hospital

Consolidated Statements of Operations

Year Ended December 31 2015 2014 (As Adjusted) (In Thousands) Operating revenues Net patient service revenue (Note 2) $ 5,739,444 $ 5,043,585 Provision for bad debts (Note 2) (119,286) (70,887) Net patient service revenue, less provision for bad debts 5,620,158 4,972,698 Other revenue (Note 11) 308,059 290,044 Total operating revenues 5,928,217 5,262,742

Operating expenses Salaries and wages 2,716,382 2,419,523 Employee benefits 755,906 686,593 Supplies and other expenses 1,847,697 1,588,439 Interest and amortization of deferred financing fees 77,800 55,556 Depreciation and amortization 304,040 286,753 Total operating expenses 5,701,825 5,036,864

Operating income 226,392 225,878

Investment (loss) return (Note 3) (26,039) 70,296 Excess of revenues over expenses before inherent contribution of unrestricted net assets received in the acquisitions of NYP/Lawrence Hospital and NYP/Hudson Valley 200,353 296,174

Inherent contribution of unrestricted net assets received in the acquisition of NYP/Lawrence Hospital (Note 1) – 82,218 Inherent contribution of unrestricted net assets received in the acquisition of NYP/Hudson Valley (Note 1) 102,818 – Excess of revenues over expenses 303,171 378,392

Other changes in unrestricted net assets: Net asset transfer to related party (824) – Net assets released from restrictions for the purchase of fixed assets 5,397 137 Deed of property, building and equipment to Royal Charter Properties, Inc. (Note 10) (10,748) (16,160) Distributions from New York-Presbyterian Fund, Inc. for the purchase of fixed assets (Note 10) 105,460 83,186 Change in pension and postretirement benefit liabilities to be recognized in future periods (Note 9) 4,571 (231,075) Change in unrestricted net assets $ 407,027 $ 214,480

See accompanying notes.

5 The New York and Presbyterian Hospital

Consolidated Statements of Changes in Net Assets

Beneficial Interest in Temporarily and Permanently Restricted Net Assets Held by Related Organizations Total Temporarily Permanently Plant Specific Endowment Temporarily Permanently Total Net Unrestricted Restricted Restricted Replacement Purpose Earnings Restricted Restricted Assets (In Thousands)

Net assets at January 1, 2014, as adjusted $ 3,127,519 $ 1,311 $ 9,075 $ 748,914 $ 537,623 $ 221,431 $ 1,507,968 $ 245,396 $ 4,891,269 Change in unrestricted net assets, as adjusted 214,480 – – – – – – – 214,480 Inherent contribution of restricted net assets received in the acquisition of NYP/Lawrence Hospital (Note 1) – 18,060 4,684 – – – – – 22,744 Restricted investment return and other, as adjusted – 1,149 25 – – – – – 1,174 Net assets released from restrictions for the purchase of fixed assets – (137) – – – – – – (137) Changes in beneficial interest in net assets held by related organizations (Note 7) – – – 19,128 4,638 (4,487) 19,279 4,225 23,504 Changes in net assets, as adjusted 214,480 19,072 4,709 19,128 4,638 (4,487) 19,279 4,225 261,765 Net assets at December 31, 2014, as adjusted 3,341,999 20,383 13,784 768,042 542,261 216,944 1,527,247 249,621 5,153,034 Change in unrestricted net assets 407,027 – – – – – – – 407,027 Inherent contribution of restricted net assets received in the acquisition of NYP/Hudson Valley (Note 1) – 1,323 1,675 – – – – – 2,998 Restricted investment return and other – 1,297 5 – – – – – 1,302 Net assets released from restrictions for the purchase of fixed assets – (5,397) – – – – – – (5,397) Changes in beneficial interest in net assets held by related organizations (Note 7) – – – (14,888) (1,822) (23,895) (40,605) (2,655) (43,260) Changes in net assets 407,027 (2,777) 1,680 (14,888) (1,822) (23,895) (40,605) (2,655) 362,670 Net assets at December 31, 2015 $ 3,749,026 $ 17,606 $ 15,464 $ 753,154 $ 540,439 $ 193,049 $ 1,486,642 $ 246,966 $ 5,515,704

See accompanying notes.

The New York and Presbyterian Hospital

Consolidated Statements of Cash Flows

Year Ended December 31 2015 2014 (As Adjusted) (In Thousands) Operating activities Change in net assets $ 362,670 $ 261,765 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 304,040 286,753 Amortization of deferred financing costs, deferred revenue, fair value adjustment to debt related to NYP/Lower Manhattan Hospital and NYP/Hudson Valley acquisitions and mortgage discount 3,396 4,325 Distributions from New York-Presbyterian Fund, Inc. for the purchase of fixed assets (105,460) (83,186) Equity in earnings of common collective/commingled trusts and alternative investments 18,856 (29,674) Net realized gains on sales of investment companies (22,981) (8,028) Change in unrealized losses 84,949 9,867 Change in interest in pooled investments held by New York-Presbyterian Fund, Inc. 660 (801) Equity in income from investee (4,840) (3,635) Restricted contributions and other (1,193) (1,537) Deed of property, building and equipment to Royal Charter Properties, Inc. 10,748 16,160 Inherent contribution received in acquisition of NYP/Lawrence Hospital – (104,962) Inherent contribution received in acquisition of NYP/Hudson Valley (105,816) – Net asset transfer to related party 824 – Changes in operating assets and liabilities: Patient accounts receivable (35,545) 60,665 Other assets (44,885) (8,815) Beneficial interest in net assets held by related organizations 43,260 (23,504) Accounts payable and accrued expenses (1,902) 51,582 Accrued salaries and related liabilities 21,959 19,682 Due to/from related organizations – net (5,769) (949) Other liabilities 6,104 43,370 Professional liabilities and other and related insurance recoveries receivable (388) (26,330) Pension and postretirement benefit liabilities 7,394 211,604 Net cash provided by operating activities 536,081 674,352

Investing activities Net purchases of short-term investments (11,090) (186,241) Acquisitions of property, buildings and equipment, net (542,869) (425,650) Net purchases of assets limited as to use (668,091) (2,893) Distribution from investee 4,450 7,460 Cash received in the acquisition of NYP/Lawrence Hospital – 19,967 Cash received in acquisition of NYP/Hudson Valley 10,312 – Cash transferred to Royal Charter Properties, Inc. – (23) Net cash used in investing activities (1,207,288) (587,380)

Financing activities Repayments of long-term debt (96,530) (122,719) Proceeds from issuance of long-term debt 750,000 – Payment of deferred financing costs (29,808) – Restricted contributions and other 1,193 1,537 Net asset transfer to related party (824) – Distributions from New York-Presbyterian Fund, Inc. for the purchase of fixed assets 105,460 83,186 Net cash provided by (used in) financing activities 729,491 (37,996)

Net increase in cash and cash equivalents 58,284 48,976 Cash and cash equivalents at beginning of year 217,863 168,887 Cash and cash equivalents at end of year $ 276,147 $ 217,863

Supplemental disclosure of cash flow information Accruals for the acquisition of property and equipment $ 6,502 $ 4,342 Assets acquired under capitalized lease obligations $ 28,202 $ 13,377

See accompanying notes.

7 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements

December 31, 2015

1. Organization and Basis of Presentation and Significant Accounting Policies

Organization and Basis of Presentation: The accompanying consolidated financial statements include the accounts of The New York and Presbyterian Hospital (NYPH), NYP Community Services, Inc. (Community Services) and NYP Community Programs, Inc. (Community Programs). NYPH is the sole member of Community Services and Community Programs. The reporting entity resulting from the consolidation of these entities is referred to herein as the “Hospital.” All significant intercompany balances and transactions have been eliminated in consolidation.

NYPH is a tax-exempt organization that was incorporated under New York State not-for-profit corporation law. NYPH is a major academic medical center, providing a full range of inpatient and outpatient services, mainly to residents of the New York metropolitan area. The Board of Trustees of the NYPH consists of persons who have first been elected as members of New York- Presbyterian Foundation, Inc. (Foundation, Inc.), a New York State not-for-profit corporation. Foundation, Inc. is related to a number of organizations.

New York-Presbyterian Fund, Inc. (Fund, Inc.) was incorporated under New York State not-for- profit corporation law to solicit, receive and administer funds to be applied exclusively for charitable, educational and scientific purposes, primarily for the benefit of health care related charitable organizations. The directors of Fund, Inc. consist of persons who have first been elected as members of Foundation, Inc. Fund, Inc. is related to NYPH and a number of other organizations.

On July 1, 2014 (the Lawrence Acquisition Date), Community Services acquired Lawrence Hospital Center and Subsidiaries, a 291-bed acute care hospital located in Bronxville, New York, a certified home health agency, a certified hospice program, a bereavement center, a durable medical equipment company and Lawrence Medical Associates, P.C., a State of New York professional corporation, and renamed it NewYork-Presbyterian/Lawrence Hospital (referred to herein as NYP/Lawrence Hospital or Lawrence). Community Services acquired NYP/Lawrence Hospital by means of an inherent contribution, in which no consideration was transferred by Community Services or NYPH. Community Services accounted for this business combination by applying the acquisition method and, accordingly, the inherent contribution received was valued as the excess of the value of NYP/Lawrence Hospital’s assets over liabilities. In determining the inherent contribution received, all assets and liabilities were measured at fair value as of the Lawrence Acquisition Date. The results of Lawrence’s operations have been included in the consolidated financial statements since the Lawrence Acquisition Date.

8 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

The following table summarizes the estimated fair values of NYP/Lawrence Hospital’s assets and liabilities at the Lawrence Acquisition Date (in thousands):

Assets Cash and cash equivalents $ 19,967 Patient accounts receivable, less allowance for uncollectibles 28,149 Other current assets 6,691 Assets limited as to use 123,905 Property, buildings and equipment – net 91,136 Other noncurrent assets – net 18,404 Total assets 288,252

Liabilities Accounts payable and accrued expenses 15,082 Other current liabilities 15,739 Long-term debt 35,616 Pension liability 71,544 Other noncurrent liabilities 45,309 Total liabilities 183,290

Excess of assets over liabilities $ 104,962

Net assets acquired Unrestricted $ 82,218 Temporarily restricted 18,060 Permanently restricted 4,684 Total net assets $ 104,962

Although NYPH and Community Services have been consolidated for financial statement presentation, there may be limitations on the use of one entity’s funds by another member of the consolidated group resulting from the charitable nature of some of the entities or other factors.

9 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

The following table summarizes amounts attributable to NYP/Lawrence Hospital from the Lawrence Acquisition Date through December 31, 2014 that are included in the accompanying 2014 consolidated statement of operations and consolidated statement of changes in net assets (in thousands):

Period From July 1, 2014 to December 31, 2014

Net patient service revenue, less provision for bad debts $ 107,835 Other revenue 3,148 Total operating revenues 110,933 Total operating expenses 112,505 Operating income (1,522) Investment loss (441) Deficiency of revenue over expenses (1,963) Change in pension and postretirement benefit liabilities to be recognized in future periods (24,723) Change in unrestricted net assets $ (26,686)

Change in temporarily restricted net assets $ 615

Change in permanently restricted net assets $ –

On January 26, 2015 (the Hudson Valley Acquisition Date), Community Programs acquired Hudson Valley Hospital Center, Westchester Putnam Health Management System, Inc. and their subsidiaries (collectively referred to herein as NYP/Hudson Valley or Hudson Valley). Hudson Valley consists of a 128-bed acute care hospital located in Cortlandt Manor, Westchester County, New York, a foundation, a physician practice and certain other entities primarily formed to purchase and lease space. Community Programs acquired NYP/Hudson Valley by means of an inherent contribution, in which no consideration was transferred by Community Programs or NYPH. Community Programs accounted for this business combination by applying the acquisition method and, accordingly, the inherent contribution received was valued as the excess of the value of NYP/Hudson Valley’s assets over liabilities. In determining the inherent

10 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued) contribution received, all assets and liabilities were measured at fair value as of the Hudson Valley Acquisition Date. The results of Hudson Valley’s operations have been included in the consolidated financial statements since the Hudson Valley Acquisition Date.

The following table summarizes the estimated fair values of NYP/Hudson Valley’s assets and liabilities at the Hudson Valley Acquisition Date (in thousands):

Assets Cash, cash equivalents and short-term investments $ 48,620 Patient accounts receivable, less allowance for uncollectibles 18,231 Other current assets 4,101 Assets limited as to use 7,299 Property, buildings and equipment – net 136,525 Other noncurrent assets – net 14,151 Total assets 228,927

Liabilities Accounts payable and accrued expenses 15,548 Other current liabilities 12,393 Long-term debt 82,326 Other noncurrent liabilities 12,844 Total liabilities 123,111

Excess of assets over liabilities $ 105,816

Net assets acquired Unrestricted $ 102,818 Temporarily restricted 1,323 Permanently restricted 1,675 Total net assets $ 105,816

11 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

The following table summarizes amounts attributable to NYP/Hudson Valley from the Hudson Valley Acquisition Date through December 31, 2015 that are included in the accompanying 2015 consolidated statement of operations and consolidated statement of changes in net assets (in thousands):

Period From January 26, 2015 to December 31, 2015

Net patient service revenue, less provision for bad debts $ 169,783 Other revenue 5,336 Total operating revenues 175,119 Total operating expenses 165,742 Operating income 9,377 Investment return 1,647 Excess of revenue over expenses 11,024 Other changes in unrestricted net assets 325 Change in unrestricted net assets $ 11,349

Change in temporarily restricted net assets $ 220

Change in permanently restricted net assets $ –

On July 1, 2015 (the Queens Acquisition Date), sole membership of The New York Hospital Medical Center of Queens and its controlled affiliates was transferred to Community Programs. Community Programs became the entity’s active parent and renamed it NewYork- Presbyterian/Queens (referred to herein as Queens or NYP/Queens). NYP/Queens consists of a 535-bed acute care hospital located in Queens County, New York, a physician practice and certain other entities. As NYP/Queens and NYPH were entities under common control as of the Queens Acquisition Date, the change in control was accounted for in a manner similar to a pooling of interests with retrospective adjustment in prior period financial statements for the period in which the entities were under common control. Therefore, the accompanying financial statements as of and for the years ended December 31, 2015 and 2014 reflect the financial

12 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued) position, operations, changes in net assets and cash flows of the Hospital, including NYP/Queens, as if the acquisition had been completed on January 1, 2014; all relevant disclosures have been adjusted.

The following table presents financial statement amounts as of December 31, 2014 (in thousands):

The Hospital, Adjustments as Previously to Include As Reported NYP/Queens Adjusted Current assets: Cash, cash equivalents and short-term investments: Cash and cash equivalents $ 210,271 $ 7,592 $ 217,863 Short-term investments 1,068,740 58,745 1,127,485 Total cash, cash equivalents and short-term investments 1,279,011 66,337 1,345,348 Patient accounts receivable, less allowance for uncollectibles 526,380 79,607 605,987 Other current assets 85,469 11,129 96,598 Assets limited as to use – current portion 32,788 10,714 43,502 Professional liabilities insurance recoveries receivable and related deposit – current portion 63,462 2,900 66,362 Beneficial interest in net assets held by related organizations – current portion 78,699 – 78,699 Total current assets 2,065,809 170,687 2,236,496

Assets limited as to use – noncurrent 1,638,685 123,812 1,762,497 Property, buildings, and equipment – net 2,404,688 280,903 2,685,591 Other noncurrent assets – net 3,309 11,747 15,056 Professional liabilities insurance recoveries receivable and related deposit – noncurrent 178,449 115 178,564 Beneficial interest in net assets held by related organizations – noncurrent 1,698,169 – 1,698,169 Total assets $ 7,989,109 $ 587,264 $ 8,576,373

13 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

The following table presents financial statement amounts as of December 31, 2014 (in thousands):

The Hospital, Adjustments as Previously to Include As Reported NYP/Queens Adjusted Current liabilities: Long-term debt – current portion $ 75,847 $ 8,333 $ 84,180 Accounts payable and accrued expenses 414,289 59,380 473,669 Accrued salaries and related liabilities 212,191 13,035 225,226 Pension and postretirement benefit liabilities – current portion 12,075 759 12,834 Professional liabilities and other – current portion 64,092 8,428 72,520 Other current liabilities 163,857 3,156 167,013 Due to related organizations – net 2,412 3,285 5,697 Total current liabilities 944,763 96,376 1,041,139

Long-term debt 997,368 184,836 1,182,204 Professional liabilities and other 337,775 76,526 414,301 Pension liability 264,807 56,664 321,471 Postretirement benefit liability 31,781 24,034 55,815 Deferred revenue 2,985 – 2,985 Other noncurrent liabilities 314,207 91,217 405,424 Total liabilities 2,893,686 529,653 3,423,339

Net assets: Unrestricted 3,295,196 46,803 3,341,999 Temporarily restricted 1,545,922 1,708 1,547,630 Permanently restricted 254,305 9,100 263,405 Total net assets 5,095,423 57,611 5,153,034 Total liabilities and net assets $ 7,989,109 $ 587,264 $ 8,576,373

14 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

The following table presents financial statement amounts for the year ended December 31, 2014 (in thousands):

The Hospital, Adjustments to as Previously Include As Reported NYP/Queens Adjusted Operating revenues Net patient service revenue $ 4,373,531 $ 670,054 $ 5,043,585 Provision for bad debts (59,465) (11,422) (70,887) Net patient service revenue, less provision for bad debts 4,314,066 658,632 4,972,698 Other revenue 262,517 27,527 290,044 Total operating revenues 4,576,583 686,159 5,262,742

Operating expenses Salaries and wages 2,091,118 328,405 2,419,523 Employee benefits 584,473 102,120 686,593 Supplies and other expenses 1,374,425 214,014 1,588,439 Interest and amortization of deferred financing fees 46,264 9,292 55,556 Depreciation and amortization 259,938 26,815 286,753 Total operating expenses 4,356,218 680,646 5,036,864 Operating income 220,365 5,513 225,878

Investment return 62,885 7,411 70,296 Excess of revenues over expenses before inherent contribution of unrestricted net assets received in the acquisition of NYP/Lawrence Hospital 283,250 12,924 296,174

Inherent contribution of unrestricted net assets received in the acquisition of NYP/Lawrence Hospital 82,218 – 82,218 Excess of revenues over expenses 365,468 12,924 378,392

Other changes in unrestricted net assets: Net assets released from restrictions for the purchase of fixed assets – 137 137 Deed of property, building and equipment to Royal Charter Properties, Inc. (16,160) – (16,160) Distributions from New York-Presbyterian Fund, Inc. for the purchase of fixed assets 83,186 – 83,186 Change in pension and postretirement benefit liabilities to be recognized in future periods (179,247) (51,828) (231,075) Change in unrestricted net assets $ 253,247 $ (38,767) $ 214,480 Change in temporarily restricted net assets $ 37,954 $ 397 $ 38,351 Change in permanently restricted net assets $ 8,909 $ 25 $ 8,934

15 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

Although NYPH and Community Programs have been consolidated for financial statement presentation, there may be limitations on the use of one entity’s funds by another member of the consolidated group resulting from the charitable nature of some of the entities or other factors.

The following table represents unaudited pro forma financial information for the Hospital, assuming the acquisitions of NYP/Lawrence Hospital and NYP/Hudson Valley had taken place on January 1, 2014 (in thousands). The unaudited pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on January 1, 2014, and excludes the unrestricted and restricted contributions received in the acquisitions of NYP/Lawrence Hospital and NYP/Hudson Valley.

Year Ended December 31 2015 2014

Net patient service revenue, less provision for bad debts $ 5,630,945 $ 5,237,775 Other revenue 310,405 298,194 Total operating revenues 5,941,350 5,535,969 Total operating expenses 5,712,457 5,314,685 Operating income 228,893 221,284 Investment (loss) return and other (28,422) 88,506 Excess of revenue over expenses 200,471 309,790 Other changes in unrestricted net assets 103,856 (200,661) Change in unrestricted net assets $ 304,327 $ 109,129

Change in temporarily restricted net assets $ (44,720) $ 21,142

Change in permanently restricted net assets $ (2,650) $ 4,250

16 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

The following is a summary of significant accounting policies:

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, such as estimated uncollectibles for accounts receivable for services to patients, valuation of alternative investments, estimated settlements with third-party payors, professional liabilities and pension and postretirement benefit liabilities, and disclosures of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the amounts of revenue and expenses reported during the period. There is at least a reasonable possibility that certain estimates will change by material amounts in the near term.

Cash and Cash Equivalents and Short-term Investments: The Hospital classifies as cash equivalents all highly liquid financial instruments with a maturity of three months or less when purchased, excluding those held in short-term investments and assets limited as to use. Investments that are readily marketable and that are not classified as assets limited as to use are considered short-term investments and are classified as current assets. Short-term investments are used for cash management purposes and consist of cash and cash equivalents, fixed income and equity securities. At December 31, 2015 and 2014, the Hospital’s cash and cash equivalents include money market funds and interest-bearing accounts that are not fully insured by the U.S. government.

Receivables for Patient Care: Patient accounts receivable for which the Hospital receives payment under cost reimbursement, prospective payment formulae or negotiated rates, which cover the majority of patient services, are stated at the estimated net amounts receivable from payors, which are generally less than the established billing rates of the Hospital. The amount of the allowance for uncollectibles is based on management’s assessment of historical and expected collections, business economic conditions, trends in health care coverage, and other collection indicators. Additions to the allowance for uncollectibles result from the provision for bad debts. Accounts written off as uncollectible are deducted from the allowance for uncollectibles.

Supplies: Supplies, which are determined on the first-in, first-out method, are stated at the lower of cost or market value. Supplies are used in the provision of patient care and are not held for sale.

17 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

Investments and Investment Return: All investments (excluding interests in common collective/commingled trusts and alternative investments) are carried at fair value based on quoted market prices and are classified as trading investments. Common collective/commingled trusts are reported in the accompanying consolidated statements of financial position based upon net asset values derived from the application of the equity method of accounting. See Note 9 for a description of the accounting policies related to assets held in the Hospital’s defined benefit pension plans.

Alternative investment interests generally are structured such that the Hospital holds a limited partnership interest or an interest in an investment management company. The Hospital’s ownership structure does not provide for control over the related investees and the Hospital’s financial risk is limited to the carrying amount reported for each investee, in addition to any unfunded capital commitment.

Individual investment holdings within the alternative investments include non-marketable and market-traded debt, equity and real asset securities and interests in other alternative investments. The Hospital may be exposed indirectly to securities lending, short sales of securities and trading in futures and forward contracts, options and other derivative products. Alternative investments often have liquidity restrictions under which the Hospital’s capital may be divested only at specified times.

Alternative investments are reported in the accompanying consolidated statements of financial position based upon net asset values derived from the application of the equity method of accounting. Financial information used by the Hospital to evaluate its alternative investments is provided by the investment manager or general partner and includes fair value valuations (quoted market prices and values determined through other means) of underlying securities and other financial instruments held by the investee, and estimates that require varying degrees of judgment. The financial statements of the investee companies are audited annually by independent auditors, although the timing for reporting the results of such audits does not coincide with the Hospital’s annual financial statement reporting.

18 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

There is uncertainty in the accounting for alternative investments arising from factors such as lack of active markets (primary and secondary), lack of transparency into underlying holdings and time lags associated with reporting by the investee companies. As a result, there is at least a reasonable possibility that estimates will change in the near term.

Investments received as a gift are recorded at fair value on the date of contribution.

All investment transactions are recorded on the dates such trades take place. Realized gains and losses on sales of marketable securities are based on the average cost method. Interest income is recorded as earned. Dividends are recorded on the ex-dividend date. Investment return is included within the performance indicator in the accompanying consolidated statements of operations, unless restricted by donor or law. Investment returns are reported net of investment expenses.

Assets Limited as to Use: Assets so classified represent investments whose use is restricted for specific purposes under internal and/or external designation, terms of loan agreements and for self-insured professional liabilities. Assets limited as to use which are internally designated for funded depreciation represent amounts that will be expended in future periods for acquisitions of property, buildings and equipment. Assets limited as to use required to meet current liabilities and current year pledges receivable held by NYP/Lawrence Hospital are reported as current assets.

Beneficial Interest in Net Assets Held by Related Organizations: The Hospital recognizes its accumulated interest in the net assets held by Fund, Inc. and The New York Weill Cornell Medical Center Fund, Inc. (WCMC Fund) as beneficial interest in net assets held by related organizations in its consolidated statements of financial position and also recognizes the periodic changes in such interests in its consolidated statements of changes in net assets.

Property, Buildings, and Equipment: Property, buildings, and equipment purchased are recorded at cost and those acquired through gifts and bequests are carried at appraised or fair value established at the date of contribution. The carrying amounts of assets and the related accumulated depreciation are removed from the accounts when such assets are disposed of and any resulting gain or loss is included in operations. Depreciation of buildings, building improvements, and fixed equipment is recorded using the straight-line method over the estimated useful lives of the assets. Depreciation of movable equipment is recorded using the sum-of-the-years-digits method. Equipment under capital lease obligations and leasehold

19 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

improvements is amortized using the straight-line method over the lesser of the estimated useful life of the asset or the lease term. Such amortization is included in depreciation and amortization in the accompanying consolidated statements of operations.

Deferred Financing Costs: Capitalized financing costs are included as a deduction to long- term debt in the accompanying consolidated statements of financial position and are amortized using the effective interest method over the term that the related debt is expected to be outstanding.

Classification of Net Assets: The Hospital separately accounts for and reports donor restricted and unrestricted net assets. Unrestricted net assets are not externally restricted for identified purposes by donors or grantors. Unrestricted net assets include resources that the governing board may use for any designated purpose and resources whose use is limited by agreement between the Hospital and an outside party other than the donor or grantor.

Temporarily restricted net assets are those whose use by the Hospital has been limited by donors to a specific time frame or purpose. When donor restrictions expire, that is, when a time restriction ends or a purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported as net assets released from restrictions. Permanently restricted net assets have been restricted by donors to be maintained in perpetuity.

Net Patient Service Revenue: Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors and others for services rendered and includes estimated retroactive revenue adjustments due to ongoing and future audits, reviews and investigations. Retroactive adjustments are considered in the recognition of revenue on an estimated basis in the period the related services are rendered and are adjusted in future periods as adjustments become known or as years are no longer subject to such audits, reviews and investigations.

Operating Leases: Scheduled base rent increases under operating leases are recognized as rental expense on a straight-line basis over the lease term.

20 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

Program Services: The Hospital’s program services consist of providing health care and related services, including graduate medical education. For the years ended December 31, 2015 and 2014, expenses related to providing these services are summarized as follows (in thousands):

2015 2014 (As Adjusted)

Health care and related services $ 4,583,304 $ 4,093,896 Program support and general services 1,118,521 942,968 $ 5,701,825 $ 5,036,864

The Hospital maintains academic affiliations with two medical colleges: The Columbia University College of Physicians & Surgeons and the Joan and Sanford I. Weill Medical College of Cornell University (collectively, the Schools). Transactions occur on a routine basis between the Hospital and the Schools, based upon arrangements between the parties. Performance Indicator: The accompanying consolidated statements of operations include excess of revenues over expenses as the performance indicator. Excluded from the performance indicator are permanent transfers of assets to or from related entities, net assets released from restrictions for the purchase of fixed assets and change in pension and postretirement benefit liabilities to be recognized in future periods. Transactions deemed by management to be ongoing, major or central to the provision of health care services are reported as operating revenues and operating expenses and included in operating income. Investment return and certain transactions of an infrequent nature are excluded from operating income.

Tax Status: The majority of the entities comprising the Hospital are Section 501(c)(3) organizations exempt from Federal income taxes under Section 501(a) of the Internal Revenue Code. These entities also are exempt from New York State income taxes. NYPH and NYP/Queens are exempt from New York City income taxes.

There are various subsidiaries of the Hospital that are for-profit entities. Taxable operations and the potential for income taxes from these entities are not significant to the accompanying consolidated financial statements.

21 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

Recent Accounting Pronouncements: In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance in ASU 2014-09 supersedes the FASB’s current revenue recognition requirements and most industry-specific guidance. The FASB subsequently issued ASU 2015-14, Revenue from Contracts with Customers, which deferred the effective dates of ASU 2014-09. Based on ASU 2015-04, the provisions of ASU 2014-09 are effective for the Hospital for annual reporting periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods beginning after December 15, 2016. The Hospital has not completed the process of evaluating the impact of ASU 2014-09 on the consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern, that will require management of public and nonpublic companies to evaluate and disclose where there is substantial doubt about an entity’s ability to continue as a going concern. The standard is effective for annual periods ending after December 15, 2016. Early application is permitted. The Hospital does not believe this standard will have a significant effect on its financial reporting.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires debt issuance costs related to a recognized debt liability to be presented in the statements of financial position as a direct deduction from the corresponding debt liability rather than as an asset. This change will make the presentation of debt issuance costs consistent with the presentation of debt discounts or premiums. The recognition and measurement guidance for debt issuance costs is not affected. The provisions of ASU 2015-03 are effective for the Hospital for annual reporting periods beginning after December 15, 2015, with retrospective application to all periods presented. Early application is permitted. The Hospital has adopted ASU 2015-03 for the year ended December 31, 2015. As a result, approximately $60.5 million of net deferred financing costs at December 31, 2015 ($35.3 million at December 31, 2014) are reflected in the accompanying consolidated statements of financial position as a component of long-term debt (see Note 5).

22 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

In May 2015, the FASB issued ASU 2015-07, Disclosures for Investments in Certain Entities that Calculate Net Asset Value Per Share (or its Equivalent). ASU 2015-07 removes the requirement to categorize within the fair value hierarchy investments for which fair values are estimated using the net asset value practical expedient provided by Accounting Standards Codification 820, Fair Value Measurement. Disclosures about investments in certain entities that calculate net asset value per share are limited under ASU 2015-07 to those investments for which the entity has elected to estimate the fair value using the net asset value practical expedient. ASU 2015-07 is effective for the Hospital for fiscal years beginning after December 15, 2016, with retrospective application to all periods presented. Early application is permitted. The Hospital has adopted ASU 2015-07 for the year ended December 31, 2015. As a result, approximately $979.9 million of defined benefit pension plan assets measured at net asset value at December 31, 2015 ($884.5 million at December 31, 2014) are not categorized within the fair value hierarchy in Note 13.

In April 2015, the FASB issued ASU 2015-05, Intangibles – Goodwill and Other – Internal- Use Software. The ASU requires the Hospital to determine whether a software contracting arrangement contains a software license element. If so, the related fees paid are accounted for consistent with the acquisition of other software licenses; if not, the arrangement is accounted for as a service contract. The provisions of ASU 2015-05 are effective for the Hospital for annual periods beginning after December 15, 2015, and interim periods in annual periods beginning after December 15, 2016. An entity adopting the ASU may apply it either prospectively to new cloud computing arrangements or retrospectively. The Hospital has elected to adopt ASU 2015-05 prospectively as of January 1, 2016 and, therefore, it has no effect on the accompanying consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which will require lessees to report most leases on their statements of financial position, but recognize expenses on their income statements in a manner similar to current accounting. The guidance also eliminates current real estate-specific provisions. Lessors in operating leases continue to recognize the underlying asset and recognize lease income on either a straight-line basis or another systematic and rational basis. The provisions of ASU 2016-02 are effective for the Hospital for annual periods beginning after December 15, 2018, and interim periods in the following year. Early adoption is permitted. The Hospital has not completed the process of evaluating the impact of ASU 2016-02 on its consolidated financial statements.

23 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

2. Net Patient Service Revenue

Net Patient Service Revenue and Accounts Receivable

The Hospital recognizes patient service revenue associated with services provided to patients who have third-party payor coverage on the basis of contractual or formula-driven rates for the services rendered (see description of third-party payor payment programs below). For uninsured and under-insured patients who do not qualify for charity care, the Hospital recognizes revenue on the basis of charges. Under the charity care policy, a patient who has no insurance or is under- insured and is ineligible for any government assistance program has his or her bill reduced to (1) the lesser of charges or the Medicaid diagnostic-related group for inpatient and (2) a discount from rates of the highest volume commercial payor for outpatient. The effect of this policy on the consolidated financial statements is lower net patient service revenue, as the discount is considered an allowance.

Patient service revenue for the years ended December 31, 2015 and 2014, net of contractual allowances and discounts (but before the provision for bad debts), recognized from these major payor sources based on primary insurance designation, is as follows (in thousands):

2015 2014 (As Adjusted)

Third-party payors $ 5,642,293 $ 4,948,306 Self-pay 97,151 95,279 $ 5,739,444 $ 5,043,585

Accounts receivable is recorded at its expected net realizable value. In evaluating the collectibility of accounts receivable, the Hospital analyzes its past history and identifies trends for each of its major payor sources of revenue to estimate the appropriate allowance for doubtful accounts and provision for bad debts. Management regularly reviews data about these major payor sources of revenue in evaluating the sufficiency of the allowance for doubtful accounts.

The allowance for doubtful accounts for self-pay patients was approximately 44% and 47% of self-pay accounts receivable as of December 31, 2015 and 2014, respectively. The Hospital did not experience significant changes in write-off trends and did not change its charity care policy in 2015 or 2014.

24 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

2. Net Patient Service Revenue (continued)

Third-Party Payment Programs

The Hospital has agreements with third-party payors that provide for payment for services rendered at amounts different from its established rates. A summary of the payment arrangements with major third-party payors follows:

Medicare Reimbursement: Hospitals are paid for most Medicare patient services under national prospective payment systems and other methodologies of the Medicare program for certain other services. Federal regulations provide for adjustments to current and prior years’ payment rates, based on industry-wide and Hospital-specific data.

Non-Medicare Reimbursement: In New York State, hospitals and all non-Medicare payors (including Medicare and Medicaid managed care plans), except Medicaid, workers’ compensation and no-fault insurance programs, negotiate hospitals’ payment rates. If negotiated rates are not established, payors are billed at hospitals’ established charges. Medicaid, workers’ compensation and no-fault payors pay hospital rates promulgated by the New York State Department of Health. Payments to hospitals for Medicaid, workers’ compensation and no-fault inpatient services are based on a statewide prospective payment system, with retroactive adjustments. Outpatient services also are paid based on a statewide prospective system. Medicaid rate methodologies are subject to approval at the Federal level by the Centers for Medicare and Medicaid Services (CMS), which may routinely request information about such methodologies prior to approval. Revenue related to specific rate components that have not been approved by CMS is not recognized until the Hospital is reasonably assured that such amounts are realizable. Adjustments to the current and prior years’ payment rates for those payors will continue to be made in future years.

25 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

2. Net Patient Service Revenue (continued)

The current Medicaid, Medicare and other third-party payor programs are based upon extremely complex laws and regulations that are subject to interpretation. Non-compliance with such laws and regulations could result in fines, penalties and exclusion from such programs. The Hospital is not aware of any allegations of non-compliance that could have a material adverse effect on the accompanying consolidated financial statements and believe that it is in compliance with all applicable laws and regulations. During 2015 and 2014, the Hospital revised estimates made in prior years to reflect the passage of time and the availability of more recent information, such as settlement activity, associated with the related payment items. For the years ended December 31, 2015 and 2014, the net effect of the Hospital’s revisions to prior year estimates resulted in net patient service revenue increasing by approximately $27.5 million and $63.0 million, respectively. There are various proposals at the federal and state levels that could, among other things, significantly reduce payment rates or modify payment methods. The ultimate outcome of these proposals and other market changes, including the potential effects of health care reform that has been enacted by the federal government, cannot be determined presently. Future changes in the Medicare and Medicaid programs and any reduction of funding could have an adverse impact on the Hospital. Additionally, certain payors’ payment rates for various years have been appealed by the Hospital. If the appeals are successful, additional income applicable to those years could be realized.

The Hospital grants credit without collateral to its patients, most of whom are insured under third-party payor agreements. Significant concentrations of patient accounts receivable at December 31, 2015 and 2014, are as follows:

2015 2014 (As Adjusted)

Medicare 19% 18% Medicaid 16 17 Commercial carriers and health maintenance organizations 55 54 Self-pay patients 10 11 100% 100%

26 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

2. Net Patient Service Revenue (continued)

Revenue from the Medicare and Medicaid programs accounted for approximately 47% and 54% of the Hospital’s net patient service revenue for the years ended December 31, 2015 and 2014, respectively.

Uncompensated Care and Community Benefit Expense

The Hospital’s commitment to community service is evidenced by services provided to special populations such as minorities, the elderly, persons with disabilities, the mentally ill, persons with AIDS and poor persons (Special Populations) and benefits provided to the broader community. Services provided to such Special Populations include services provided to persons who cannot afford health care because of inadequate resources and who are uninsured or underinsured.

The Hospital provides quality medical care regardless of race, creed, sex, sexual orientation, national origin, handicap, age or ability to pay. Although reimbursement for services rendered is critical to the operations and stability of the Hospital, the Hospital recognizes that not all individuals have the ability to pay for medically necessary services and, furthermore, the Hospital’s mission is to serve the community with respect to health care. Therefore, in keeping with the Hospital’s commitment to serve members of the community, the Hospital provides uncompensated care through: medical care to the indigent for free or discounted prices (charity care/financial aid) and care to persons covered by governmental programs that pay the Hospital less than the full cost of services provided. In addition, the Hospital provides significant community benefit activities which include wellness programs, community education programs, health screenings and a broad variety of community support services, health professionals’ education, school based programs, and subsidized health services.

27 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

2. Net Patient Service Revenue (continued) associated with providing charity care. Funds received to offset bad debt and charity services totaled approximately $51.7 million and $62.9 million for the years ended December 31, 2015 and 2014, respectively, including approximately $49.5 million and $58.1 million, respectively, from the indigent care pool under the New York State Medicaid program. The charity care component of the indigent care pool payments (approximately 55% for 2015 and 66% for 2014) is estimated utilizing a ratio of charity care charges to total charity care and bad debt charges applied to the indigent care pool reimbursement.

Costs related to uncompensated care and community benefit activities are summarized for the years ended December 31, 2015 and 2014 as follows (in thousands):

2015 2014

Charity care, net(a) $ 40,378 $ 37,307 Means-tested programs(b) 365,251 330,756 Other community benefits(c)(d) 435,683 369,771 Total charity care and other community benefits $ 841,312 $ 737,834

Charity care, at cost, and means-tested programs include the following (and exclude losses incurred on providing services to Medicare patients):

(a) Charity Care: As part of its charity care and financial aid policy, the Hospital obtains and uses additional financial information for uninsured or under-insured patients who have not supplied the requisite information to qualify for charity care. The additional information obtained is used by the Hospital to determine whether to qualify patients for charity care and/or financial aid in accordance with the Hospital’s policies. The Hospital makes available free care programs for qualifying patients under its charity care and financial aid policy. During the registration, billing and collection process, a patient’s eligibility for free care funds is determined. For patients who do not receive free care and who are determined to be eligible for charity care in the form of discounted medical services under the Hospital’s charity care and financial aid policy, care given but not paid for is classified as charity care. For patients who were determined by the Hospital to have the ability to pay but did not, the uncollected amounts are classified as provision for bad debt (approximately $119.3 million in 2015 and $70.9 million in 2014). Distinguishing between bad debt and charity care is difficult, in part because services are often rendered prior to full evaluation of a patient’s ability to pay.

28 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

2. Net Patient Service Revenue (continued)

Annually, the Hospital accrues for potential losses that meet the definition of charity care (including free and discounted medical care) allowances.

(b) Means-Tested Programs: Community benefits include losses incurred in providing services to patients who participate in certain public health programs such as Medicaid. Payments received by the Hospital for patient services provided to Medicaid program participants are less than the actual cost of providing such services. Therefore, to the extent Medicaid payments are less than the cost of care provided to Medicaid patients, the uncompensated cost of that care is considered to be a community benefit.

Other community benefits include the following:

(c) Community Health Improvement Services and Community Benefit Operations: The Hospital is committed to serving the vast array of neighborhoods comprising its service area and recognizes the importance of preserving a local community focus to effectively meet community need. The Hospital adheres to a single standard for assessing and meeting community need, while retaining a geographically focused approach for soliciting community participation and involvement and providing community outreach.

The Hospital has fostered continued community participation and outreach activities through linkages with numerous community-based groups. Community health improvement services and related operations include clinical services, screening and exams, and other education or support services in areas such as the following: asthma, behavioral health, cancer, children’s health, community-based outreach and health education, digestive diseases, emergency services/emergency preparedness, heart disease, HIV/AIDS, neuroscience, vascular disease and women’s health (a complete description of each service can be found in the Hospital’s annual community service plan).

(d) Health Professions Education: Helping to prepare future health care professionals is a distinguishing characteristic of major academic not-for-profit teaching hospitals and constitutes a significant community benefit. The Hospital has a world renowned residency program and trains approximately 1,700 residents each year in all clinical programs (the programs are in two medical schools and cover 147 accredited graduate medical education programs). The Hospital is committed to offering quality graduate medical education programs as part of its education mission.

29 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

3. Investments and Assets Limited as to Use

The composition and reported value of assets limited as to use, excluding beneficial interest in net assets held by related organizations (see Note 7), at December 31, 2015 and 2014, consist of the following (in thousands):

2015 2014 (As Adjusted)

Marketable securities, carried at fair value (Note 13) $ 1,271,075 $ 1,109,493

Investments accounted for using the equity method: Equities and bonds held in common collective/commingled trusts: U.S. equities 320,125 82,306 Corporate bonds 6,884 5,195 Non-U.S. equities 316,029 124,291 Non-U.S. government bonds 2,879 12,302 Total equities and bonds held in common collective/commingled trusts 645,917 224,094

Pooled investments held by Fund, Inc. 21,863 22,523 Hedge funds 202,350 197,731 Private equity 162,131 154,933 Private real assets 97,156 94,311 Total investments accounted for using the equity method 1,129,417 693,592 Pledges receivable – net 2,219 2,914 Total assets limited as to use 2,402,711 1,805,999 Less current portion 43,502 43,502 Assets limited as to use – noncurrent $ 2,359,209 $ 1,762,497

See Note 13 for a description of the common collective/commingled trusts, hedge funds, private equity and private real asset categories.

30 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

3. Investments and Assets Limited as to Use (continued)

Assets limited to use at December 31, 2015 and 2014 are limited to the following uses (in thousands):

2015 2014 (As Adjusted) Funded depreciation $ 956,902 $ 952,102 Funds held under loan agreements 522,834 646,366 Other Board designated funds (Note 5) 742,599 13,423 Employee benefit funds 30,561 30,960 Funded self-insurance (professional liabilities) (Note 8) 89,818 100,620 Investments held by captive insurance company (Note 8) 26,856 26,604 Secured letters of credit 3,541 3,465 Donor restricted 29,600 32,459 $ 2,402,711 $ 1,805,999

The funded depreciation balance includes approximately $465.5 million and $514.3 million at December 31, 2015 and December 31, 2014, respectively, in funds required to be designated for capital projects under a mortgage issued in 2013 (see Note 5).

Funds held under loan agreements are for the following purposes (in thousands):

2015 2014 (As Adjusted) Construction escrow (Note 5) $ 378,073 $ 488,894 Mortgage reserve funds 126,950 139,349 Escrow fund (Note 5) 3,776 1,002 Capital reserve fund 6,758 6,396 Debt service fund 7,277 8,687 Capital lease agreements (Note 5) – 142 Other – 1,896 $ 522,834 $ 646,366

31 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

3. Investments and Assets Limited as to Use (continued)

Investment (loss) return for the years ended December 31, 2015 and 2014 consisted of the following (in thousands):

2015 2014 (As Adjusted) Interest and dividend income $ 55,445 $ 41,660 Net realized gains on sales of investments 22,981 8,028 Equity in earnings of common collective/commingled trusts and alternative investment companies (18,856) 29,674 Change in interest in pooled investments held by Fund Inc. (660) 801 Net change in unrealized gains and losses (84,949) (9,867) $ (26,039) $ 70,296

4. Property, Buildings, and Equipment

A summary of property, buildings, and equipment at December 31, 2015 and 2014 follows (in thousands):

2015 2014 (As Adjusted)

Land and land improvements $ 226,882 $ 225,878 Buildings, building improvements, and fixed equipment 3,508,488 3,296,469 Movable equipment 979,536 967,461 Leasehold improvements 13,890 5,762 4,728,796 4,495,570 Less accumulated depreciation and amortization 2,210,732 2,160,853 2,518,064 2,334,717 Construction-in-progress 562,495 350,874 $ 3,080,559 $ 2,685,591

Substantially all property, buildings and equipment have been pledged as collateral under various debt agreements (see Note 5).

At December 31, 2015 and 2014, assets recorded in connection with capital leases aggregated approximately $150.5 million and $143.0 million, respectively, with accumulated amortization aggregating approximately $106.8 million and $111.1 million, respectively.

The Hospital leases certain buildings from Royal Charter Properties – Westchester, Inc., a related entity (see Note 10).

32 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt

A summary of long-term debt at December 31, 2015 and 2014 follows (in thousands):

2015 2014 (As Adjusted)

The New York and Presbyterian Hospital taxable bonds, Series 2015(a) $ 750,000 $ – FHA Section 242 insured mortgage loan – 1998 – Downtown Campus(b) 218,404 242,591 FHA Section 242 insured mortgage loans – 2004 – Uptown Campus(c) – 14,743 FHA Section 241 insured mortgage loan – 2007(d) 237,341 246,427 Secured hospital revenue refunding bonds – 2011 – Lower Manhattan Campus(e) 26,555 29,660 FHA Section 241 insured mortgage loan – 2013(f) 474,359 486,076 Series 1998 bonds payable – NYP/Lawrence Hospital(g) 10,040 11,165 Term loan payable – NYP/Lawrence Hospital(h) 22,005 23,761 FHA Section 242 insured mortgage loan – 1993 – NYP/Hudson Valley (i) 5,650 – FHA Section 241 insured mortgage loan – 2007 – NYP/Hudson Valley (j) 61,660 – FHA Section 241 insured mortgage loan – 1999 – NYP/Queens(k) 34,831 37,334 FHA Section 241 insured mortgage loan – 2007 – NYP/Queens(l) 152,091 156,655 Capital leases(m) 60,067 51,053 Other 787 479 2,053,790 1,299,944 Add unamortized fair value adjustment related to acquisitions 10,676 1,699 Less deferred financing costs, net of accumulated amortization (2015 – $18,628; 2014 – $13,476) 60,541 35,259 Less current portion, net of current deferred financing costs (2015 – $4,796; 2014 – $4,138) 72,300 84,180 Long-term portion $ 1,931,625 $ 1,182,204

33 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt (continued)

(a) The New York and Presbyterian Hospital Taxable Bonds, Series 2015: In February 2015, NYPH issued $750.0 million in unsecured, taxable bonds. The bonds bear interest at a fixed rate of 4.02%, payable semi-annually. The bonds have a final maturity date of August 1, 2045, at which time the full principal balance will be repaid. NYPH is the only member of the obligated group for this debt. NYPH incurred approximately $29.8 million of financing costs in connection with the issuance of the bonds that will be amortized over the life of the bonds using the effective interest method. Bond proceeds that have not been expended are included in assets limited as to use.

(b) FHA Section 242 Insured Mortgage Loan – 1998: NYPH’s original mortgage agreement with the Dormitory Authority of the State of New York (DASNY) is insured under the provisions of the U.S. Department of Housing and Urban Development Federal Housing Agency (FHA) Section 242 mortgage insurance program. During 2005, NYPH received $8.4 million from DASNY in relation to a release of assets held by DASNY in reserve under the mortgage note and recorded the receipts as an increase to NYPH’s deferred revenue balance in the accompanying consolidated statement of financial position. The deferred revenue is being amortized over the remaining life of the mortgage using the effective interest method.

In August 2009, NYPH completed the final endorsement of the FHA Section 242 Insured Mortgage Loan – 1998. The remaining amortization schedule was finalized with principal and interest payments due through July 1, 2025. The terms of the mortgage were amended and, effective September 1, 2009, interest was to be paid at a fixed annual rate of 5.99% of the unpaid balance until the loan was fully paid. As a result of the final endorsement, DASNY released to NYPH an additional $40.8 million of unused proceeds from the initial mortgage loan and NYPH received approximately $2.9 million from the IRS related to prior years’ bond proceeds arbitrage, all used for certain capital projects and as additional equity for the December 2010 transaction (see below). Additionally, the final endorsement resulted in NYPH’s debt escrow fund (approximately $12.5 million at final endorsement) being released for partial payment of the debt obligation at various future intervals.

34 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt (continued)

loan, effective December 15, 2010, to a fixed rate of 4.22% over the remaining term and required NYPH to make an equity contribution of $23.8 million ($15.1 million of the equity contribution was made, with the remaining balance of amounts held in assets limited as to use as part of the final endorsement). The equity contribution is being amortized over the remaining life of the mortgage using the effective interest method and has a balance that is a reduction to long-term debt, net of accumulated amortization, of approximately $10.4 million and $12.5 million at December 31, 2015 and 2014, respectively. All other material terms of the mortgage remained the same.

(c) FHA Section 242 Insured Mortgage Loans – 2004: NYPH had two mortgage loans, with identical terms most recently amended in 2004, issued through DASNY. The two mortgage loans were insured under the provisions of the FHA Section 242 mortgage insurance program. The mortgage loans were payable monthly through April 2015 and carried an interest rate of 7.5%. In connection with a 1998 revision to one of the original mortgage notes, deferred revenue with an initial balance of $29.5 million was recognized, reflecting the present value of the interest rate savings that were advanced to NYPH upon creation of the 1998 mortgage. The deferred revenue was fully amortized as of April 2015. (d) FHA Section 241 Insured Mortgage Loan – 2007: In September 2007, DASNY issued $296.1 million of The New York and Presbyterian Hospital FHA-Insured Mortgage Hospital Revenue Bonds, Series 2007. A portion of the proceeds of the bonds was used to fund a mortgage loan from DASNY to NYPH. The maximum principal amount of $278.5 million incorporated a discount of $5.4 million. The mortgage is insured under the provisions of the FHA Section 241 mortgage insurance program. The mortgage bore interest at a rate of 6.5% through May 31, 2010 and 4.9% through July 31, 2012 (in addition, NYPH paid an incremental rate of 1.6% until final endorsement). On August 7, 2012, NYPH completed final endorsement and the terms of the mortgage were amended and, effective August 1, 2012, interest was to be paid at a rate of 4.55%. The remaining amortization schedule was finalized, with principal and interest payments through June 1, 2035. In addition, the final endorsement resulted in the termination of NYPH’s letter of credit with a bank that provided security for equity contributions required under the plan of financing.

35 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt (continued)

In December 2012, DASNY assigned NYPH’s mortgage loan to Prudential. In connection therewith, the DASNY bonds were refunded and Prudential issued new Government National Mortgage Association securities to fund NYPH’s mortgage. This transaction resulted in a reduction in the interest rate on the mortgage loan to a fixed rate of 2.74% over the remaining term of the loan, effective December 13, 2012. All other material terms of the mortgage remained the same.

(e) Secured Hospital Revenue Refunding Bonds – 2011: In March 2011, NewYork- Presbyterian/Lower Manhattan Hospital (NYP/LMH) issued $32.6 million of Secured Hospital Revenue Refunding Bonds – 2011 through DASNY. The bonds bear interest at a fixed interest rate of 5%, payable semi-annually, with a final maturity date of February 15, 2022. NYP/LMH has granted to DASNY, with certain permitted exceptions, a security interest in gross receipts and certain fixtures, furnishings and equipment that secure the payment of the debt. The bonds are further secured by amounts, if required, that would be payable under a service contract between DASNY and the State of New York.

(f) FHA Section 241 Insured Mortgage Loan – 2013: In September 2013, NYPH executed a $500.0 million mortgage note with Prudential. The mortgage note bears interest at a fixed interest rate of 4.5%, payable semi-annually. The loan has a final maturity of September 1, 2038, principal payable annually. The proceeds of the loan were issued to a construction escrow account and are to be used to construct an ambulatory care center and for related costs (see Note 3). NYPH incurred approximately $8.5 million of financing costs in connection with the issuance of the loan that will be amortized over the life of the loan.

(g) Series 1998 Bonds Payable: In June 1998 and December 1998, on behalf of NYP/Lawrence, the County of Westchester Industrial Development Agency issued $10.7 million of Series 1998A bonds and $10.8 million of Series 1998B bonds. The Series 1998A bonds mature at varying dates through January 1, 2018, with fixed interest rates ranging from 3.80% to 5.13% payable semiannually. The Series 1998B bonds mature at varying dates through January 1, 2028, with fixed interest rates ranging from 4.20% to 5.00% payable semiannually.

(h) Term Loan Payable: In September 2013, Lawrence signed a term loan agreement with TD Bank, NA. The initial principal amount of the loan was $25.7 million to be used for the construction of a new three-story building to house a new surgery and oncology center and a six-room operating suite on Lawrence’s property. The loan is payable over 144 months. Interest is charged on the amount outstanding at a fixed rate of 4.29% per annum.

36 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt (continued)

(i) FHA Section 242 Insured Mortgage Loan – 1993: In October 1993, Hudson Valley entered into a mortgage note to borrow $22.7 million. The mortgage note is insured under the provisions of the FHA Section 242 mortgage insurance program and is secured by substantially all of the property, buildings, equipment and gross receipts of Hudson Valley. The proceeds of the mortgage were used to finance an expansion and renovation project at Hudson Valley. The mortgage note called for monthly payments of principal and interest at 6.35% and was scheduled to mature in November 2020. On August 6, 2007, the mortgage note was modified to reduce the interest rate to 5.38% and accelerate the maturity date to October 1, 2019. In 2011, DASNY assigned the mortgage to Prudential. This transaction resulted in a reduction in the interest rate of the mortgage loan, effective August 1, 2011, to a fixed interest rate of 2.6% over the remaining term. All other material terms of the mortgage remained the same.

(j) FHA Section 241 Insured Mortgage Loan – 2007: In October 2007, Hudson Valley entered into a supplemental mortgage note with DASNY to borrow up to $71.7 million. The supplemental mortgage note is insured by the FHA under the provisions of the Section 241 mortgage insurance program. The supplemental loan is a second mortgage to Hudson Valley’s Section 242 loan described in (i) above. The supplemental mortgage note called for payments of interest only, at the rate of 6.2%, through February 28, 2010. Commencing March 1, 2010, the interest rate was reduced to 5.0% and the note calls for monthly payments of principal and interest in the amount of $0.4 million through March 1, 2035.

(k) FHA Section 241 Insured Mortgage Loan – 1999: In August 1999, Queens entered into a mortgage agreement with DASNY. The mortgage is insured by the FHA under the provisions of the Section 241 mortgage insurance program. The loan is secured by a first mortgage lien on certain real and personal property of NYP/Queens. Effective December 7, 2006, the loan was subject to a fixed interest rate of 5.6%. In 2007, the loan was final endorsed by the FHA, at which time the remaining amortization schedule was finalized with principal payments due through October 2026. In December 2010, the DASNY bonds underlying the loan were defeased and Prudential issued new Government National Mortgage Association securities. In connection therewith, DASNY assigned Queens’ mortgage to Prudential. The transaction resulted in a reduction in the interest rate of the mortgage loan, effective December 2, 2010, to a fixed rate of 4.1% over the remaining term. All other material terms of the mortgage remained the same.

37 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt (continued)

(l) FHA Section 241 Insured Mortgage Loan – 2007: In February 2007, DASNY issued $188.7 million of The New York Hospital Medical Center of Queens FHA-Insured Mortgage Hospital Revenue Bonds, Series 2007, a portion of the proceeds of which were used to provide a mortgage loan, insured by the FHA under Section 241 of the mortgage insurance program, to Queens in the maximum principal amount of $175.0 million. The loan is secured by a second mortgage lien on certain real and personal property of Queens, including the facilities constructed with the proceeds of the loan. The mortgage bore interest at a rate of 6.2% through July 31, 2010. Commencing September 1, 2010, the mortgage requires monthly principal and interest payments through August 2035 at an interest rate not to exceed 4.95% (the interest rate will be determined upon final endorsement).

Estimated principal payments under all long-term debt (reflective of amounts obligated to date) for the next five years and thereafter, excluding capital leases, consist of the following (in thousands):

2016 $ 58,092 2017 60,038 2018 62,576 2019 64,101 2020 65,497 Thereafter 1,683,419

Pursuant to debt agreements, NYPH, NYP/Lawrence Hospital, NYP/Hudson Valley and NYP/Queens are required to maintain certain debt service funds, including mortgage reserve funds. In addition, NYPH, NYP/Lawrence Hospital, NYP/Hudson Valley and NYP/Queens are required to maintain certain working capital, debt service coverage and other financial ratios and financial conditions, and to obtain approvals to incur additional debt above specified levels if certain covenant requirements are not met. At December 31, 2015 and 2014, NYPH, NYP/Hudson Valley and NYP/Queens were in compliance with the financial covenants. At December 31, 2014, NYP/Lawrence was in compliance with the financial covenants. As of December 31, 2015, NYP/Lawrence was not in compliance with certain of the financial covenants of the Series 1998A and 1998B bonds. This noncompliance provides the trustee for the bonds with the ability to accelerate the repayment terms. In April 2016, Lawrence obtained a commitment from a commercial bank to refinance the Series 1998A and 1998B bonds over a

38 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt (continued) long-term basis. Accordingly, the principal payments due for the Series 1998A and 1998B bonds are classified in the accompanying consolidated statement of financial position at December 31, 2015 based on the scheduled maturity of the related bonds. NYP/Lawrence expects to fully repay the bonds in May 2016. At December 31, 2015, NYP/Lawrence was not in compliance with certain of the financial covenants of its term loan agreement. NYP/Lawrence received a letter from the commercial bank which waived compliance with certain financial covenants for all measurement periods during the year ended December 31, 2015. The commercial bank also committed to not accelerate repayment of the debt prior to January 1, 2017 should similar instances of noncompliance continue at any measurement period during the year ending December 31, 2016. Accordingly, principal payments required under the loan are classified in the accompanying consolidated statements of financial position based on the scheduled repayment terms.

The mortgages are collateralized by substantially all of NYPH’s, NYP/Lawrence Hospital’s, NYP/Hudson Valley’s and NYP/Queens’ property, buildings and equipment and gross receipts derived from operations.

(m) Capital Leases: Certain equipment leases are the equivalent of an installment purchase for purposes of financial statement reporting. The lenders hold a first security interest in the financed equipment. NYPH has entered into several capital lease financing agreements with commercial lenders in conjunction with DASNY’s tax-exempt lease program. The total amount outstanding related to the tax-exempt lease program is approximately $3.1 million and $6.4 million at December 31, 2015 and 2014, respectively. The Hospital entered into several other capital leases in 2015 and 2014, totaling approximately $28.2 million and $13.4 million, respectively. Interest rates related to the Hospital’s outstanding capital lease obligations range from 0.0% to 6.5%.

39 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt (continued)

Following is a summary of payments due under capital lease obligations for the years ending December 31 (in thousands):

2016 $ 19,838 2017 14,586 2018 10,600 2019 8,017 2020 6,023 Thereafter 4,469 63,533 Less imputed interest 3,466 $ 60,067

Interest paid under all borrowings for the years ended December 31, 2015 and 2014 aggregated approximately $77.0 million and $56.7 million, respectively.

NYPH has a $100.0 million unsecured line of credit agreement with a bank which expires on June 30, 2016. Through 2014, NYP/Lawrence Hospital had a $5.0 million revolving loan agreement with TD Bank, N.A. During 2015, the available amount for the line of credit was reduced to $4.1 million. The line of credit is renewable annually. Effective October 2014, NYP/Queens entered into a $10.0 million unsecured line of credit agreement with a bank. NYP/Queens borrowed and repaid $1.0 million on the line of credit during the year ended December 31, 2015. There is no outstanding balance as of December 31, 2015. In connection with the line of credit, NYP/Queens is required to maintain a $2.5 million account with the bank. As a result, approximately $2.5 million is included within funds held under debt agreements in assets limited as to use in the accompanying consolidated statement of financial position at December 31, 2015.

There were no other borrowings on the lines of credit during 2015 or 2014.

40 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

6. Operating Leases

Total rental expense for the years ended December 31, 2015 and 2014 aggregated approximately $79.5 million and $71.2 million, respectively. Sublease income and contingent rentals were not significant. The Hospital leases certain properties owned by related entities (see Note 10).

Future minimum lease payments under non-cancellable operating leases with initial or remaining terms of one year or more at December 31, 2015 consisted of the following (in thousands):

2016 $ 68,247 2017 57,764 2018 53,191 2019 49,088 2020 45,125 Thereafter 98,942

7. Beneficial Interest in Net Assets Held by Related Organizations

The Hospital recognizes its accumulated interest in net assets held by Fund, Inc. and WCMC Fund, which were as follows at December 31, 2015 and 2014 (in thousands):

2015 2014 Temporarily restricted: Fund, Inc.: Building and equipment replacement $ 753,154 $ 768,042 Specific purpose health care services 540,439 542,261 Endowment earnings restricted for specific-purpose health care services 193,049 216,944 1,486,642 1,527,247 Permanently restricted: Fund, Inc. – Investments to be held in perpetuity 212,676 213,726 WCMC Fund – Investments held in perpetual trust 34,290 35,895 246,966 249,621 Total beneficial interest in net assets held by related organizations 1,733,608 1,776,868 Less current portion 73,635 78,699 $ 1,659,973 $ 1,698,169

41 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

7. Beneficial Interest in Net Assets Held by Related Organizations (continued)

Permanently restricted net assets that are included in the beneficial interest in net assets held by related organizations represent endowments that have been restricted by donors to be maintained in perpetuity and are held by Fund, Inc. and WCMC Fund on behalf of the Hospital. The Hospital follows the requirements of the New York Prudent Management of Institutional Funds Act (NYPMIFA) as they relate to its permanently restricted contributions and net assets.

The Hospital has interpreted NYPMIFA as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment fund, absent explicit donor stipulations to the contrary. The Hospital classifies as permanently restricted net assets the original value of the gifts donated to the permanent endowment and the original value of subsequent gifts to the permanent endowment. Accumulations to the permanent endowment are used in accordance with the direction of the applicable donor gift. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until the amounts are appropriated for expenditure in accordance with a standard of prudence prescribed by NYPMIFA. The Hospital considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (i) the duration and preservation of the fund; (ii) the purposes of the Hospital and the donor-restricted endowment fund; (iii) general economic conditions; (iv) the possible effects of inflation and deflation; (v) where appropriate and circumstances would otherwise warrant, alternatives to expenditure of the endowment fund, giving due consideration to the effect that such alternatives may have on the Hospital; (vi) the expected total return from income and the appreciation of investments; (vii) other resources of the Hospital and (viii) the investment and spending policies of the Hospital. Fund, Inc.’s endowment investment returns distribution policy, which applies to the Hospital, allows for expenditures of investment return only, at a rate not to exceed 4.5% of the permanently restricted net asset balance on an annual basis.

The Hospital has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding related to the endowment funds, while seeking to maintain the purchasing power of the funds. To satisfy long-term return objectives, the Hospital relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Hospital employs a long-term equity oriented strategy of investing in both traditional and alternative asset classes.

42 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

7. Beneficial Interest in Net Assets Held by Related Organizations (continued)

Assets held by Fund, Inc. and WCMC Fund for the benefit of the Hospital consist of pledges and investments (at fair value) that represent allocated amounts from Fund, Inc.’s pooled investments portfolio and WCMC Fund’s interest in a perpetual trust. These assets are comprised of the following at December 31, 2015 and 2014 (in thousands):

2015 2014 Marketable securities: Cash and cash equivalents $ 104,470 $ 103,271 Fixed income: U.S. government 118,663 119,919 Non-U.S. government 5,604 11,229 Corporate 277 1,465 Common collective/commingled trusts 13,450 24,574 Equities: U.S. equities 75,369 91,625 Non-U.S. equities 51,945 70,824 Common collective/commingled trusts 290,538 245,716 Real assets 24,440 31,811 Total marketable securities 684,756 700,434

Hedge funds 262,800 268,226 Private equity 184,840 186,463 Private real assets 119,470 112,948 Total investments 1,251,866 1,268,071 Pledges receivable, net 447,452 472,902 1,699,318 1,740,973 WCMC Fund: Investment held in perpetual trusts 34,290 35,895 Total beneficial interests in net assets held by related organizations 1,733,608 1,776,868 Less current portion 73,635 78,699 $ 1,659,973 $ 1,698,169

The current portion of beneficial interest in net assets held by related organizations represents amounts the Hospital expects to receive and expend on operations in the subsequent year.

43 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

7. Beneficial Interest in Net Assets Held by Related Organizations (continued)

Pledges receivable by Fund, Inc., net of present value discount and valuation allowance of approximately $106.8 million and $106.0 million at December 31, 2015 and 2014, respectively, are to be paid as follows (in thousands):

December 31 2015 2014

Less than one year $ 118,349 $ 160,112 One to five years 167,724 152,379 Thereafter 161,379 160,411 $ 447,452 $ 472,902

Fund, Inc. uses a discount and valuation allowance factor of 7.35%. The discount and valuation allowance reflects the time value of money and credit risk.

44 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

7. Beneficial Interest in Net Assets Held by Related Organizations (continued)

Changes in the net assets held by Fund, Inc. and WCMC Fund on the Hospital’s behalf are recognized in the Hospital’s consolidated statements of changes in net assets for the years ended December 31, 2015 and 2014 and are summarized as follows (in thousands):

Temporarily Restricted Plant Specific Endowment Total Temporarily Permanently Total Interest Replacement Purpose Earnings Restricted Restricted in Net Assets

Year ended December 31, 2015 Gifts, bequests, and similar items $ 100,845 $ 73,513 $ – $ 174,358 $ 3,481 $ 177,839 Net investment income and realized and unrealized gains and losses (2,229) 4,617 (19,776) (17,388) (6,136) (23,524) Net assets released from restrictions for administrative and fund raising costs (8,429) (5,951) (4,731) (19,111) – (19,111) Net assets released from restrictions for program expenditures (5,519) (69,940) 624 (74,835) – (74,835) Net assets released from restrictions for distribution to the Hospital for the purchase of fixed assets (99,556) (4,061) (12) (103,629) – (103,629) Changes in net assets $ (14,888) $ (1,822) $ (23,895) $ (40,605) $ (2,655) $ (43,260)

Year ended December 31, 2014 Gifts, bequests, and similar items $ 88,461 $ 47,240 $ – $ 135,701 $ 4,272 $ 139,973 Net investment income and realized and unrealized gains and losses 24,561 28,418 745 53,724 (47) 53,677 Net assets released from restrictions for administrative and fund raising costs (8,215) (5,861) (4,744) (18,820) – (18,820) Net assets released from restrictions for program expenditures (13,199) (65,056) (444) (78,699) – (78,699) Net assets released from restrictions for distribution to the Hospital for the purchase of fixed assets (72,480) (103) (44) (72,627) – (72,627) Changes in net assets $ 19,128 $ 4,638 $ (4,487) $ 19,279 $ 4,225 $ 23,504

The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

8. Insurance

Professional Liability Insurance: In 1978, NYPH, in conjunction with a number of unrelated health care entities, participated in the formation of captive insurance companies (collectively, the Captive) to provide professional liability and general liability insurance to its participants. The premiums are based on a modified claims-made coverage and are actuarially determined based on the actual experience of the Captive, NYPH-specific experience, and estimated current exposure. The Captive has reinsurance coverage from reinsurers for certain amounts above its coverage level per claim limits. In January 1996, rights to equity in the Captive were transferred to Fund, Inc. Accordingly, insurance premiums are paid by the Hospital initially to Fund, Inc. (see Note 10).

Effective July 1, 2013, NYP/LMH is insured by the Captive. Prior to July 1, 2013, NYP/LMH was covered by various self-insured, claims-made and excess insurance policies.

Effective August 1, 2014, NYP/Lawrence is insured by the Captive. Effective November 15, 1998, NYP/Lawrence and certain other member hospitals of Stellaris Health Network (Stellaris), NYP/Lawrence’s former active parent, participated in a combined insurance program that provided coverage through purchased primary and excess insurance on a claims-made basis. Effective January 1, 2004, NYP/Lawrence purchased excess professional liability insurance above its primary placement layer on a claims-made basis with a prepaid tail liability endorsement from a captive insurance company formed by Stellaris, NWLP Insurance Company Ltd. (NWLP). Effective June 30, 2014, NWLP implemented a segregated “cell captive” structure which replaced the previous insurance structure. Under this program, NWLP utilizes individual cells for each participating hospital, under which invested assets and insurance-related liabilities are segregated for each participant and there is no shared risk among the entities. NYP/Lawrence’s investments under the cell captive structure and the related changes in its segregated account as reported by NWLP are recorded in the accompanying consolidated statements of financial position. At December 31, 2015 and 2014, investments held by NWLP totaling approximately $26.9 million and $26.6 million are included in assets limited as to use in the accompanying consolidated statements of financial position, respectively (see Note 3). Effective October 1, 2014, the NWLP prepaid tail liability endorsement was removed.

Effective February 1, 2015, NYP/Hudson Valley is insured by the Captive. Prior to February 1, 2015, NYP/Hudson Valley maintained a commercial claims-made policy for its medical malpractice insurance.

46 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

8. Insurance (continued)

For the period March 1977 through September 1997, NYP/Queens was self-insured for its professional liabilities. Effective June 1996, NYP/Queens purchased occurrence-based commercial excess professional liability insurance. Effective September 1997 through September 16, 2004, NYP/Queens purchased primary professional liability insurance from a commercial carrier and excess professional liability insurance from Network Insurance Company Ltd. (NICL), a related company that is an offshore captive insurance company. For the period from September 17, 2002 through September 16, 2004, NYP/Queens was self-insured for liabilities above the capped limit. Effective September 17, 2004, NYP/Queens discontinued its primary and first excess arrangements and became self-insured for these exposure levels. The second excess coverage continues to be maintained with a commercial carrier. Effective December 1, 2015, NYP/Queens is insured by the Captive.

Exposure for claims that occurred prior to NYP/Lawrence, NYP/Hudson Valley and NYP/Queens being insured by the Captive is retained by each hospital and will be paid under a deposit program with the Captive (assets totaling $6.0 million that are on deposit with the Captive at December 31, 2015 are reported within professional liabilities insurance recoveries receivable and related deposit in the accompanying consolidated statement of financial position).

The Hospital’s undiscounted estimate for professional liabilities and the estimate for incidents that have been incurred but not reported aggregated approximately $555.3 million and $525.1 million at December 31, 2015 and 2014, respectively, and is included in professional liabilities in the accompanying consolidated statements of financial position at the actuarially determined present value of approximately $507.4 million and $477.8 million, respectively, based on a discount rate of 3.0% (2.5% for Queens) and 3.0% (2.0% for Queens) for each of the years ended December 31, 2015 and 2014, respectively (the NYP/LMH self-insured liability of approximately $17.1 million and $19.8 million at December 31, 2015 and 2014, respectively, is undiscounted). The Hospital has recorded related insurance recoveries receivable of approximately $267.4 million and $244.9 million at December 31, 2015 and 2014, respectively, in consideration of the expected insurance recoveries for the total discounted modified claims- made insurance. Funded amounts (approximately $89.8 million and $100.6 million at December 31, 2015 and 2014, respectively, aside from the investments held in the segregated cell) have been placed in a separate account and are included in assets limited as to use in the accompanying consolidated statements of financial position. The current portion of professional liabilities and the related insurance recoveries receivable represents an estimate of expected settlements and insurance recoveries over the next 12 months.

47 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

8. Insurance (continued)

The Hospital’s estimates for professional liabilities are based upon complex actuarial calculations which utilize factors such as historical claims experience for the Hospital and related industry factors, trending models, estimates for the payment patterns of future claims and present value discount factors. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. Revisions to estimated amounts resulting from actual experience differing from projected expectations are recorded in the period the information becomes known or when changes are anticipated.

Workers’ Compensation Insurance: Prior to April 1, 1999, NYPH was self-insured for workers’ compensation claims. Since April 1, 1999, NYPH has purchased insurance through the New York State Insurance Fund in a program that effectively transfers risk from NYPH. At December 31, 2015 and 2014, the estimate for all recorded workers’ compensation claims and incurred but not reported liabilities aggregated approximately $11.2 million and $9.0 million, respectively, and is included in professional liabilities in the accompanying consolidated statements of financial position.

In connection with the workers’ compensation self-insurance programs, the Hospital maintains two letters of credit through banks in the aggregate amount of approximately $13.2 million, which satisfies the collateral deposit requirement.

9. Pension and Similar Benefit Plans

Pension Plans: The Hospital provides pension and similar benefits to its employees through several plans, including various multiemployer plans for union employees (see Note 14), a qualified noncontributory defined benefit plan primarily for eligible non-union employees of NYPH (the Qualified Pension Plan), a defined benefit retirement plan under a collective bargaining agreement for certain employees of NYP/LMH (the NYP/LMH Pension Plan), a noncontributory defined benefit retirement plan for eligible NYP/Lawrence employees (the Lawrence Pension Plan), a nonqualified defined benefit plan for certain NYPH executives (the Nonqualified Pension Plan), a nonqualified defined benefit plan for certain Lawrence executives (the Lawrence Nonqualified Pension Plan) and a defined benefit plan for union and nonunion employees of NYP/Queens that was frozen for future benefit accruals in 2003 (the Queens Pension Plan) (the non-multiemployer plans are collectively referred to as the Pension Plans).

48 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

The Hospital funds the noncontributory defined benefit plans in accordance with the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA), plus additional amounts that the Hospital may deem appropriate from time to time. Amounts contributed to the Pension Plans are based on actuarial valuations.

The benefits for participants or their beneficiaries in the Pension Plans sponsored by the Hospital are based on years of service and employees’ compensation during their years of employment.

Postretirement Benefits: The Hospital provides certain health care and life insurance benefits to its retired non-union employees through several plans (the Postretirement Benefit Plans).

The Hospital recognizes in the accompanying consolidated statements of financial position an asset, for a defined benefit postretirement plan’s overfunded status, or a liability, for a plan’s underfunded status; measures a defined benefit postretirement plan’s assets and obligations that determine funded status as of the end of the fiscal year; and recognizes the periodic change in the funded status of a defined benefit postretirement plan as a component of changes in unrestricted net assets in the year in which the change occurs. Amounts that are recognized as a component of changes in unrestricted net assets will be subsequently recognized as net periodic pension and postretirement cost.

49 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

The reconciliation of the beginning and ending balances of the benefit obligation and the fair value of the plans’ assets for the years ended December 31, 2015 and 2014 is as follows (in thousands):

Postretirement Pension Plans Benefit Plans 2015 2014 2015 2014 Benefit obligation (As Adjusted) (As Adjusted) Benefit obligation at beginning of year* $ 1,677,744 $ 1,417,595 $ 59,722 $ 55,458 Service cost 74,862 58,540 1,728 1,626 Interest cost 66,693 61,658 2,112 1,805 Actuarial (gains) losses (90,145) 206,860 (6,080) 11,080 Plan amendment – – – (7,114) Settlement paid (2,066) (2,226) – – Effect of curtailment (7,533) – – – Medicare Part D subsidy – – 119 139 Plan participant contributions – – 201 172 Benefits paid (68,066) (64,683) (3,654) (3,444) Benefit obligation at end of year 1,651,489 1,677,744 54,148 59,722

Fair value of plan assets Fair value of plan assets at beginning of year* 1,347,346 1,294,537 – – Actual return on plan assets (29,649) 51,373 – – Hospital contributions 60,558 68,338 3,453 3,272 Plan participant contributions – – 201 172 Effect of settlement (2,066) (2,219) – – Benefits paid (68,066) (64,683) (3,654) (3,444) Fair value of plan assets at end of year 1,308,123 1,347,346 – – Funded status $ (343,366) $ (330,398) $ (54,148) $ (59,722)

* Includes Lawrence balances as of July 1, 2014 of approximately $215.9 million within the benefit obligation and $150.3 million within the fair value of plan assets of the Pension Plans and approximately $5.9 million within the benefit obligation of the Postretirement Benefit Plans.

The actuarial gain in 2015 (and loss in 2014) primarily relates to changes in the discount rate and mortality assumptions used to measure the projected benefit obligation.

50 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

At December 31, 2015 and 2014, the funded status of the Pension Plans and Postretirement Benefits Plans are reported in the accompanying consolidated statements of financial position as follows (in thousands):

Postretirement Pension Plans Benefit Plans Total 2015 2014 2015 2014 2015 2014 (As Adjusted) (As Adjusted) (As Adjusted)

Current liability $ 13,276 $ 8,927 $ 3,546 $ 3,907 $ 16,822 $ 12,834 Noncurrent liability 330,090 321,471 50,602 55,815 380,692 377,286 $ 343,366 $ 330,398 $ 54,148 $ 59,722 $ 397,514 $ 390,120

Included in other changes in unrestricted net assets for the years ended December 31, 2015 and 2014 are the following amounts that have not yet been recognized in net periodic pension and postretirement cost (in thousands):

Postretirement Pension Plans Benefit Plans Total 2015 2014 2015 2014 2015 2014 (As Adjusted) (As Adjusted) (As Adjusted) Unrecognized prior service cost $ 487 $ 1,138 $ (12,533) $ (13,314) $ (12,046) $ (12,176) Unrecognized actuarial loss 515,646 512,681 16,278 23,944 531,924 536,625 $ 516,133 $ 513,819 $ 3,745 $ 10,630 $ 519,878 $ 524,449

The change in net assets from pension and postretirement benefit liabilities to be recognized in future periods as reported in the accompanying consolidated statements of operations is an increase in net assets of approximately $4.6 million and a decrease in net assets of approximately $231.1 million for 2015 and 2014, respectively, and represents the combined change in the amounts for pension and postretirement benefits plans in the table above.

51 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

The prior service cost and actuarial loss included in changes in unrestricted net assets at December 31, 2015, that are expected to be recognized in net periodic pension and postretirement cost during the year ending December 31, 2016, are as follows (in thousands):

Pension Postretirement Plans Benefit Plans

Unrecognized prior service cost $ 121 $ (834) Unrecognized actuarial loss 29,141 1,154

The projected benefit obligation, accumulated benefit obligation, and fair value of the plans’ assets by defined benefit pension plan follow (in thousands):

December 31, 2015 Nonqualified NYPH NYP/LMH Lawrence Queens Pension Plans

Projected benefit obligation $ 1,097,021 $ 46,119 $ 238,153 $ 231,193 $ 39,003 Accumulated benefit obligation 1,083,774 44,765 210,658 227,117 30,249 Fair value of plans’ assets 956,968 29,467 150,636 171,052 –

December 31, 2014 Nonqualified NYPH NYP/LMH Lawrence Queens Pension Plans

Projected benefit obligation $ 1,102,560 $ 45,267 $ 243,644 $ 243,313 $ 42,960 Accumulated benefit obligation 1,087,066 43,627 213,197 238,880 30,638 Fair value of plans’ assets 978,790 29,702 152,205 186,649 –

52 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

Weighted-average assumptions used in determining the pension and postretirement benefits obligations as of December 31, 2015 and 2014 were as follows:

Postretirement Pension Plans Benefit Plans 2015 2014 2015 2014

Discount rate – NYPH 4.25% 4.00% 3.75% 3.50% Discount rate – NYP/LMH 4.25 4.00 – – Discount rate – NYP/Lawrence 4.50 4.00 4.25 3.75 Discount rate – NYP/Queens 4.43 4.18 4.22 3.87 Rate of compensation increase – NYPH 3.50 3.50 – – Rate of compensation increase – NYP/LMH 4.00 4.00 – – Rate of compensation increase – NYP/Lawrence 3.00 4.00 – – Rate of compensation increase – NYP/Queens 2.50 2.50 – –

Net periodic pension cost and postretirement benefits cost for the years ended December 31, 2015 and 2014 consist of the following (in thousands):

Postretirement Pension Plans Benefit Plans 2015 2014 2015 2014 (As Adjusted) (As Adjusted)

Service cost $ 74,862 $ 58,540 $ 1,728 $ 1,626 Interest cost 66,693 61,658 2,112 1,805 Expected return on plan assets (105,420) (93,466) – – Net amortization of prior service cost 651 613 (781) (331) Recognized actuarial loss 37,726 21,479 1,586 172 Recognized actuarial loss due to curtailment (3,300) 143 – – Net periodic pension cost and postretirement benefits cost $ 71,212 $ 48,967 $ 4,645 $ 3,272

53 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

Weighted-average assumptions used in determining the net periodic pension and postretirement benefits cost for the years ended December 31, 2015 and 2014 were as follows:

Postretirement Pension Plans Benefit Plans 2015 2014 2015 2014

Discount rate – NYPH 4.00% 4.75% 3.50% 4.00% Discount rate – NYP/LMH 4.00 4.75 – – Discount rate – NYP/Lawrence 4.00 4.50 3.75 3.75 Discount rate – NYP/Queens 4.18 5.03 3.87 4.80 Expected rate of return on plan assets – NYPH 7.75 7.75 – – Expected rate of return on plan assets – NYP/LMH 7.75 7.75 – – Expected rate of return – NYP/Lawrence 7.75 8.00 – – Expected rate of return on plan assets – NYP/Queens 7.50 7.50 – – Rate of compensation increase – NYPH 3.50 3.50 – – Rate of compensation increase – NYP/LMH 4.00 4.00 – – Rate of compensation increase – NYP/Lawrence 4.00 4.00 – – Rate of compensation increase – NYP/Queens 2.50 2.50 – –

The overall expected long-term rate of return on assets of the Pension Plans is based on the historical returns of each asset class weighted by the target asset allocation. The target asset allocation has been selected consistent with the Hospital’s desired risk and return characteristics. The Hospital reviews the expected long-term rate periodically and, based on the building block approach, updates the rate for changes in the marketplace. The market conditions in 2015 and 2014 and changes in the pension asset allocations were considered in the Hospital’s evaluation of the expected long-term rate of return assumption.

54 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

In relation to NYPH’s postretirement benefit plan (excluding the postretirement benefit plans for Lawrence and Queens), the weighted-average annual assumed rate of increase per capita cost of covered benefits (i.e., health care cost trend rate) is assumed to start at 6.40% and decrease to 4.50% by 2023. The health care cost trend rate assumption may have an effect on the amounts reported. A one percent change in the assumed health care cost trend rate would have the following effects (in thousands):

1% 1% Increase Decrease Effect on total of service and interest cost components in health care cost trend rate $ 52 $ (47) Effect on postretirement benefit obligation as of as of December 31, 2015 1,292 (1,162)

The measurement date used to determine the pension and postretirement benefits measurements is December 31.

Plan Assets: The Qualified Pension Plan, the NYP/LMH Pension Plan, the Lawrence Pension Plan and the Queens Pension Plan have separate asset allocation targets. The overall objectives of the investment policies are to produce an asset allocation that will generate return annually in order to meet the expense and income needs and provide for sufficient annual asset growth. Funds are invested with a long-term (five years or greater) return objective.

The investment policies include the following asset allocation guidelines:

Strategic Asset Allocation Policy Target NYP/Queens and Asset Category NYPH NYP/Lawrence

Equities 37% 54% Fixed income 11 34 Alternative assets 19 – Private equity 17 – Natural resources 8 6 Real estate 8 5 Other – 1

55 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

The policy target percentages are reevaluated at least quarterly. Investment performance is reviewed quarterly with performance results and benchmarks. NYP/LMH Pension Plan’s weighted-average asset allocations at December 31, 2015 are comprised of investments in equity and fixed income securities. Assets invested in the Pension Plans are carried at fair value. Fixed income and equity securities and real assets with readily determinable values are carried at fair value as determined based on independent published sources. Alternative investments are stated at fair value, as estimated in an unquoted market. Fair value for alternative investments is determined for each investment using net asset values as a practical expedient, as permitted by U.S. generally accepted accounting principles, rather than using another valuation method to independently estimate fair value. The composition and reported value of the Pension Plans’ assets at December 31, 2015 and 2014 are disclosed in Note 13. The Hospital expects to contribute approximately $62.0 million to its Pension Plans and $4.1 million to its Postretirement Benefit Plans in 2016. The Medicare Prescription Drug Act introduced a prescription drug benefit under Medicare (Medicare Part D) as well as a Federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The Hospital expects to pay the following benefit payments, which reflect expected future service as appropriate, and receive the following Medicare Part D subsidies (in thousands):

Medicare Pension Postretirement Part D Plans Benefit Plans Subsidies Year: 2016 $ 87,193 $ 4,074 $ 141 2017 89,866 4,021 134 2018 95,256 3,932 126 2019 98,460 3,914 118 2020 103,615 3,808 109 2021 to 2025 580,517 18,192 422

56 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

10. Related Organizations Fund, Inc. is an affiliated not-for-profit public charity whose revenue is derived from soliciting, receiving and administering funds. Royal Charter Properties, Inc. (RCP, Inc.), Royal Charter Properties-East, Inc. (RCP-East) and Royal Charter Properties-Westchester, Inc. (RCP-West) are affiliated not-for-profit support corporations that derive revenue from acquiring and holding direct and indirect interests in real estate and related personal property, which are primarily used to provide residential housing, office space and parking to the Hospital and its employees based on the market value of such services. RCP, Inc., RCP-East and RCP-West provide services primarily to or for the benefit of the Hospital. Amounts received by NYPH from or amounts contributed by NYPH to related support organizations, reflected in other revenue in the accompanying consolidated statements of operations for the years ended December 31, 2015 and 2014 are as follows (see Note 11) (in thousands):

2015 2014 Distributions from (payments to) according to organization’s bylaws: RCP, Inc. $ 12,614 $ 11,480 RCP-East 34,039 33,625 RCP-West (70) (69) $ 46,583 $ 45,036

Fund, Inc. also pays certain program related costs on behalf of NYPH (see Note 7). Fund, Inc. paid approximately $11.3 million and $9.2 million in 2015 and 2014, respectively, related to malpractice and postretirement costs incurred by NYPH. Other distributions made by Fund, Inc. to NYPH include approximately $105.5 million and $83.2 million in 2015 and 2014, respectively, for the purchase of fixed assets.

Services provided to NYPH by related entities for the years ended December 31, 2015 and 2014 are as follows (in thousands):

2015 2014

Fund, Inc. – insurance (Note 8) $ 58,550 $ 65,608 RCP, Inc. – rentals (net) 3,379 3,364 RCP-East – rentals 9,909 9,744 RCP-West – rentals 290 267 $ 72,128 $ 78,983

57 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

10. Related Organizations (continued)

In connection with a financing completed by RCP, Inc. in 2001 for the renovation and improvement of a parking garage facility, NYPH entered into a noncancellable lease with RCP, Inc., for a period not longer than 29 years, whereby NYPH will lease 50% of the parking spaces at an amount sufficient to cover the debt service on the financing.

In connection with the financing completed by RCP-East in 1998, NYPH entered into a lease through April 2035, whereby NYPH is required to pay a fixed rent in the event that RCP-East does not meet certain covenants.

In September 2014, the Hospital deeded property, building and equipment located in lower Manhattan to RCP, Inc. In connection with the transaction, NYPH transferred the mortgage collateralized by the building. The assets and liabilities transferred at their historical carrying values were as follows at September 19, 2014 (in thousands):

Land $ 20,000 Building and equipment, net 5,805 Mortgage note (7,585) Other (2,060) Net assets transferred $ 16,160

In October 2015, the Hospital deeded a 170-unit parking facility located in lower Manhattan to RCP, Inc. The carrying value of the parking facility was approximately $10.7 million at the date of transfer.

NYPH received distributions of $10.0 million and $15.0 million in 2015 and 2014, respectively, from Weill Cornell Imaging at New York-Presbyterian, a radiology and imaging joint venture affiliated with NYPH and Weill Cornell Medical College.

The Hospital provides employee and other services to related entities for which the Hospital receives reimbursement, and the costs of providing such services are recorded directly by those entities. Accordingly, such amounts are not included in the accompanying consolidated financial statements of the Hospital. Charges for such services are based on the approximate cost to provide the services and totaled approximately $61.8 million and $52.1 million for the years ended December 31, 2015 and 2014, respectively. The services consist of patient accounting, financial planning, information systems and telecommunications, general accounting, medical supplies, biomedical engineering services, house staff, ambulance services, institutional billings, engineering and other services.

58 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

10. Related Organizations (continued)

The following balances are due (to) from related organizations at December 31, 2015 and 2014 (in thousands):

2015 2014

(As Adjusted)

Fund, Inc. $ (9,445) $ (10,117) RCP, Inc. 8,814 4,948 RCP-East 1,506 1,429 RCP-West 248 254 Network Recovery Services, Inc. 328 (111) Silvercrest Extended Care Facility 108 51 The Hospital for Special Surgery 296 771 The New York Community Hospital of Brooklyn, Inc. 83 109 The New York Gracie Square Hospital, Inc. (Gracie)(a) 458 177 The New York Methodist Hospital 870 784 New York-Presbyterian Healthcare System, Inc. (3,219) (4,176) The Rogosin Institute 99 184 146 (5,697) Less noncurrent portion included in other noncurrent assets, before valuation allowance 74 – Due (to) from related organizations – net $ 72 $ (5,697)

(a) During 2015, NYPH provided Gracie approximately $0.8 million.

The Hospital periodically assesses the collectibility of amounts due from related organizations. The amounts included in other noncurrent assets are adjusted to state the receivables at their estimated net realizable value. The balances due from certain related organizations are provided for through a valuation allowance.

59 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

11. Other Revenue

Other revenue consisted of the following for the years ended December 31, 2015 and 2014 (in thousands):

2015 2014 (As Adjusted)

Grants and contracts $ 27,383 $ 31,054 Amounts received from related organizations, net (Note 10) 56,583 60,036 Rental of space 42,091 40,045 Cafeteria and vending 14,994 14,446 Net assets released from restrictions, included in changes in beneficial interest in net assets held by related organizations (Note 7) 74,835 78,699 Affiliation agreements 5,851 6,773 Other 86,322 58,991 $ 308,059 $ 290,044

12. Commitments and Contingencies

Various lawsuits and claims arising in the normal course of operations are pending or are in progress against the Hospital. Such lawsuits and claims are either specifically covered by insurance or are not deemed material. While the outcome of these lawsuits cannot be determined at this time, management, based on advice from legal counsel, believes that any loss which may arise from these actions will not have a material adverse effect on the financial position or results of operations of the Hospital.

At December 31, 2015 and 2014, approximately 38% of the Hospital’s employees were covered by collective bargaining agreements. Collective bargaining agreements covering all such employees are set to expire at various dates through 2018.

Effective January 1, 2009, the IRS issued final regulations for purposes of determining common control for qualified retirement plans sponsored by tax-exempt organizations. In general, tax- exempt entities that are under common control are treated as one entity for certain of the requirements of qualified plans. The regulations determine control based on facts and circumstances; for this purpose, common control would exist if, among other situations, at least

60 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

12. Commitments and Contingencies (continued)

80% of the directors or trustees of one organization were either representatives of, or directly or indirectly controlled by, another organization. These regulations could have an effect on the operations of the Hospital’s and its related entities’ retirement plans and the responsibilities of those entities for associated liabilities, although such effects are uncertain at this time.

13. Fair Value Measurements

The Hospital uses various methods of calculating fair value of its financial assets and liabilities, when applicable. The Hospital defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a framework for measuring fair value. Fair value measurements are applied based on the unit of account from the Hospital’s perspective. The unit of account determines what is being measured by reference to the level at which the asset or liability is aggregated (or disaggregated).

The Hospital uses a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable inputs that are based on inputs not quoted in active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. In determining fair value, the Hospital uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers non-performance risk in its assessment of fair value.

61 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

13. Fair Value Measurements (continued)

The following table presents financial instruments carried at fair value, excluding assets invested in the Pension Plans, as of December 31, 2015 and 2014 (in thousands):

December 31, 2015 Total Level 1 Level 2 Level 3

Cash and cash equivalents – held for investment $ 241,016 $ 203,708 $ 37,308 $ – Fixed income: U.S. government 999,251 999,251 – – Non-U.S. government 3,345 3,345 – – Corporate 479,966 7,661 472,305 – Mortgage and asset backed 379,659 – 379,659 – Other 19,997 19,997 – – Equities: U.S. equities(a) 173,417 173,417 – – Non-U.S. equities(b) 58,187 58,187 – – Real assets 43,328 43,328 – – Mutual funds 48,662 48,662 – – $ 2,446,828 $ 1,557,556 $ 889,272 $ –

December 31, 2014 (As Adjusted) Total Level 1 Level 2 Level 3

Cash and cash equivalents – held for investment $ 132,303 $ 118,690 $ 13,613 $ – Fixed income: U.S. government 977,182 977,182 – – Non-U.S. government 14,657 14,657 – – Corporate 339,739 31,291 308,448 – Mortgage and asset backed 229,042 17,733 211,309 – Other 15,684 – 15,684 – Equities: U.S. equities(a) 261,899 261,899 – – Non-U.S. equities(b) 148,614 148,614 – – Real assets 20,577 20,577 – – Mutual funds 97,281 97,281 – – $ 2,236,978 $ 1,687,924 $ 549,054 $ –

The Hospital’s alternative investments, common collective/commingled trusts and pooled investments held by Fund, Inc. are reported using the equity method of accounting and, therefore, are not included in the tables above (see Note 1).

62 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

13. Fair Value Measurements (continued)

Financial instruments invested in the Hospital’s Pension Plans at fair value are classified in the table below in one of the three categories described above as of December 31, 2015 and 2014 (in thousands):

December 31 ,2015 Total Level 1 Level 2 Level 3

Cash and cash equivalents $ 34,250 $ 34,250 $ – $ – Fixed income: U.S. government 157,661 157,661 – – Non-U.S. government 11,051 11,051 – – Corporate bonds 176 176 – – Equities: U.S. equities(a) 74,204 74,204 – – Non-U.S. equities(b) 1,921 1,921 – – Real assets 32,206 32,206 – – Mutual funds 16,800 16,800 – – 328,269 $ 328,269 $ – $ – Assets measured at net asset value as a practical expedient: Common collective fixed income funds(c) 32,596 Common collective equity funds(d) 466,238 Hedge funds(e) 215,740 Private equity(f) 152,682 Private real assets(g) 112,598 $ 1,308,123

December 31, 2014 (As Adjusted) Total Level 1 Level 2 Level 3

Cash and cash equivalents $ 39,585 $ 39,585 $ – $ – Fixed income: U.S. government 99,889 99,889 – – Non-U.S. government 8,905 8,905 – – Corporate bonds 11,895 1,162 10,733 – Equities: U.S. equities(a) 131,673 131,673 – – Non-U.S. equities(b) 16,591 16,591 – – Mutual funds 130,480 130,480 – Real assets 23,837 23,837 – – 462,855 $ 452,122 $ 10,733 $ – Assets measured at net asset value as a practical expedient: Common collective fixed income funds(c) 33,840 Common collective equity funds(d) 333,174 Hedge funds(e) 242,356 Private equity(f) 171,210 Private real assets(g) 103,911 $ 1,347,346

63 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

13. Fair Value Measurements (continued)

(a) Equity portfolios invested in common stock of corporations primarily domiciled in the United States. (b) Equity portfolios invested in common stock of corporations primarily domiciled outside the United States, including emerging market countries. (c) Common collective/commingled trusts invested in corporate bonds and mortgage and asset backed securities. (d) Common collective/commingled trusts invested in common stock of corporations domiciled in the United States and outside the United States, including emerging market countries. (e) Hedge funds include long and short equity, multi-strategy, event driven and relative value funds invested with managers who invest with different strategies and typically employ some leverage. In long and short equity, fund managers create a portfolio of long positions in stocks expected to appreciate over time and short positions in stocks expected to depreciate. Event driven managers create a portfolio designed to profit from corporate events such as mergers, spin-offs, defaults and bankruptcy. Relative value managers invest in long and short positions, but typically have a more neutral net market position than long and short. Multi-strategy is a fund employing a variety of hedge fund strategies. (f) Private equity investments include limited partnership investments in funds pursuing strategies in corporate buyouts, venture capital, growth equity, distressed and turnaround investments. (g) Real estate and natural resources investments.

The following is a description of the Hospital’s valuation methodologies for assets measured at fair value. The fair value methodologies are not necessarily indicators of investment risk, but are descriptive of the measures used to arrive at fair value pricing. Fair value for Level 1 is based upon quoted market prices. Investments classified as Level 2 are primarily valued using techniques that are consistent with the market approach. Valuations for Level 2 are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Inputs, which include broker/dealer quotes, reported/comparable trades, and benchmark yields are obtained from various sources including market participants, dealers and brokers. Common collective/commingled trusts and alternative investments are measured at net asset value. The valuation for alternative investments is described in Note 9. The methods described above may produce a fair value that is not indicative of net realizable value or reflective of future fair values. Furthermore, while the Hospital believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

64 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

13. Fair Value Measurements (continued)

The following is a summary of investments (by major class) that have restrictions on the Hospital’s ability to redeem its investments at the measurement date, any unfunded capital commitments and the investments strategies of the investees as of December 31, 2015 (including investments accounted for using the equity method) (in thousands):

Redemption Redemption Description of Fair Unfunded Frequency Notice Investment Value Commitments (If Currently Eligible) Period

Common collective/ commingled trusts $ 1,144,751 $ – Daily to quarterly 0 to 30 days Hedge funds 418,090 – Monthly to tri-annually 45 to 180 days Private equity 314,813 190,641 * * Private real assets 209,754 211,757 * * $ 2,087,408 $ 402,398

* The Hospital’s liquidity restrictions range from several months to ten years for certain private equity and real asset investments. Liquidity restrictions may apply to all or portions of a particular invested amount.

The carrying values of cash and cash equivalents, receivables, accounts payable and accrued expenses, other current assets and liabilities are reasonable estimates of fair value due to the short-term nature of these financial instruments. Carrying value approximates fair value for other noncurrent financial instruments, excluding long-term debt obligations and financial instruments included in the fair value tables. At December 31, 2015 and 2014, the fair value of long-term debt obligations totaled approximately $2,085.2 million and $1,406.7 million, respectively, excluding capital leases and unamortized fair value adjustments (see carrying value of long-term debt at Note 5). The fair value of long-term debt is classified as Level 2 in the fair value hierarchy, using techniques consistent with the market approach. Valuations for long-term debt, excluding the term loan payable, are based on quoted market prices for related bonds. The carrying amount of the term loan payable approximates fair value based on consideration of current market data and discounted cash flow estimates.

65 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

14. Multiemployer Pension Plans

The Hospital contributes to the New York State Nurses Association Pension Plan (NYSNA), the 1199 SEIU Healthcare Employees Pension Fund (1199 SEIU) and the International Union of Operating Engineers Local 30 Pension Fund (Local 30). These are multiemployer defined benefit pension plans under the terms of collective bargaining agreements that cover the Hospital’s union-represented employees. Contributions to union plans are based on union employee gross salary levels and rates required under union contractual arrangements.

The risks of participating in these multiemployer plans are different from single-employer plans in the following respects:

• Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

• If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

• If the Hospital chooses to stop participating in some of its multiemployer plans, the Hospital may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

66 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

14. Multiemployer Pension Plans (continued)

The Hospital’s participation in these plans for the annual period ended December 31, 2015 is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employee Identification Number (EIN) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act (PPA) zone status available in 2015 and 2014 is for the plan’s year-end at December 31, 2014 and 2013, respectively. The zone status is based on information that the Hospital received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded and plans in the green zone are at least 80% funded. The “FIP/RP Status” column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration dates of the collective bargaining agreements to which the plans are subject.

Expiration Date of Pension Protection Act Contributions by the Collective Pension EIN/Pension Zone Status FIP/RP Hospital Surcharge Bargaining Fund Plan Number 2015 2014 Status 2015 2014 Imposed Agreement (In Thousands) NYSNA 13-6604799/ Plan No. 001 Green Green No $ 24,199 $ 22,973 No 12/31/2018

1199 SEIU 13-3604862/ Plan No. 001 Green Green No 34,278 34,185 No 9/30/2018

Local 30 51-6045848/ Plan No. 001 Green Green No 1,481 1,391 No 9/30/2018 $ 59,958 $ 58,549

The Hospital was listed in the NYSNA plan’s Forms 5500 as providing more than 5% of the total contributions during each of the plans 2014 and 2013 plan years. Forms 5500 are not yet available for the plan years ended in 2015.

67 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

15. Events Subsequent to December 31, 2015

Subsequent events have been evaluated through April 29, 2016, which is the date the consolidated financial statements were issued.

Effective January 1, 2016, NYP/Lawrence entered into an agreement (the Commutation Agreement) with NWLP whereby all claims previously recorded under the cell captive structure were fully commuted to the Hospital. In connection with the Commutation Agreement, NWLP initially transferred approximately $12.9 million to the Hospital in February 2016. Also effective January 1, 2016, the Hospital entered into a separate agreement with Stellaris in order to distribute the assets held by NWLP in the Hospital’s segregated cell and other contributed capital. The Hospital received a distribution of approximately $13.3 million in March 2016 with a final distribution of approximately $0.6 million expected later in 2016.

Except as disclosed above, no events have occurred that require disclosure in or adjustment to the accompanying consolidated financial statements.

Supplementary Information

The New York and Presbyterian Hospital

Consolidating Statement of Financial Position

December 31, 2015 (In Thousands)

NYP Community NYP Community Services, Inc. Programs, Inc. NYP/Hudson NYPH NYP/Lawrence Valley NYP/Queens Eliminations Consolidated Assets Current assets: Cash, cash equivalents and short-term investments: Cash and cash equivalents $ 227,515 $ 19,070 $ 19,564 $ 9,492 $ 506 $ 276,147 Short-term investments 1,087,581 – 39,478 48,694 – 1,175,753 Total cash, cash equivalents and short-term investments 1,315,096 19,070 59,042 58,186 506 1,451,900

Patient accounts receivable, less allowance for uncollectibles 516,992 31,821 22,160 88,790 – 659,763 Other current assets 114,249 7,137 6,066 15,777 (694) 142,535 Assets limited as to use – current portion 29,640 4,473 – 9,389 – 43,502 Professional liabilities insurance recoveries receivable and related deposit – current portion 69,322 – 2,415 8 – 71,745 Beneficial interest in net assets held by related organizations – current portion 73,635 – – – – 73,635 Due from (to) related organizations – net 7,427 – (315) (6,849) (191) 72 Total current assets 2,126,361 62,501 89,368 165,301 (379) 2,443,152

Assets limited as to use – noncurrent 2,120,717 102,948 9,500 126,044 – 2,359,209 Property, buildings, and equipment – net 2,546,518 126,469 132,251 275,321 – 3,080,559 Other noncurrent assets – net 3,029 – 3,078 14,846 – 20,953 Professional liabilities insurance recoveries receivable and related deposit – noncurrent 171,702 22,083 6,542 1,345 – 201,672 Beneficial interest in net assets held by related organizations – noncurrent 1,659,973 – – – – 1,659,973 Total assets $ 8,628,300 $ 314,001 $ 240,739 $ 582,857 $ (379) $ 9,765,518

The New York and Presbyterian Hospital

Consolidating Statement of Financial Position

December 31, 2015 (In Thousands)

NYP Community NYP Community Services, Inc. Programs, Inc. NYP/Hudson NYPH NYP/Lawrence Valley NYP/Queens Eliminations Consolidated Liabilities and net assets Current liabilities: Long-term debt – current portion $ 55,375 $ 3,011 $ 5,027 $ 8,887 $ – $ 72,300 Accounts payable and accrued expenses 390,604 26,711 9,535 54,173 (379) 480,644 Accrued salaries and related liabilities 216,114 13,277 11,195 15,444 – 256,030 Pension and postretirement benefit liabilities – current portion 16,014 – – 808 – 16,822 Professional liabilities and other – current portion 69,322 2,242 2,521 7,179 – 81,264 Other current liabilities 182,351 4,416 4,292 1,207 – 192,266 Total current liabilities 929,780 49,657 32,570 87,698 (379) 1,099,326 Long-term debt 1,651,884 29,034 72,696 178,011 – 1,931,625 Professional liabilities and other 309,468 37,416 9,866 80,620 – 437,370 Pension liability 182,432 87,517 – 60,141 – 330,090 Postretirement benefit liability 23,846 4,455 – 22,301 – 50,602 Deferred revenue 2,266 – – – – 2,266 Other noncurrent liabilities 289,682 11,546 8,222 89,085 – 398,535 Total liabilities 3,389,358 219,625 123,354 517,856 (379) 4,249,814 Net assets: Unrestricted 3,505,334 75,556 114,167 53,969 – 3,749,026 Temporarily restricted: NYP/Lawrence Hospital – 14,136 – – – 14,136 NYP/Hudson Valley – – 1,543 – – 1,543 NYP/Queens – – – 1,927 – 1,927 Held by related organizations 1,486,642 – – – – 1,486,642 Total temporarily restricted 1,486,642 14,136 1,543 1,927 – 1,504,248 Permanently restricted: NYP/Lawrence Hospital – 4,684 – – – 4,684 NYP/Hudson Valley – – 1,675 – – 1,675 NYP/Queens – – – 9,105 – 9,105 Held by related organizations 246,966 – – – – 246,966 Total permanently restricted 246,966 4,684 1,675 9,105 – 262,430 Total net assets 5,238,942 94,376 117,385 65,001 – 5,515,704 Total liabilities and net assets $ 8,628,300 $ 314,001 $ 240,739 $ 582,857 $ (379) $ 9,765,518

The New York and Presbyterian Hospital

Consolidating Statement of Operations

Year Ended December 31, 2015 (In Thousands)

NYP Community

Services, Inc. NYP Community Programs, Inc. NYPH NYP/Lawrence NYP/Hudson Valley NYP/Queens Consolidated (Period from January 26, 2015 to December 31, 2015) Operating revenues Net patient service revenue $ 4,586,660 $ 256,718 $ 174,409 $ 721,657 $ 5,739,444 Provision for bad debts (80,921) (11,521) (4,626) (22,218) (119,286) Net patient service revenue, less provision for bad debts 4,505,739 245,197 169,783 699,439 5,620,158 Other revenue 263,969 4,251 5,336 34,503 308,059 Total operating revenues 4,769,708 249,448 175,119 733,942 5,928,217

Operating expenses Salaries and wages 2,170,025 124,241 76,403 345,713 2,716,382 Employee benefits 596,226 35,244 19,013 105,423 755,906 Supplies and other expenses 1,450,447 92,353 58,572 246,325 1,847,697 Interest and amortization of deferred financing fees 65,799 506 2,378 9,117 77,800 Depreciation and amortization 262,098 7,146 9,376 25,420 304,040 Total operating expenses 4,544,595 259,490 165,742 731,998 5,701,825

Operating income (loss) 225,113 (10,042) 9,377 1,944 226,392

Investment (loss) return (28,591) 1,446 1,647 (541) (26,039) Excess (deficiency) of revenues over expenses before inherent contribution of unrestricted assets received in the acquisition of NYP/Hudson Valley 196,522 (8,596) 11,024 1,403 200,353 Inherent contribution of unrestricted net assets received in the acquisition of NYP/Hudson Valley – – 102,818 – 102,818 Excess (deficiency) of revenues over expenses 196,522 (8,596) 113,842 1,403 303,171 Other changes in unrestricted net assets: Net asset transfers (to) from related parties (16,812) 13,588 – 2,400 (824) Net assets released from restrictions for the purchase of fixed assets – 4,820 325 252 5,397 Deed of property, building and equipment to Royal Charter Properties, Inc. (10,748) – – – (10,748) Distributions from New York-Presbyterian Fund, Inc. for the purchase of fixed assets 105,460 – – – 105,460 Change in pension and postretirement benefit liabilities to be recognized in future periods (8,752) 10,212 – 3,111 4,571 Change in unrestricted net assets $ 265,670 $ 20,024 $ 114,167 $ 7,166 $ 407,027

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C ONSOLIDATED F INANCIAL S TATEMENTS AND S UPPLEMENTARY I NFORMATION

The New York and Presbyterian Hospital Years Ended December 31, 2014 and 2013 With Report of Independent Auditors

Ernst & Young LLP

The New York and Presbyterian Hospital

Consolidated Financial Statements and Supplementary Information

Years Ended December 31, 2014 and 2013

Contents

Report of Independent Auditors...... 1

Consolidated Financial Statements

Supplementary Information

Consolidating Statement of Financial Position ...... 62 Consolidating Statement of Operations ...... 64

Ernst & Young LLP Tel: +1 212 773 3000 5 Times Square Fax: +1 212 773 6350 New York, NY 10036-6530 ey.com

Report of Independent Auditors

The Board of Trustees The New York and Presbyterian Hospital

We have audited the accompanying consolidated financial statements of The New York and Presbyterian Hospital, which comprise the consolidated statements of financial position as of December 31, 2014 and 2013, 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 Financial Statements

Auditor’s Responsibility

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

A member firm of Ernst & Young Global Limited 1

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The New York and Presbyterian Hospital at December 31, 2014 and 2013, and the consolidated results of its operations, changes in its net assets, and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating details appearing in conjunction with the consolidated statements of financial position and operations as of and for the year ended December 31, 2014, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. April 29, 2015

A member firm of Ernst & Young Global Limited The New York and Presbyterian Hospital

Consolidated Statements of Financial Position

December 31 2014 2013 (In Thousands) Assets Current assets: Cash, cash equivalents and short-term investments: Cash and cash equivalents $ 210,271 $ 152,982 Short-term investments (Note 13) 1,068,740 882,499 Total cash, cash equivalents and short-term investments 1,279,011 1,035,481

Patient accounts receivable, less allowance for uncollectibles (2014 – $190,039; 2013 – $181,945) 526,380 559,638 Other current assets 85,469 71,252 Assets limited as to use – current portion (Notes 3, 5, 8, and 13) 32,788 28,390 Professional liabilities insurance recoveries receivable – current portion (Note 8) 63,462 60,812 Beneficial interest in net assets held by related organizations – current portion (Note 7) 78,699 68,420 Total current assets 2,065,809 1,823,993

Assets limited as to use – noncurrent (Notes 3, 5, 8, and 13) 1,638,685 1,490,430 Property, buildings, and equipment – net (Note 4) 2,404,688 2,169,218 Other noncurrent assets – net 31,698 36,941 Professional liabilities insurance recoveries receivable – noncurrent (Note 8) 178,449 165,350 Beneficial interest in net assets held by related organizations – noncurrent (Note 7) 1,698,169 1,684,944

Total assets $ 8,017,498 $ 7,370,876

December 31 2014 2013 (In Thousands) Liabilities and net assets Current liabilities: Long-term debt – current portion (Note 5) $ 80,512 $ 113,411 Accounts payable and accrued expenses 414,289 334,479 Accrued salaries and related liabilities 212,191 175,823 Due to related organizations – net (Note 10) 2,412 4,671 Pension and postretirement benefit liabilities – current portion (Note 9) 12,075 12,112 Professional liabilities and other – current portion (Note 8) 64,092 60,812 Other current liabilities (Note 2) 163,857 120,879 Total current liabilities 949,428 822,187

Long-term debt (Note 5) 1,021,092 1,063,385 Professional liabilities and other (Note 8) 337,775 331,170 Pension liability (Note 9) 264,807 38,633 Postretirement benefit liability (Note 9) 31,781 24,823 Deferred revenue (Note 5) 2,985 3,770 Other noncurrent liabilities (Note 2) 314,207 291,595 Total liabilities 2,922,075 2,575,563

Commitments and contingencies (Notes 2, 5, 6, 8, 9, 10, and 12)

Net assets: Unrestricted 3,295,196 3,041,949 Temporarily restricted: NYP/Lawrence Hospital 18,675 – Held by related organizations 1,527,247 1,507,968 Total temporarily restricted 1,545,922 1,507,968 Permanently restricted: NYP/Lawrence Hospital 4,684 – Held by related organizations 249,621 245,396 Total permanently restricted 254,305 245,396 Total net assets 5,095,423 4,795,313 Total liabilities and net assets $ 8,017,498 $ 7,370,876

See accompanying notes.

4 The New York and Presbyterian Hospital

Consolidated Statements of Operations

Year Ended December 31 2014 2013 (In Thousands) Operating revenues Net patient service revenue (Note 2) $ 4,373,531 $ 4,050,632 Provision for bad debts (Note 2) (59,465) (54,081) Net patient service revenue, less provision for bad debts 4,314,066 3,996,551 Other revenue (Note 11) 262,517 267,959 Total operating revenues 4,576,583 4,264,510

Operating expenses Salaries and wages 2,091,118 1,945,813 Employee benefits 584,473 551,330 Supplies and other expenses 1,374,425 1,270,885 Interest and amortization of deferred financing fees 46,264 39,022 Depreciation and amortization 259,938 255,297 Total operating expenses 4,356,218 4,062,347

Operating income 220,365 202,163

Investment return (Note 3) 62,885 153,945 Excess of revenues over expenses before inherent contribution of unrestricted net assets received in the acquisition of NYP/Lawrence Hospital and net medical resident tax refund 283,250 356,108

Inherent contribution of unrestricted net assets received in the acquisition of NYP/Lawrence Hospital (Note 1) 82,218 – Net medical resident tax refund – 214 Excess of revenues over expenses 365,468 356,322

Other changes in unrestricted net assets: Transfer of fixed assets from Royal Charter Properties, Inc. (Note 10) – 3,191 Deed of property, building and equipment to Royal Charter Properties, Inc. (Note 10) (16,160) – Distributions from New York-Presbyterian Fund, Inc. for the purchase of fixed assets (Note 10) 83,186 77,785 Change in pension and postretirement benefit liabilities to be recognized in future periods (Note 9) (179,247) 157,787 Change in unrestricted net assets $ 253,247 $ 595,085

See accompanying notes.

5 The New York and Presbyterian Hospital

Consolidated Statements of Changes in Net Assets

Net assets at January 1, 2013 $ 2,446,864 $ 12,857 $ 6,710 $ 574,237 $ 462,576 $ 197,207 $ 1,234,020 $ 228,804 $ 3,929,255 Change in unrestricted net assets 595,085 – – – – – – – 595,085 Transfer of donor-restricted net assets to New York-Presbyterian Fund, Inc. (Note 10) – (12,857) (6,710) – – – – – (19,567) Changes in beneficial interest in net assets held by related organizations (Note 7) – – – 174,677 75,047 24,224 273,948 16,592 290,540 Changes in net assets 595,085 (12,857) (6,710) 174,677 75,047 24,224 273,948 16,592 866,058 Net assets at December 31, 2013 3,041,949 – – 748,914 537,623 221,431 1,507,968 245,396 4,795,313 Change in unrestricted net assets 253,247 – – – – – – – 253,247 Inherent contribution of restricted net assets received in the acquisition of NYP/Lawrence Hospital (Note 1) – 18,060 4,684 – – – – – 22,744 Restricted investment return and other – 615 – – – – – – 615 Changes in beneficial interest in net assets held by related organizations (Note 7) – – – 19,128 4,638 (4,487) 19,279 4,225 23,504 Changes in net assets 253,247 18,675 4,684 19,128 4,638 (4,487) 19,279 4,225 300,110 Net assets at December 31, 2014 $ 3,295,196 $ 18,675 $ 4,684 $ 768,042 $ 542,261 $ 216,944 $ 1,527,247 $ 249,621 $ 5,095,423

See accompanying notes.

The New York and Presbyterian Hospital

Consolidated Statements of Cash Flows

Year Ended December 31 2014 2013 (In Thousands) Operating activities Change in net assets $ 300,110 $ 866,058 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 259,938 255,297 Amortization of deferred financing costs, deferred revenue, fair value adjustment to debt related to NYP/LMH acquisition and mortgage discount 3,677 2,603 Distributions from New York-Presbyterian Fund, Inc. for the purchase of fixed assets (83,186) (77,785) Equity in earnings of common collective/commingled trusts and alternative investments (29,674) (85,627) Net realized gains on sales of investment companies (8,840) (1,925) Change in unrealized gains and losses 12,489 (39,576) Restricted contributions (1,512) – Deed of property, building and equipment to Royal Charter Properties, Inc. 16,160 – Inherent contribution received in the acquisition of NYP/Lawrence Hospital (104,962) – Transfer of fixed assets from Royal Charter Properties, Inc. – (3,191) Changes in operating assets and liabilities: Patient accounts receivable 61,407 (93,481) Other assets (7,394) 14,469 Beneficial interest in net assets held by related organizations (23,504) (290,540) Accounts payable and accrued expenses 60,402 14,213 Accrued salaries and related liabilities 24,975 (35,383) Due to/from related organizations – net (17) 9,329 Other liabilities 48,234 27,483 Professional liabilities and other and related insurance recoveries receivable (19,587) 6,391 Pension and postretirement benefit liabilities 161,551 (177,688) Net cash provided by operating activities 670,267 390,647

Investing activities Net purchases of short-term investments (186,241) (111,726) Acquisitions of property, buildings and equipment, net (414,081) (319,052) Net purchases of assets limited as to use (2,895) (459,827) Cash received in acquisition of NYP/Lawrence Hospital 19,967 – Cash transferred to Royal Charter Properties, Inc. (23) – Net cash used in investing activities (583,273) (890,605)

Financing activities Repayments of long-term debt (114,403) (98,164) Proceeds from issuance of long-term debt – 500,000 Payment of deferred financing costs – (8,537) Restricted contributions 1,512 – Distributions from New York-Presbyterian Fund, Inc. for the purchase of fixed assets 83,186 77,785 Net cash (used in) provided by financing activities (29,705) 471,084

Net increase (decrease) in cash and cash equivalents 57,289 (28,874) Cash and cash equivalents at beginning of year 152,982 181,856 Cash and cash equivalents at end of year $ 210,271 $ 152,982

Supplemental disclosure of cash flow information Accruals for the acquisition of property and equipment $ 4,342 – Assets acquired under capitalized lease obligations $ 11,654 $ 14,236

See accompanying notes.

7 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements

December 31, 2014

1. Organization and Basis of Presentation and Significant Accounting Policies

Organization and Basis of Presentation: The accompanying consolidated financial statements include the accounts of The New York and Presbyterian Hospital (NYPH) and NYP Community Services, Inc. (Community Services), of which NYPH is the sole member. The reporting entity resulting from the consolidation of these entities is referred to herein as the “Hospital.” All significant intercompany balances and transactions have been eliminated in consolidation.

On July 1, 2013, New York Downtown Hospital (NYDH) and its controlled affiliates, an entity under common control with NYPH, merged into NYPH, at which time the operating facilities of NYDH became the sixth campus of NYPH, and NYDH was renamed New York- Presbyterian/Lower Manhattan Hospital (referred to herein as NYP/LMH or Lower Manhattan Hospital). This transaction was accounted for similar to a pooling of interests with retrospective adjustment in prior period financial statements for the period in which the entities were under common control. Therefore, the accompanying consolidated financial statements as of and for the years ended December 31, 2014 and 2013 reflect the financial position, operations, changes in net assets and cash flows of the Hospital, including NYP/LMH, as if the merger had been completed on September 6, 2012, the date that NYDH and NYPH came under common control.

On July 1, 2014 (the Acquisition Date), Community Services acquired Lawrence Hospital Center and Subsidiaries, consisting of a 291-bed approved acute care hospital located in Bronxville, New York, a certified home health agency, a certified hospice program, a bereavement center, a durable medical equipment company and Lawrence Medical Associates, P.C., a State of New York professional corporation, and renamed it NewYork-Presbyterian/Lawrence Hospital (referred to herein as NYP/Lawrence Hospital or Lawrence). Community Services acquired NYP/Lawrence Hospital by means of an inherent contribution, in which no consideration was transferred by Community Services or NYPH. Community Services accounted for this business combination by applying the acquisition method and, accordingly, the inherent contribution

8 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued) received was valued as the excess of the value of NYP/Lawrence Hospital’s assets over liabilities. In determining the inherent contribution received, all assets and liabilities were measured at fair value as of the Acquisition Date. The results of Lawrence’s operations have been included in the consolidated financial statements since the Acquisition Date.

The following table summarizes the estimated fair values of NYP/Lawrence Hospital’s assets and liabilities at the Acquisition Date (in thousands):

Liabilities Accounts payable and accrued expenses 15,082 Other current liabilities 15,739 Long-term debt 35,616 Pension liability 71,544 Other noncurrent liabilities 45,309 Total liabilities 183,290

Excess of assets over liabilities $ 104,962

Net assets acquired Unrestricted $ 82,218 Temporarily restricted 18,060 Permanently restricted 4,684 Total net assets $ 104,962

9 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

The following table summarizes amounts attributable to NYP/Lawrence Hospital from the Acquisition Date through December 31, 2014 that are included in the accompanying 2014 consolidated statement of operations and consolidated statement of changes in net assets (in thousands):

Period From July 1, 2014 to December 31, 2014

Net patient service revenue, less provision for bad debts $ 107,835 Other revenue 3,148 Total operating revenues 110,983 Total operating expenses 112,505 Operating income (1,522) Investment loss (441) Deficiency of revenue over expenses (1,963) Change in pension and postretirement benefit liabilities to be recognized in future periods (24,723) Change in unrestricted net assets $ (26,686)

Change in temporarily restricted net assets $ 615

Change in permanently restricted net assets $ –

10 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

The following table represents unaudited pro forma financial information for the Hospital, assuming the acquisition of NYP/Lawrence Hospital had taken place on January 1, 2013 (in thousands). The unaudited pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transaction been effected on January 1, 2013 and excludes the unrestricted contribution received in the acquisition of NYP/Lawrence Hospital.

Year Ended December 31 2014 2013

Net patient service revenue, less provision for bad debts $ 4,425,913 $ 4,222,244 Other revenue 266,159 273,905 Total operating revenues 4,692,072 4,496,149 Total operating expenses 4,455,792 4,291,334 Operating income 236,280 204,815 Investment return and other 64,577 159,080 Excess of revenue over expenses 300,857 363,895 Other changes in unrestricted net assets (149,946) 272,191 Change in unrestricted net assets $ 150,911 $ 636,086

Change in temporarily restricted net assets $ 21,248 $ 264,856

Change in permanently restricted net assets $ 4,225 $ 9,882

11 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

The following is a summary of significant accounting policies:

Cash and Cash Equivalents and Short-term Investments: The Hospital classifies as cash equivalents all highly liquid financial instruments with a maturity of three months or less when purchased, excluding those held in short-term investments and assets limited as to use. Investments that are readily marketable and that are not classified as assets limited as to use are considered short-term investments and are classified as current assets. Short-term investments are used for cash management purposes and consist of cash and cash equivalents, fixed income and equity securities. At December 31, 2014 and 2013, the Hospital’s cash and cash equivalents include money market funds and interest-bearing accounts that are not fully insured by the U.S. government.

12 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

13 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

Investments received as a gift are recorded at fair value on the date of contribution.

Beneficial Interest in Net Assets Held by Related Organizations: The Hospital recognizes its accumulated interest in the net assets held by New York Presbyterian Fund, Inc. (Fund, Inc.) and The New York Weill Cornell Medical Center Fund, Inc. (WCMC Fund) as beneficial interest in net assets held by related organizations in its consolidated statements of financial position and also recognizes the periodic changes in such interests in its consolidated statements of changes in net assets.

14 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

Deferred Financing Costs: Capitalized financing costs are included in other noncurrent assets and are amortized using the effective interest method over the term that the related debt is expected to be outstanding.

15 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

Operating Leases: Scheduled base rent increases under operating leases are recognized as rental expense on a straight-line basis over the lease term.

Program Services: The Hospital’s program services consist of providing health care and related services, including graduate medical education. For the years ended December 31, 2014 and 2013, expenses related to providing these services are summarized as follows (in thousands):

2014 2013

Health care and related services $ 3,523,022 $ 3,331,125 Program support and general services 833,196 731,222 $ 4,356,218 $ 4,062,347

The Hospital maintains academic affiliations with two medical colleges: The Columbia University College of Physicians & Surgeons and the Joan and Sanford I. Weill Medical College of Cornell University (collectively, the Schools). Transactions occur on a routine basis between the Hospital and the Schools, based upon arrangements between the parties. Performance Indicator: The accompanying consolidated statements of operations include excess of revenues over expenses as the performance indicator. Excluded from the performance indicator are permanent transfers of assets to or from related entities and changes in pension and postretirement benefit liabilities to be recognized in future periods. Transactions deemed by management to be ongoing, major or central to the provision of health care services are reported as operating revenue and operating expenses and included in operating income. Investment return and certain transactions of an infrequent nature are excluded from operating income.

16 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

1. Organization and Basis of Presentation and Significant Accounting Policies (continued)

Tax Status: The entities comprising the Hospital, with the exception of LC Services, Inc., are Section 501(c)(3) organizations exempt from Federal income taxes under Section 501(a) of the Internal Revenue Code. These entities are also exempt from New York State income taxes. NYPH is exempt from New York City income taxes.

LC Services, Inc. is an inactive for-profit durable medical equipment company.

Reclassifications: Certain categories within investments were reclassified in Notes 7 and 13 from the 2013 presentation in order to conform with the 2014 presentation. These reclassifications have no impact on the net assets previously reported.

Recent Accounting Pronouncement: In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance in ASU 2014-09 supersedes the FASB’s current revenue recognition requirements and most industry-specific guidance. The provisions of ASU 2014- 09 are effective for the Hospital for annual reporting periods beginning after December 15, 2016, although subject to postponement. Early application is not permitted. The Hospital has not completed the process of evaluating the impact of ASU 2014-09 on the consolidated financial statements.

2. Net Patient Service Revenue

Net Patient Service Revenue and Accounts Receivable

17 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

2. Net Patient Service Revenue (continued) from rates of the highest volume commercial payor for outpatient. The effect of this policy on the consolidated financial statements is lower net patient service revenue, as the discount is considered an allowance.

Patient service revenue for the years ended December 31, 2014 and 2013, net of contractual allowances and discounts (but before the provision for bad debts), recognized from these major payor sources based on primary insurance designation, is as follows (in thousands):

2014 2013

Third-party payors $ 4,292,014 $ 3,974,176 Self-pay 81,517 76,456 $ 4,373,531 $ 4,050,632

Accounts receivable is recorded at its expected net realizable value. In evaluating the collectibility of accounts receivable, the Hospital analyzes its past history and identify trends for each of its major payor sources of revenue to estimate the appropriate allowance for doubtful accounts and provision for bad debts. Management regularly reviews data about these major payor sources of revenue in evaluating the sufficiency of the allowance for doubtful accounts.

The allowance for doubtful accounts for self-pay patients was approximately 46% and 52% of self-pay accounts receivable as of December 31, 2014 and 2013, respectively. The Hospital did not experience significant changes in write-off trends and did not change its charity care policy in 2014 or 2013.

Third-Party Payment Programs

18 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

2. Net Patient Service Revenue (continued)

The Hospital has established estimates, based on information presently available, of amounts due to or from Medicare and non-Medicare payors for adjustments to current and prior years’ payment rates, based on industry-wide and Hospital-specific data. Medicare cost reports, which serve as the basis for final settlement with the Medicare program, have been audited by the Medicare fiscal intermediary and settled through 2001 for NYPH, 2008 for NYP/LMH and 2011 for NYP/Lawrence Hospital. Other years and various issues remain open for audit and settlement, as are numerous issues related to the New York State Medicaid program for prior years. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount when open years are settled, audits are completed and additional information is obtained. The current Medicaid, Medicare and other third-party payor programs are based upon extremely complex laws and regulations that are subject to interpretation. Non-compliance with such laws and regulations could result in fines, penalties and exclusion from such programs. The Hospital is not aware of any allegations of non-compliance that could have a material adverse effect on the accompanying consolidated financial statements and believe that it is in compliance with all applicable laws and regulations. During 2014 and 2013, the Hospital revised estimates made in prior years to reflect the passage of time and the availability of more recent information, such as settlement activity, associated with the related payment items. For the years ended December 31, 2014 and 2013, the net effect of the Hospital’s revisions to prior year estimates resulted in net patient service revenue increasing by approximately $48.9 million and $38.4 million, respectively.

19 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

2. Net Patient Service Revenue (continued)

There are various proposals at the federal and state levels that could, among other things, significantly reduce payment rates or modify payment methods. The ultimate outcome of these proposals and other market changes, including the potential effects of health care reform that has been enacted by the federal government, cannot be determined presently. Future changes in the Medicare and Medicaid programs and any reduction of funding could have an adverse impact on the Hospital. Additionally, certain payors’ payment rates for various years have been appealed by the Hospital. If the appeals are successful, additional income applicable to those years could be realized.

2014 2013

Medicare 17% 21% Medicaid 16 17 Commercial carriers and health maintenance organizations 55 55 Self-pay patients 12 7 100% 100%

Revenue from the Medicare and Medicaid programs accounted for approximately 42% and 44% of the Hospital’s net patient service revenue for the years ended December 31, 2014 and 2013, respectively.

Uncompensated Care and Community Benefit Expense

20 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

2. Net Patient Service Revenue (continued)

The Hospital believes it is important to quantify comprehensively the benefits it provides to the community, which is an area of emphasis for not-for-profit health care providers. The costs of uncompensated care and community benefit activities are derived from various Hospital records. Amounts for activities as reported below are based on estimated and actual data, subject to changes in estimates upon the finalization of the Hospital’s cost report and other government filings. The amounts reported below are calculated in accordance with guidelines prescribed by the Internal Revenue Service (IRS); 2013 estimates have been updated to reflect actual amounts. The net cost of charity care includes the direct and indirect cost of providing charity care services, offset by revenues received from indigent care pools and other subsidies. The cost is estimated by utilizing a ratio of cost to gross charges applied to the gross uncompensated charges associated with providing charity care. Funds received to offset bad debt and charity services totaled approximately $54.5 million and $53.4 million for the years ended December 31, 2014 and 2013, respectively, including approximately $52.6 million and $51.7 million, respectively, from the indigent care pool under the New York State Medicaid program. The charity care component of the indigent care pool payments (approximately 64% for 2014 and 2013) is estimated utilizing a ratio of charity care charges to total charity care and bad debt charges applied to the indigent care pool reimbursement.

21 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

2. Net Patient Service Revenue (continued)

Costs related to uncompensated care and community benefit activities are summarized for the years ended December 31, 2014 and 2013 as follows (in thousands):

2014 2013

Charity care, net(a) $ 35,224 $ 27,945 Means-tested programs(b) 246,314 231,447 Other community benefits(c)(d) 395,645 337,630 Total charity care and other community benefits $ 677,183 $ 597,022

Charity care, at cost, and means-tested programs include the following (and exclude losses incurred on providing services to Medicare patients):

(a) Charity Care: As part of its charity care and financial aid policy, the Hospital obtains and uses additional financial information for uninsured or under-insured patients who have not supplied the requisite information to qualify for charity care. The additional information obtained is used by the Hospital to determine whether to qualify patients for charity care and/or financial aid in accordance with the Hospital’s policies. The Hospital makes available free care programs for qualifying patients under its charity care and financial aid policy. During the registration, billing and collection process, a patient’s eligibility for free care funds is determined. For patients who do not receive free care and who are determined to be eligible for charity care in the form of discounted medical services under the Hospital’s charity care and financial aid policy, care given but not paid for is classified as charity care. For patients who were determined by the Hospital to have the ability to pay but did not, the uncollected amounts are classified as provision for bad debt (approximately $59.5 million in 2014 and $54.1 million in 2013). Distinguishing between bad debt and charity care is difficult, in part because services are often rendered prior to full evaluation of a patient’s ability to pay. Annually, the Hospital accrues for potential losses that meet the definition of charity care (including free and discounted medical care) allowances.

22 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

2. Net Patient Service Revenue (continued)

extent Medicaid payments are less than the cost of care provided to Medicaid patients, the uncompensated cost of that care is considered to be a community benefit.

Other community benefits include the following:

23 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

3. Investments and Assets Limited as to Use

The composition and reported value of assets limited as to use, excluding assets held by related organizations (see Note 7), at December 31, 2014 and 2013 consist of the following (in thousands):

2014 2013

Marketable securities, carried at fair value (Note 13) $ 997,490 $ 915,198

Investments accounted for using the equity method: Equities and bonds held in common collective/commingled trusts: U.S. equities 82,306 80,106 Corporate bonds 5,195 16,797 Non-U.S. equities 124,291 118,827 Non-U.S. government bonds 12,302 11,859 Total equities and bonds held in common collective/commingled trusts 224,094 227,589

Hedge funds 197,731 168,415 Private equity 154,933 131,904 Private real assets 94,311 75,714 Total investments accounted for using the equity method 671,069 603,622 Pledges receivable – net 2,914 – Total assets limited as to use 1,671,473 1,518,820 Less current portion 32,788 28,390 Assets limited as to use – noncurrent $ 1,638,685 $ 1,490,430

See Note 13 for a description of the common collective/commingled trusts, hedge funds, private equity and private real asset categories.

24 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

3. Investments and Assets Limited as to Use (continued)

Assets limited to use at December 31, 2014 and 2013 are limited to the following uses (in thousands):

2014 2013

Funded depreciation $ 944,102 $ 834,473 Funds held under loan agreements 622,089 640,562 Employee benefit funds 30,960 25,045 Funded self-insurance (professional liabilities) (Note 8) 20,894 15,125 Secured letters of credit 3,465 3,460 Investments held by captive insurance company (Note 8) 26,604 – Donor restricted 23,359 155 $ 1,671,473 $ 1,518,820

Funds held under loan agreements are for the following purposes (in thousands):

2014 2013

Construction escrow (Note 5) $ 488,894 $ 500,149 Mortgage reserve funds 119,156 118,035 Escrow fund (Note 5) 1,002 10,576 Capital reserve fund 3,523 3,522 Debt service fund 7,476 3,544 Capital lease agreements (Note 5) 142 142 Other 1,896 4,594 $ 622,089 $ 640,562

Investment return for the years ended December 31, 2014 and 2013 consisted of the following (in thousands):

2014 2013

Interest and dividend income $ 36,860 $ 26,817 Net realized gains on sales of investments 8,840 1,925 Equity in earnings of common collective/commingled trusts and alternative investment companies 29,674 85,627 Net change in unrealized gains and losses (12,489) 39,576 $ 62,885 $ 153,945

25 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

4. Property, Buildings, and Equipment

A summary of property, buildings, and equipment at December 31, 2014 and 2013 follows (in thousands):

2014 2013

Land and land improvements $ 224,700 $ 240,882 Buildings, building improvements, and fixed equipment 2,837,031 3,514,441 Movable equipment 814,534 1,256,524 Leasehold improvements 5,762 11,171 3,882,027 5,023,018 Less accumulated depreciation and amortization 1,820,835 3,041,724 2,061,192 1,981,294 Construction-in-progress 343,496 187,924 $ 2,404,688 $ 2,169,218

Substantially all property, buildings and equipment have been pledged as collateral under various debt agreements (see Note 5).

At December 31, 2014 and 2013, assets recorded in connection with capital leases aggregated approximately $101.1 million and $162.2 million, respectively, with accumulated amortization aggregating approximately $75.2 million and $129.7 million, respectively.

The Hospital leases certain buildings from Royal Charter Properties – Westchester, Inc., a related entity (see Note 10).

26 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt

A summary of long-term debt at December 31, 2014 and 2013 follows (in thousands):

2014 2013

FHA Section 242 insured mortgage loan – 1998 – Downtown Campus(a) $ 242,591 $ 271,725 FHA Section 242 insured mortgage loans – 2004 – Uptown Campus(b) 14,743 56,832 FHA Section 241 insured mortgage loan – 2007(c) 246,427 255,268 Secured hospital revenue refunding bonds – 2011 – NYP/LMH Campus(d) 29,660 32,570 Beekman mortgage payable(e) – 7,352 FHA Section 241 insured mortgage loan – 2013(f) 486,076 497,277 Series 1998 bonds payable – NYP/Lawrence Hospital(g) 11,165 – Term loan payable – NYP/Lawrence Hospital(h) 23,761 – Capital leases(i) 45,482 53,615 1,099,905 1,174,639 Add unamortized fair value adjustment related to NYP/LMH acquisition 1,699 2,157 Less current portion 80,512 113,411 Long-term portion $ 1,021,092 $ 1,063,385

(a) FHA Section 242 Insured Mortgage Loan – 1998: NYPH’s original mortgage agreement with the Dormitory Authority of the State of New York (DASNY) is insured under the provisions of the U.S. Department of Housing and Urban Development Federal Housing Agency (FHA) Section 242 mortgage insurance program. During 2005, NYPH received $8.4 million from DASNY in relation to a release of assets held by DASNY in reserve under the mortgage note and recorded the receipts as an increase to NYPH’s deferred revenue balance in the accompanying consolidated statement of financial position. The deferred revenue is being amortized over the remaining life of the mortgage using the effective interest method.

27 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt (continued)

DASNY released to NYPH an additional $40.8 million of unused proceeds from the initial mortgage loan and NYPH received approximately $2.9 million from the IRS related to prior years’ bond proceeds arbitrage, all used for certain capital projects and as additional equity for the December 2010 transaction (see below). Additionally, the final endorsement resulted in NYPH’s debt escrow fund (approximately $12.5 million at final endorsement) being released for partial payment of the debt obligation at various future intervals.

In December 2010, DASNY assigned NYPH’s mortgage to Prudential Huntoon Paige Associates, Ltd. (Prudential). In connection therewith, DASNY bonds were defeased and Prudential issued new Government National Mortgage Association bonds to fund the mortgage loan. This transaction resulted in a reduction in the interest rate of the mortgage loan, effective December 15, 2010, to a fixed rate of 4.22% over the remaining term and required NYPH to make an equity contribution of $23.8 million ($15.1 million of the equity contribution was made, with the remaining balance of amounts held in assets limited as to use as part of the final endorsement). The equity contribution is being amortized over the remaining life of the mortgage using the effective interest method and has a balance in noncurrent assets, net of accumulated amortization, of approximately $12.5 million and $14.9 million at December 31, 2014 and 2013, respectively. All other material terms of the mortgage remained the same. (b) FHA Section 242 Insured Mortgage Loans – 2004: NYPH has two mortgage loans, with identical terms most recently amended in 2004, issued through DASNY. The two mortgage loans are insured under the provisions of the FHA Section 242 mortgage insurance program. The mortgage loans are payable monthly through April 2015 and carry an interest rate of 7.5%. In connection with a 1998 revision to one of the original mortgage notes, deferred revenue with an initial balance of $29.5 million was recognized, reflecting the present value of the interest rate savings that were advanced to NYPH upon creation of the 1998 mortgage. The deferred revenue is being amortized over the remaining life of the mortgage using the effective interest method.

28 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt (continued)

(c) FHA Section 241 Insured Mortgage Loan – 2007: In September 2007, DASNY issued $296.1 million of The New York and Presbyterian Hospital FHA-Insured Mortgage Hospital Revenue Bonds, Series 2007. A portion of the proceeds of the bonds was used to fund a mortgage loan from DASNY to NYPH. The maximum principal amount of $278.5 million incorporated a discount of $5.4 million. The mortgage is insured under the provisions of the FHA Section 241 mortgage insurance program. The mortgage bore interest at a rate of 6.5% through May 31, 2010 and 4.9% through July 31, 2012 (in addition, NYPH paid an incremental rate of 1.6% until final endorsement). On August 7, 2012, NYPH completed final endorsement and the terms of the mortgage were amended and, effective August 1, 2012, interest was to be paid at a rate of 4.55%. The remaining amortization schedule was finalized, with principal and interest payments through June 1, 2035. In addition, the final endorsement resulted in the termination of NYPH’s letter of credit with a bank that provided security for equity contributions required under the plan of financing.

(d) Secured Hospital Revenue Refunding Bonds – 2011: In March 2011, NYP/LMH issued $32.6 million of Secured Hospital Revenue Refunding Bonds – 2011 through DASNY. The bonds bear interest at a fixed interest rate of 5%, payable semi-annually, with a final maturity date of February 15, 2022. NYP/LMH has granted to DASNY, with certain permitted exceptions, a security interest in gross receipts and certain fixtures, furnishings and equipment that secure the payment of the debt. The bonds are further secured by amounts, if required, that would be payable under a service contract between DASNY and the State of New York.

29 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt (continued)

In January 2005, in connection with the then outstanding NYP/LMH Series 1998 Bonds, DASNY required NYP/LMH to fund an escrow account with two years of principal and interest payments on the outstanding bonds (approximately $10.6 million at December 31, 2013 (see Note 3)). In May 2014, NYPH obtained approval from DASNY to release the funds from the escrow account.

(e) Beekman Mortgage Payable: In July 1977, NYP/LMH, through an affiliate, entered into an agreement with the New York City Housing Development Corporation (HDC), whereby the then existing mortgage agreement was modified and the mortgage debt was divided into a senior mortgage (bore interest at 7.25%), which was insured by the U.S. Secretary of Housing and Urban Development (HUD) and a junior mortgage (bore interest at 7.82%) which was held by HDC. HDC administered both the senior and junior mortgages.

In September 2014, the mortgage was transferred to Royal Charter Properties, Inc. (RCP, Inc.) in connection with the deeding of the mortgaged property, building and equipment to RCP, Inc. (see Note 10). Concurrently, the debt was refinanced by RCP, Inc. through a commercial bank.

(g) Series 1998 Bonds Payable: In June 1998 and December 1998, the County of Westchester Industrial Development Agency issued $10.7 million of Series 1998A bonds and $10.8 million of Series 1998B bonds. The Series 1998A bonds mature at varying dates through January 1, 2018, with fixed interest rates ranging from 3.80% to 5.13% payable semiannually. The Series 1998B bonds mature at varying dates through January 1, 2028, with fixed interest rates ranging from 4.20% to 5.00% payable semiannually.

30 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt (continued)

a six-room operating suite on Lawrence’s property. The loan is payable over 144 months. Interest is charged on the amount outstanding at a fixed rate of 4.29% per annum.

Estimated principal payments under all long-term debt (reflective of amounts obligated to date) for the next five years and thereafter consist of the following (in thousands):

2015 $ 65,718 2016 46,757 2017 48,696 2018 50,719 2019 51,962 Thereafter 790,571

Pursuant to debt agreements, NYPH and NYP/Lawrence Hospital are required to maintain certain debt service funds, including mortgage reserve funds. In addition, NYPH and NYP/Lawrence Hospital are required to maintain certain working capital, debt service coverage and other financial ratios and financial conditions, and to obtain approval to incur additional debt above specified levels if certain covenant requirements are not met. Through December 31, 2014 and 2013, NYPH and NYP/Lawrence Hospital were in compliance with the financial covenants. The mortgages are collateralized by substantially all of NYPH and NYP/Lawrence Hospital’s property, buildings and equipment and gross receipts derived from operations.

In February 2015, NYPH issued $750.0 million in unsecured taxable bonds. The bonds bear interest at a fixed rate of 4.0%. The bonds have a final maturity date of August 1, 2045.

(i) Capital Leases: Certain equipment leases are the equivalent of an installment purchase for purposes of financial statement reporting. The lenders hold a first security interest in the financed equipment. NYPH has entered into several capital lease financing agreements with commercial lenders in conjunction with DASNY’s tax-exempt lease program. The total amount outstanding related to the tax-exempt lease program is approximately $6.4 million and $13.4 million at December 31, 2014 and 2013, respectively. The Hospital entered into several other capital leases in 2014 and 2013, totaling approximately $11.7 million and $14.2 million, respectively. Interest rates related to the Hospital’s outstanding capital lease obligations range from 1.7% to 6.5%.

31 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

5. Long-Term Debt (continued)

Following is a summary of payments due under capital lease obligations for the years ending December 31 (in thousands):

2015 $ 16,467 2016 12,405 2017 9,492 2018 4,965 2019 2,786 Thereafter 2,292 48,407 Less imputed interest 2,925 $ 45,482

Interest paid under all borrowings for the years ended December 31, 2014 and 2013 aggregated approximately $46.9 million and $39.6 million, respectively.

NYPH has a $100.0 million unsecured line of credit agreement with a bank which expires on June 30, 2015. NYP/Lawrence Hospital has a $5.0 million revolving loan agreement with TD Bank, N.A. The line of credit is renewable annually. There were no borrowings on the lines of credit during the year ended December 31, 2014.

32 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

6. Operating Leases

Total rental expense for the years ended December 31, 2014 and 2013, aggregated approximately $60.6 million and $56.9 million, respectively. Sublease income and contingent rentals were not significant. The Hospital leases certain properties owned by related entities (see Note 10).

Future minimum lease payments under non-cancellable operating leases with initial or remaining terms of one year or more at December 31, 2014 consisted of the following (in thousands):

2015 $ 56,302 2016 47,341 2017 44,621 2018 41,842 2019 39,289 Thereafter 102,701

7. Beneficial Interest in Net Assets Held by Related Organizations

The Hospital recognizes its accumulated interest in net assets held by Fund, Inc. and WCMC Fund, which were as follows at December 31, 2014 and 2013 (in thousands):

2014 2013 Temporarily restricted: Fund, Inc.: Building and equipment replacement $ 768,042 $ 748,914 Specific purpose health care services 542,261 537,623 Endowment earnings restricted for specific-purpose health care services 216,944 221,431 1,527,247 1,507,968 Permanently restricted: Fund, Inc. – Investments to be held in perpetuity 213,726 211,090 WCMC Fund – Investments held in perpetual trust 35,895 34,306 249,621 245,396 Total beneficial interest in net assets held by related organizations 1,776,868 1,753,364 Less current portion 78,699 68,420 $ 1,698,169 $ 1,684,944

33 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

7. Beneficial Interest in Net Assets Held by Related Organizations (continued)

34 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

7. Beneficial Interest in Net Assets Held by Related Organizations (continued)

2014 2013 Marketable securities: Cash and cash equivalents $ 103,271 $ 86,717 Fixed income: U.S. government 119,919 92,467 Non-U.S. government 11,229 22,010 Corporate 1,465 8,378 Mortgage and asset backed – 7,463 Other – 2,463 Common collective/commingled trusts 24,574 43,814 Equities: U.S. equities 91,625 98,857 Non-U.S. equities 70,824 75,790 Common collective/commingled trusts 245,716 249,116 Real assets 31,811 18,185 Total marketable securities 700,434 705,260

Hedge funds 268,226 251,017 Private equity 186,463 178,386 Private real assets 112,948 98,388 Total investments 1,268,071 1,233,051 Pledges receivable, net 472,902 486,007 1,740,973 1,719,058 WCMC Fund: Investment held in perpetual trusts 35,895 34,306 Total beneficial interests in net assets held by related organizations 1,776,868 1,753,364 Less current portion 78,699 68,420 $ 1,698,169 $ 1,684,944

The current portion of beneficial interest in net assets held by related organizations represents amounts the Hospital expects to receive and expend on operations in the subsequent year.

35 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

7. Beneficial Interest in Net Assets Held by Related Organizations (continued)

Pledges receivable by Fund, Inc., net of present value discount and valuation allowance of approximately $106.0 million and $119.0 million at December 31, 2014 and 2013, respectively, are to be paid as follows (in thousands):

December 31 2014 2013

Less than one year $ 160,112 $ 140,214 One to five years 152,379 181,326 Thereafter 160,411 164,467 $ 472,902 $ 486,007

Fund, Inc. uses a discount and valuation allowance factor of 7.35%. The discount and valuation allowance reflects the time value of money and credit risk.

36 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

7. Beneficial Interest in Net Assets Held by Related Organizations (continued)

Changes in the net assets held by Fund, Inc. and WCMC Fund on the Hospital’s behalf are recognized in the Hospital’s consolidated statements of changes in net assets for the years ended December 31, 2014 and 2013 and are summarized as follows (in thousands):

Temporarily Restricted Plant Specific Endowment Total Temporarily Permanently Total Interest Replacement Purpose Earnings Restricted Restricted in Net Assets Year ended December 31, 2014 Gifts, bequests, and similar items $ 88,461 $ 47,240 $ – $ 135,701 $ 4,272 $ 139,973 Net investment income and realized and unrealized gains and losses 24,561 28,418 745 53,724 (47) 53,677 Net assets released from restrictions for administrative and fund raising costs (8,215) (5,861) (4,744) (18,820) – (18,820) Net assets released from restrictions for program expenditures (13,199) (65,056) (444) (78,699) – (78,699) Net assets released from restrictions for distribution to the Hospital for the purchase of fixed assets (72,480) (103) (44) (72,627) – (72,627) Changes in net assets $ 19,128 $ 4,638 $ (4,487) $ 19,279 $ 4,225 $ 23,504

Year ended December 31, 2013 Gifts, bequests, and similar items $ 194,792 $ 96,178 $ – $ 290,970 $ 2,727 $ 293,697 Net investment income and realized and unrealized gains and losses 61,984 43,779 29,215 134,978 7,155 142,133 Net assets released from restrictions for administrative and fund raising costs (7,073) (5,697) (4,856) (17,626) – (17,626) Net assets released from restrictions for program expenditures (1,114) (67,454) (108) (68,676) – (68,676) Net assets released from restrictions for distribution to the Hospital for the purchase of fixed assets (74,759) (3,617) (27) (78,403) – (78,403) Transfer of donor-restricted net assets related to Lower Manhattan Hospital 847 11,858 – 12,705 6,710 19,415 Changes in net assets $ 174,677 $ 75,047 $ 24,224 $ 273,948 $ 16,592 $ 290,540

The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

8. Insurance

Professional Liability Insurance: In 1978, the Hospital, in conjunction with a number of unrelated health care entities, participated in the formation of captive insurance companies (collectively, the Captive) to provide professional liability and general liability insurance to its participants. The premiums are based on a modified claims-made coverage and are actuarially determined based on the actual experience of the Captive, Hospital-specific experience, and estimated current exposure. The Captive has reinsurance coverage from reinsurers for certain amounts above its coverage level per claim limits. The investments in the Captive are owned by Fund, Inc. Accordingly, insurance premiums are paid by the Hospital initially to Fund, Inc. (see Note 10). Effective July 1, 2013, NYP/LMH is insured by the Captive. Prior to July 1, 2013, NYP/LMH was covered by various self-insured, claims-made and excess insurance policies. Most recently, effective July 1, 2009, NYP/LMH increased its claims-made self-insured program to $6.0 million with a retroactive date of August 6, 2003. The primary layer consists of $2.0 million per claim with a $10.0 million aggregate (the aggregate includes $1.5 million of general liability coverage) followed by an excess layer of $4.0 million per claim and aggregate limit (the excess excludes general liability). For this layer, however, NYP/LMH has the option to activate claims-made coverage from an insurance company for a specified premium. The purchase option can be activated at any point during the next seven years after inception and the coverage applies to all claims in the layer from the July 1, 2009 inception date. Effective August 1, 2014, Lawrence is insured by the Captive. Effective November 15, 1998, Lawrence and certain other member hospitals of Stellaris Health Network (Stellaris), Lawrence’s former active parent, participated in a combined insurance program that provided coverage through purchased primary and excess insurance on a claims-made basis. Effective January 1, 2004, Lawrence purchased excess professional liability insurance above its primary placement layer on a claims-made basis with a prepaid tail liability endorsement from a captive insurance company formed by Stellaris, NWLP Insurance Company Ltd. (NWLP). Effective June 30, 2014, NWLP implemented a segregated “cell captive” structure which replaced the previous insurance structure. Under this program, NWLP utilizes individual cells for each participating hospital, under which invested assets and insurance-related liabilities are segregated for each participant and there is no shared risk among the entities.

38 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

8. Insurance (continued)

Lawrence’s investments under the cell captive structure and the related changes in its segregated account as reported by NWLP are recorded in the accompanying 2014 consolidated statement of financial position. At December 31, 2014, investments held by NWLP totaling approximately $26.6 million are included in assets limited as to use in the accompanying consolidated 2014 statement of financial position (see Note 3). Effective October 1, 2014, the NWLP prepaid tail liability endorsement was removed.

The Hospital’s undiscounted estimate for professional liabilities and the estimate for incidents that have been incurred but not reported aggregated approximately $430.8 million and $422.4 million at December 31, 2014 and 2013, respectively, and is included in professional liabilities in the accompanying statements of financial position at the actuarially determined present value of approximately $392.9 million and $381.4 million, respectively, based on a discount rate of 3.0% for each of the years ended December 31, 2014 and 2013 (the NYP/LMH self-insured liability of approximately $19.8 million and $26.1 million at December 31, 2014 and 2013, respectively, is undiscounted). The Hospital has recorded related insurance recoveries receivable of approximately $241.9 million and $226.2 million at December 31, 2014 and 2013, respectively, in consideration of the expected insurance recoveries for the total discounted modified claims-made insurance. Funded amounts (approximately $20.9 million and $15.1 million at December 31, 2014 and 2013, respectively, aside from the investments held in the segregated cell) have been placed in a separate account and are included in assets limited as to use in the accompanying consolidated statements of financial position. The current portion of professional liabilities and the related insurance recoveries receivable represents an estimate of expected settlements and insurance recoveries over the next 12 months. The Hospital’s estimates for professional liabilities are based upon complex actuarial calculations which utilize factors such as historical claims experience for the Hospital and related industry factors, trending models, estimates for the payment patterns of future claims and present value discount factors. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. Revisions to estimated amounts resulting from actual experience differing from projected expectations are recorded in the period the information becomes known or when changes are anticipated.

39 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

8. Insurance (continued)

Workers’ Compensation Insurance: Prior to April 1, 1999, the Hospital was self-insured for workers’ compensation claims. Since April 1, 1999, the Hospital has purchased insurance through the New York State Insurance Fund in a program that effectively transfers risk from the Hospital. At December 31, 2014 and 2013, the estimate for self-insured workers’ compensation claims and incurred but not reported liabilities prior to April 1, 1999, aggregated approximately $9.0 million and $10.6 million, respectively, and is included in professional liabilities in the accompanying consolidated statements of financial position.

9. Pension and Similar Benefit Plans

Pension Plans: The Hospital provides pension and similar benefits to its employees through several plans, including various multiemployer plans for union employees (see Note 14), a qualified noncontributory defined benefit plan primarily for eligible non-union employees of NYPH (the Qualified Pension Plan), a defined benefit retirement plan under a collective bargaining agreement for certain employees of NYP/LMH (the NYP/LMH Pension Plan), a noncontributory defined benefit retirement plan for eligible Lawrence employees (the Lawrence Pension Plan), a nonqualified defined benefit plan for certain NYPH executives (the Nonqualified Pension Plan) and a nonqualified defined benefit plan for certain Lawrence executives (the Lawrence Nonqualified Pension Plan) (the non-multiemployer plans are collectively referred to as the Pension Plans).

Through December 31, 2008, NYPH also provided pension and similar benefits to certain employees through a defined contribution plan. The employees who participated in the defined contribution plan became participants of the qualified defined benefit plan effective December 31, 2008, in a change that responded to certain regulatory requirements. Certain employees of NYP/LMH are covered under a defined contribution plan to which annual discretionary contributions are made based on percentages of both applicable salaries and voluntary contributions. The Hospital funds the noncontributory defined benefit plans in accordance with the minimum funding requirement of the Employee Retirement Income Security Act of 1974 (ERISA), plus additional amounts that the Hospital may deem appropriate from time to time. Amounts contributed to the Pension Plans are based on actuarial valuations.

40 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

The benefits for participants or their beneficiaries in the Pension Plans sponsored by the Hospital are based on years of service and employees’ compensation during their years of employment.

Postretirement Benefits: The Hospital provides certain health care and life insurance benefits to its retired non-union employees through several plans (the Postretirement Benefit Plans).

41 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

The reconciliation of the beginning and ending balances of the benefit obligation and the fair value of the plans’ assets for the years ended December 31, 2014 and 2013 is as follows (in thousands):

Postretirement Pension Plans Benefit Plans 2014 2013 2014 2013 Benefit obligation Benefit obligation at beginning of year* $ 1,220,474 $ 1,036,184 $ 33,589 $ 31,133 Service cost 58,540 55,889 316 290 Interest cost 51,948 40,912 1,136 1,013 Actuarial losses (gains) 160,579 (80,088) 2,338 (2,319) Plan amendment – – 129 – Effect of curtailment and settlement (2,226) (1,128) – – Medicare Part D subsidy – – 139 121 Plan participant contributions – – 172 203 Benefits paid (54,884) (47,236) (2,890) (2,729) Benefit obligation at end of year 1,434,431 1,004,533 34,929 27,712

Fair value of plan assets Fair value of plan assets at beginning of year* 1,106,951 814,061 – – Actual return on plan assets 46,511 110,727 – – Hospital contributions 64,338 80,253 2,718 2,526 Plan participant contributions – – 172 203 Effect of settlement (2,219) (1,128) – – Benefits paid (54,884) (47,236) (2,890) (2,729) Fair value of plan assets at end of year 1,160,697 956,677 – – Funded status $ (273,734) $ (47,856) $ (34,929) $ (27,712)

The actuarial loss in 2014 primarily relates to changes in the discount rate and mortality assumptions used to measure the projected benefit obligation.

42 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

At December 31, 2014 and 2013, the funded status of the pension and postretirement benefits plans are reported in the accompanying consolidated statements of financial position as follows (in thousands):

Postretirement Pension Plans Benefit Plans Total 2014 2013 2014 2013 2014 2013

Current liability $ 8,927 $ 9,223 $ 3,148 $ 2,889 $ 12,075 $ 12,112 Noncurrent liability 264,807 38,633 31,781 24,823 296,588 63,456 $ 273,734 $ 47,856 $ 34,929 $ 27,712 $ 308,663 $ 75,568

Included in other changes in unrestricted net assets for the years ended December 31, 2014 and 2013 are the following amounts that have not yet been recognized in net periodic pension and postretirement cost (in thousands):

Postretirement Pension Plans Benefit Plans Total 2014 2013 2014 2013 2014 2013 Unrecognized prior service cost $ 1,138 $ 1,758 $ 166 $ 142 $ 1,304 $ 1,900 Unrecognized actuarial loss 391,721 214,591 6,800 4,565 398,521 219,156 $ 392,859 $ 216,349 $ 6,966 $ 4,707 $ 399,825 $ 221,056

The change in net assets from pension and postretirement benefit liabilities to be recognized in future periods as reported in the accompanying consolidated statements of operations is a decrease of approximately $179.2 million and an increase of approximately $157.8 million for 2014 and 2013, respectively, and represents the combined change in the amounts for pension and postretirement benefits plans in the table above.

43 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

The prior service cost and actuarial loss included in changes in unrestricted net assets at December 31, 2014 that are expected to be recognized in net periodic pension and postretirement cost during the year ending December 31, 2015 are as follows (in thousands):

Pension Postretirement Plans Benefit Plans

Unrecognized prior service cost $ 416 $ 66 Unrecognized actuarial loss 27,485 403

The projected benefit obligation, accumulated benefit obligation, and fair value of the plans’ assets by defined benefit pension plan follow (in thousands):

December 31, 2014 Nonqualified Pension NYPH NYP/LMH Lawrence Plans

Projected benefit obligation $ 1,102,560 $ 45,267 $243,644 $ 42,960 Accumulated benefit obligation 1,087,066 43,627 213,197 30,638 Fair value of plans’ assets 978,790 29,702 152,205 –

December 31, 2013 Nonqualified Pension NYPH NYP/LMH Plan

Projected benefit obligation $ 931,644 $ 34,999 $ 37,890 Accumulated benefit obligation 919,960 33,902 27,659 Fair value of plans’ assets 931,882 24,795 –

44 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

Weighted-average assumptions used in determining the pension and postretirement benefits obligations as of December 31, 2014 and 2013 were as follows:

Postretirement Pension Plans Benefit Plans 2014 2013 2014 2013

Discount rate – NYPH 4.00% 4.75% 3.50% 4.00% Discount rate – NYP/LMH 4.00 4.75 – – Discount rate – Lawrence 4.00 – 3.75 – Rate of compensation increase – NYPH 3.50 3.50 – – Rate of compensation increase – NYP/LMH 4.00 4.00 – – Rate of compensation increase – Lawrence 4.00 – – –

Net periodic pension cost and postretirement benefits cost for the years ended December 31, 2014 and 2013 consist of the following (in thousands):

Postretirement Pension Plans Benefit Plans 2014 2013 2014 2013

Service cost $ 58,540 $ 55,889 $ 316 $ 290 Interest cost 51,948 40,912 1,136 1,013 Expected return on plan assets (79,783) (66,180) – – Net amortization of prior service cost 613 644 105 (67) Recognized actuarial loss 16,456 29,488 103 416 Recognized actuarial loss (gain) due to settlement 143 (13) – – Net periodic pension cost and postretirement benefits cost $ 47,917 $ 60,740 $ 1,660 $ 1,652

45 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

Weighted-average assumptions used in determining the net periodic pension and postretirement benefits cost for the years ended December 31, 2014 and 2013 were as follows:

Postretirement Pension Plans Benefit Plans 2014 2013 2014 2013

Discount rate – NYPH 4.75% 4.00% 4.00% 3.50% Discount rate – NYP/LMH 4.75 4.75 – – Discount rate – Lawrence 4.50 – 3.75 – Expected rate of return on plan assets – NYPH 7.75 7.75 – – Expected rate of return on plan assets – NYP/LMH 7.75 7.75 – – Expected rate of return – Lawrence 8.00 – – – Rate of compensation increase – NYPH 3.50 3.50 – – Rate of compensation increase – NYP/LMH 4.00 4.00 – – Rate of compensation increase – Lawrence 4.00 – – –

The overall expected long-term rate of return on assets of the Pension Plans is based on the historical returns of each asset class weighted by the target asset allocation. The target asset allocation has been selected consistent with the Hospital’s desired risk and return characteristics. The Hospital reviews the expected long-term rate periodically and, based on the building block approach, updates the rate for changes in the marketplace. The market conditions in 2014 and 2013 and changes in the pension asset allocations were considered in the Hospital’s evaluation of the expected long-term rate of return assumption.

46 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

In relation to the NYPH’s postretirement benefit plan (excluding the postretirement benefit plan for Lawrence), the weighted-average annual assumed rate of increase per capita cost of covered benefits (i.e., health care cost trend rate) is assumed to start at 6.70% and decrease to 4.50% by 2023. The health care cost trend rate assumption may have an effect on the amounts reported. A one percent change in the assumed health care cost trend rate would have the following effects (in thousands):

1% 1% Increase Decrease Effect on total of service and interest cost components in health care cost trend rate $ 49 $ (44) Effect on postretirement benefit obligation as of as of December 31, 2014 1,411 (1,265)

The measurement date used to determine the pension and postretirement benefits measurements is December 31.

Plan Assets: The Qualified Pension Plan, the NYP/LMH Pension Plan and the Lawrence Pension Plan have separate asset allocation targets. The overall objective of the investment policy of the Qualified Pension Plan is to produce an asset allocation that will generate return annually in order to meet the expense and income needs and provide for sufficient annual asset growth. Funds are invested with a long- term (five years or greater) return objective.

The Qualified Pension Plan’s investment policy includes the following asset allocation guidelines:

Strategic Asset Allocation Asset Category Policy Target

Equities 33% Fixed income 14 Alternative assets 21 Private equity 17 Natural resources 8 Real estate 7

47 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

9. Pension and Similar Benefit Plans (continued)

The policy target percentages are reevaluated at least quarterly. Investment performance is reviewed quarterly with performance results and benchmarks compiled independently by the plan’s trustee. NYP/LMH and NYP/Lawrence Hospital Pension Plans’ weighted-average asset allocations at December 31, 2014 are comprised of investments in equity and fixed income securities. Assets invested in the Pension Plans are carried at fair value. Fixed income and equity securities and real assets with readily determinable values are carried at fair value as determined based on independent published sources. Alternative investments are stated at fair value, as estimated in an unquoted market. Fair value for alternative investments is determined for each investment using net asset values as a practical expedient, as permitted by U.S. generally accepted accounting principles, rather than using another valuation method to independently estimate fair value. The composition and reported value of the Pension Plans’ assets at December 31, 2014 and 2013 are disclosed in Note 13. The Hospital expects to contribute approximately $55 million to its Pension Plans and $4 million to its Postretirement Benefit Plans in 2015. The Medicare Prescription Drug Act introduced a prescription drug benefit under Medicare (Medicare Part D) as well as a Federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The Hospital expects to pay the following benefit payments, which reflect expected future service as appropriate, and receive the following Medicare Part D subsidies (in thousands):

Medicare Pension Postretirement Part D Plans Benefit Plans Subsidies Year: 2015 $ 72,119 $ 3,384 $ 176 2016 75,978 3,372 172 2017 83,900 3,283 166 2018 91,718 3,183 160 2019 91,033 3,112 154 2020 to 2024 514,741 13,121 652

48 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

10. Related Organizations Fund, Inc. is an affiliated not-for-profit public charity whose revenue is derived from soliciting, receiving and administering funds. RCP, Inc., Royal Charter Properties-East, Inc. (RCP-East) and Royal Charter Properties-Westchester, Inc. (RCP-West) are affiliated not-for-profit support corporations that derive revenue from acquiring and holding direct and indirect interests in real estate and related personal property, which are primarily used to provide residential housing, office space and parking to the Hospital and its employees based on the market value of such services. RCP, Inc., RCP-East and RCP-West provide services primarily to or for the benefit of the Hospital. Amounts received by NYPH from or amounts contributed by NYPH to related support organizations, reflected in other revenue in the accompanying consolidated statements of operations for the years ended December 31, 2014 and 2013, are as follows (see Note 11) (in thousands): 2014 2013 Distributions from (payments to) according to organization’s bylaws: RCP, Inc. $ 11,480 $ 10,820 RCP-East 33,625 39,763 RCP-West (69) (70) $ 45,036 $ 50,513

Fund, Inc. also pays certain program related costs on behalf of NYPH (see Note 7). Fund, Inc. paid approximately $9.2 million and $8.0 million in 2014 and 2013, respectively, related to malpractice and postretirement costs incurred by NYPH. Other distributions made by Fund, Inc. to NYPH include approximately $83.2 million and $77.8 million in 2014 and 2013, respectively, for the purchase of fixed assets.

Services provided to NYPH by related entities for the years ended December 31, 2014 and 2013 are as follows (in thousands):

2014 2013

Fund, Inc. – insurance (Note 8) $ 65,608 $ 62,087 RCP, Inc. – rentals (net) 3,364 1,422 RCP-East – rentals 9,744 9,291 RCP-West – rentals 267 294 $ 78,983 $ 73,094

49 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

10. Related Organizations (continued)

In September 2014, the Hospital deeded property, building and equipment located in lower Manhattan to RCP, Inc. In connection with the transaction, NYPH transferred the mortgage collateralized by the building (see Note 5). The assets and liabilities transferred at their historical carrying values were as follows at September 19, 2014 (in thousands):

Land $ 20,000 Building and equipment, net 5,805 Mortgage note (7,585) Other (2,060) Net assets transferred $ 16,160

NYPH received distributions of $15.0 million and $8.0 million in 2014 and 2013, respectively, from Weill Cornell Imaging at New York-Presbyterian, a radiology and imaging joint venture affiliated with NYPH and Weill Cornell Medical College.

The Hospital provides employee and other services to related entities for which the Hospital receives reimbursement, and the costs of providing such services are recorded directly by those entities. Accordingly, such amounts are not included in the accompanying consolidated financial statements of the Hospital. Charges for such services are based on the approximate cost to provide the services and totaled approximately $52.1 million and $43.3 million for the years ended December 31, 2014 and 2013, respectively. The services consist of patient accounting, financial planning, information systems and telecommunications, general accounting, medical supplies, biomedical engineering services, house staff, ambulance services, institutional billings, engineering and other services.

50 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

10. Related Organizations (continued)

The following balances are due (to) from related organizations at December 31, 2014 and 2013 (in thousands):

2014 2013

Fund, Inc. $ (10,117) $ (8,785) RCP, Inc. 4,948 1,235 RCP-East 1,429 2,111 RCP-West 254 113 Network Recovery Services, Inc. 180 (985) Silvercrest Extended Care Facility 128 85 The Brooklyn Hospital Center (TBHC)(a) – 1,043 The Hospital for Special Surgery 771 334 The New York Community Hospital of Brooklyn, Inc. 109 108 The New York Gracie Square Hospital, Inc. 177 141 The New York Hospital Medical Center of Queens 2,917 3,591 The New York Methodist Hospital 784 765 New York-Presbyterian Healthcare System, Inc. (4,176) (4,152) The New York Westchester Square Medical Center (Westchester Square)(b) – 2,927 The Rogosin Institute 184 186 Nyack Hospital – 99 (2,412) (1,184) Less noncurrent portion included in other noncurrent assets, before valuation allowance – (3,487) Due (to) from related organizations – net $ (2,412) $ (4,671)

(a) Effective September 2, 2014, TBHC is no longer a related entity of the Hospital. All amounts due to or from TBHC from transactions after this date are reflected in the accompanying consolidated statement of financial position as other noncurrent assets. (b) Westchester Square filed for bankruptcy protection in December 2006. Effective February 21, 2013, Westchester Square is no longer a related organization.

51 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

11. Other Revenue

Other revenue consisted of the following for the years ended December 31, 2014 and 2013 (in thousands):

2014 2013

Grants and contracts $ 26,219 $ 32,253 Amounts received from related organizations, net (Note 10) 60,036 58,513 Rental of space 37,478 35,921 Cafeteria and vending 14,446 13,048 Net assets released from restrictions, included in changes in beneficial interest in net assets held by related organizations (Note 7) 78,699 68,676 Affiliation agreements 6,773 6,201 Other 38,866 53,347 $ 262,517 $ 267,959

12. Commitments and Contingencies

At December 31, 2014, approximately 38% of the Hospital’s employees were covered by collective bargaining agreements. Collective bargaining agreements covering all such employees are set to expire at various dates through 2018.

52 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

12. Commitments and Contingencies (continued)

13. Fair Value Measurements

Level 2: Observable inputs that are based on inputs not quoted in active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

53 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

13. Fair Value Measurements (continued)

The following table presents financial instruments carried at fair value, excluding assets invested in the Pension Plans, as of December 31, 2014 and 2013 (in thousands):

December 31, 2014 Total Level 1 Level 2 Level 3

Cash and cash equivalents – held for investment $ 122,970 $ 109,357 $ 13,613 $ – Fixed income: U.S. government 917,470 917,470 – – Non-U.S. government 14,657 14,657 – – Corporate 305,806 31,291 274,515 – Mortgage and asset backed 182,240 17,733 164,507 – Other 13,159 – 13,159 – Equities: U.S. equities(b) 257,179 257,179 – – Non-U.S. equities(c) 148,614 148,614 – – Real assets 20,577 20,577 – – Mutual funds 83,556 83,556 – – $ 2,066,228 $ 1,600,434 $ 465,794 $ –

December 31, 2013 Total Level 1 Level 2 Level 3

Cash and cash equivalents – held for investment $ 621,823 $ 621,823 $ – $ – Fixed income: U.S. government 426,495 426,495 – – Non-U.S. government 27,308 27,308 – – Corporate 220,884 37,350 183,534 – Mortgage and asset backed 129,968 2,049 127,919 – Other 5,764 876 4,888 – Equities: U.S. equities(b) 207,218 207,218 – – Non-U.S. equities(c) 123,279 123,279 – – Real assets 9,913 9,913 – – Mutual funds 25,045 25,045 – – $ 1,797,697 $ 1,481,356 $ 316,341 $ –

The Hospital’s alternative investments and common collective/commingled trusts are reported using the equity method of accounting and, therefore, are not included in the tables above (see Note 1).

54 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

13. Fair Value Measurements (continued)

December 31, 2014 Total Level 1 Level 2 Level 3

Cash and cash equivalents $ 27,526 $ 27,526 $ – $ – Fixed income: U.S. government 99,889 99,889 – – Non-U.S. government 8,905 8,905 – – Corporate bonds 1,162 1,162 – – Common collective/ commingled trusts(a) 33,840 – 33,840 – Equities: U.S. equities(b) 95,135 95,135 – – Non-U.S. equities(c) 11,857 11,857 – – Common collective/commingled trusts(d) 320,765 – 311,203 9,562 Mutual funds 73,340 73,340 – – Real assets 23,837 23,837 – – Hedge funds(e) 203,264 – 69,143 134,121 Private equity(f) 162,596 – – 162,596 Private real assets(g) 98,582 – 4,942 93,640 $ 1,160,698 $ 341,651 $ 419,128 $ 399,919

December 31, 2013 Total Level 1 Level 2 Level 3

Cash and cash equivalents $ 71,357 $ 71,357 $ – $ – Fixed income: U.S. government 70,225 70,225 – – Non-U.S. government 16,695 16,695 – – Corporate bonds 6,371 6,371 – – Mortgage and asset backed 5,740 5,740 – – Other 1,892 1,892 – – Common collective/ commingled trusts(a) 43,894 – 43,894 – Equities: U.S. equities(b) 72,370 72,370 – – Non-U.S. equities(c) 12,349 12,349 – – Common collective/commingled trusts(d) 255,391 – 255,391 – Real assets 14,687 14,687 – – Hedge funds(e) 164,536 – 144,114 20,422 Private equity(f) 146,164 – – 146,164 Private real assets(g) 75,006 – 7,277 67,729 $ 956,677 $ 271,686 $ 450,676 $ 234,315

55 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

13. Fair Value Measurements (continued)

(a) Common collective/commingled trusts invested in corporate bonds and mortgage and asset backed securities. (b) Equity portfolios invested in common stock of corporations primarily domiciled in the United States. (c) Equity portfolios invested in common stock of corporations primarily domiciled outside the United States, including emerging market countries. (d) Common collective/commingled trusts invested in common stock of corporations domiciled in the United States and outside the United States, including emerging market countries. (e) Hedge funds include long and short equity, multi-strategy, event driven and relative value funds invested with managers who invest with different strategies and typically employ some leverage. In long and short equity, fund managers create a portfolio of long positions in stocks expected to appreciate over time and short positions in stocks expected to depreciate. Event driven managers create a portfolio designed to profit from corporate events such as mergers, spin-offs, defaults and bankruptcy. Relative value managers invest in long and short positions, but typically have a more neutral net market position than long and short. Multi- strategy is a fund employing a variety of hedge fund strategies. (f) Private equity investments include limited partnership investments in funds pursuing strategies in corporate buyouts, venture capital, growth equity, distressed and turnaround investments. (g) Real estate and natural resources investments.

The following is a description of the Hospital’s valuation methodologies for assets measured at fair value. The fair value methodologies are not necessarily indicators of investment risk, but are descriptive of the measures used to arrive at fair value pricing. Fair value for Level 1 is based upon quoted market prices. Investments classified as Level 2, excluding alternative investments, are primarily valued using techniques that are consistent with the market approach. Valuations for Level 2 are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Inputs, which include broker/dealer quotes, reported/comparable trades, and benchmark yields are obtained from various sources including market participants, dealers and brokers. Common collective/commingled trusts and alternative investments classified as Level 2 are redeemable in the near term. Level 3 assets consist of alternative investments that are not redeemable in the near term. The valuation for alternative investments included in Levels 2 and 3 is described in Note 9. The methods described above may produce a fair value that is not indicative of net realizable value or reflective of future fair values. Furthermore, while the Hospital believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

56 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

13. Fair Value Measurements (continued)

The following is a rollforward of the consolidated statements of financial position amounts for financial instruments classified by the Hospital in Level 3 of the fair value hierarchy defined above for the years ended December 31, 2014 and 2013 (in thousands):

2014 2013

Balance, beginning of year $ 234,315 $ 183,354 Total realized and unrealized gains or losses 32,164 23,979 Acquisition of NYP/Lawrence Hospital Level 3 investments 9,061 – Purchases 122,915 57,375 Transfers 1,464 (30,393) Balance, end of year $ 399,919 $ 234,315

Change in unrealized gains related to financial instruments held at the reporting date $ 24,297 $ 19,298

Transfers between Levels 2 and 3 reflect management’s assessment of whether the underlying investments are redeemable in the near term.

57 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

13. Fair Value Measurements (continued)

The following is a summary of investments (by major class) that have restrictions on the Hospital’s ability to redeem its investments at the measurement date, any unfunded capital commitments and the investments strategies of the investees as of December 31, 2014 (including investments accounted for using the equity method) (in thousands):

Redemption Redemption Description of Fair Unfunded Frequency Notice Investment Value Commitments (If Currently Eligible) Period

Common collective/ commingled trusts $ 578,699 $ – Daily to Monthly 3 to 30 days Hedge funds 400,995 – Monthly to tri-annually 45 to 180 days Private equity 317,529 187,011 * * Private real assets 192,893 167,059 * * $ 1,490,116 $ 354,070

The carrying values of cash and cash equivalents, receivables, accounts payable and accrued expenses, other current assets and liabilities are reasonable estimates of fair value due to the short-term nature of these financial instruments. Carrying value approximates fair value for other noncurrent financial instruments, excluding long-term debt obligations and financial instruments included in the fair value tables. At December 31, 2014 and 2013, the fair value of long-term debt obligations totaled approximately $1,205.0 million and $1,180.2 million, respectively, excluding capital leases and unamortized fair value adjustments (see carrying value of long-term debt at Note 5). The fair value of long-term debt is classified as Level 2 in the fair value hierarchy, using techniques consistent with the market approach. Valuations for long-term debt, excluding the term loan payable, are based on quoted market prices for related bonds. The carrying amount of the term loan payable approximates fair value based on consideration of current market data and discounted cash flow estimates.

58 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

14. Multiemployer Pension Plans

The Hospital contributes to the New York State Nurses Association Pension Plan (NYSNA) and the 1199 SEIU Healthcare Employees Pension Fund (1199 SEIU). These are multiemployer defined benefit pension plans under the terms of collective bargaining agreements that cover the Hospital’s union-represented employees. Contributions to union plans are based on union employee gross salary levels and rates required under union contractual arrangements.

The risks of participating in these multiemployer plans are different from single-employer plans in the following respects:

• Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

• If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

59 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

14. Multiemployer Pension Plans (continued)

The Hospital’s participation in these plans for the annual period ended December 31, 2014, is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employee Identification Number (EIN) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act (PPA) zone status available in 2014 and 2013 is for the plan’s year-end at December 31, 2013 and December 31, 2012, respectively. The zone status is based on information that the Hospital received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded and plans in the green zone are at least 80% funded. The “FIP/RP Status” column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration dates of the collective bargaining agreements to which the plans are subject.

Expiration Date of Pension Protection Act Contributions by the Collective Pension EIN/Pension Zone Status FIP/RP Hospital Surcharge Bargaining Fund Plan Number 2014 2013 Status 2014 2013 Imposed Agreement (In Thousands) 13-6604799/ NYSNA Plan No. 001 Green Green No $ 22,973 $ 20,620 No *

13-3604862/ 1199 SEIU Plan No. 001 Green Green No 31,826 32,210 No 4/30/2015 $ 54,799 $ 52,830

* The most recent collective bargaining agreement expired on December 31, 2014. A new collective bargaining agreement is currently under negotiation.

The Hospital was listed in the NYSNA plan’s Forms 5500 as providing more than 5% of the total contributions during each of the plans 2013 and 2012 plan years. Forms 5500 are not yet available for the plan years ended in 2014.

60 The New York and Presbyterian Hospital

Notes to Consolidated Financial Statements (continued)

15. Events Subsequent to December 31, 2014

Subsequent events have been evaluated through April 29, 2015, which is the date the consolidated financial statements were issued.

In January 2015, NYP Community Programs, Inc. (Community Programs), of which NYPH is the sole member, acquired Hudson Valley Hospital Center (Hudson Valley), a 128-bed acute care hospital located in Cortlandt Manor, Westchester County, New York. Community Programs acquired Hudson Valley by means of an inherent contribution, in which no consideration was transferred by Community Programs. The Hospital will account for this business combination by applying the acquisition method and, accordingly, the inherent contribution received will be valued as the excess of assets acquired over liabilities assumed. In determining the inherent contribution received, all assets acquired and liabilities assumed will be measured at fair value as of the date of the acquisition. As of the date these consolidated financial statements were issued, management is preparing the initial accounting for the acquisition.

In April 2015, the New York State Department of Health approved a certificate of need application filed by Community Programs to acquire the New York Hospital Medical Center of Queens (the Medical Center). Approval from the U.S. Department of Housing and Urban Development is also required before the acquisition can take place. The Hospital expects that such approval will be granted during 2015. As the Hospital and the Medical Center are entities under common control, the assets and liabilities of the Medical Center will be transferred to the Hospital at historical cost.

Except for the acquisition of Hudson Valley, the certificate of need filed to acquire the Medical Center and the bond issuance described in Note 5, no other subsequent events have occurred that require disclosure in or adjustment to the consolidated financial statements.

Supplementary Information

The New York and Presbyterian Hospital

Consolidating Statement of Financial Position

December 31, 2014 (In Thousands)

NYP Community NYPH Services, Inc. Consolidated Assets Current assets: Cash, cash equivalents and short-term investments: Cash and cash equivalents $ 190,038 $ 20,233 $ 210,271 Short-term investments 1,068,740 – 1,068,740 Total cash, cash equivalents and short-term investments 1,258,778 20,233 1,279,011

Patient accounts receivable, less allowance for uncollectibles 498,094 28,286 526,380 Other current assets 78,675 6,794 85,469 Assets limited as to use – current portion 29,856 2,932 32,788 Professional liabilities insurance recoveries receivable – current portion 63,462 – 63,462 Beneficial interest in net assets held by related organizations – current portion 78,699 – 78,699 Total current assets 2,007,564 58,245 2,065,809

Assets limited as to use – noncurrent 1,522,192 116,493 1,638,685 Property, buildings, and equipment – net 2,300,906 103,782 2,404,688 Other noncurrent assets – net 31,698 – 31,698 Professional liabilities insurance recoveries receivable – noncurrent 166,396 12,053 178,449 Beneficial interest in net assets held by related organizations – noncurrent 1,698,169 – 1,698,169 Total assets $ 7,726,925 $ 290,573 $ 8,017,498

The New York and Presbyterian Hospital

Consolidating Statement of Financial Position (continued)

December 31, 2014 (In Thousands)

NYP Community NYPH Services, Inc. Consolidated Liabilities and net assets Current liabilities: Long-term debt – current portion $ 77,631 $ 2,881 $ 80,512 Accounts payable and accrued expenses 388,309 25,980 414,289 Accrued salaries and related liabilities 202,196 9,995 212,191 Due to related organizations – net 2,412 – 2,412 Pension and postretirement benefit liabilities – current portion 11,686 389 12,075 Professional liabilities and other – current portion 63,462 630 64,092 Other current liabilities 158,573 5,284 163,857 Total current liabilities 904,269 45,159 949,428

Long-term debt 989,047 32,045 1,021,092 Professional liabilities and other 315,325 22,450 337,775 Pension liability 173,368 91,439 264,807 Postretirement benefit liability 26,025 5,756 31,781 Deferred revenue 2,985 – 2,985 Other noncurrent liabilities 299,374 14,833 314,207 Total liabilities 2,710,393 211,682 2,922,075

Commitments and contingencies

Net assets: Unrestricted 3,239,664 55,532 3,295,196 Temporarily restricted: NYP/Lawrence Hospital – 18,675 18,675 Held by related organizations 1,527,247 – 1,527,247 Total temporarily restricted 1,527,247 18,675 1,545,922 Permanently restricted: NYP/Lawrence Hospital – 4,684 4,684 Held by related organizations 249,621 – 249,621 Total permanently restricted 249,621 4,684 254,305 Total net assets 5,016,532 78,891 5,095,423 Total liabilities and net assets $ 7,726,925 $ 290,573 $ 8,017,498

The New York and Presbyterian Hospital

Consolidating Statement of Operations

Year Ended December 31, 2014 (In Thousands)

NYP Community NYPH Services, Inc. Consolidated (Year Ended (Period from December 31, July 1, 2014 to 2014) December 31, 2014) Operating revenues Net patient service revenue $ 4,263,145 $ 110,386 $ 4,373,531 Provision for bad debts (56,914) (2,551) (59,465) Net patient service revenue, less provision for bad debts 4,206,231 107,835 4,314,066 Other revenue 259,369 3,148 262,517 Total operating revenues 4,465,600 110,983 4,576,583

Operating expenses Salaries and wages 2,032,992 58,126 2,091,118 Employee benefits 570,326 14,147 584,473 Supplies and other expenses 1,337,887 36,538 1,374,425 Interest and amortization of deferred financing fees 45,981 283 46,264 Depreciation and amortization 256,527 3,411 259,938 Total operating expenses 4,243,713 112,505 4,356,218

Operating income (loss) 221,887 (1,522) 220,365

Investment return (loss) 63,326 (441) 62,885 Excess (deficiency) of revenues over expenses before inherent contribution of unrestricted net assets received in the acquisition of NYP/Lawrence Hospital Center 285,213 (1,963) 283,250 Inherent contribution of unrestricted net assets received in the acquisition of NYP/Lawrence Hospital Center – 82,218 82,218 Excess of revenues over expenses 285,213 80,255 365,468

Other changes in unrestricted net assets: Deed of property, buildings and equipment to Royal Charter Properties, Inc. (16,160) – (16,160) Distributions from New York-Presbyterian Fund, Inc. for the purchase of fixed assets 83,186 – 83,186 Change in pension and postretirement benefit liabilities to be recognized in future periods (154,524) (24,723) (179,247) Change in unrestricted net assets $ 197,715 $ 55,532 $ 253,247

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APPENDIX C-2

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2016

[THIS PAGE INTENTIONALLY LEFT BLANK] UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

The New York and Presbyterian Hospital As of and For the Three Months Ended March 31, 2016 The New York and Presbyterian Hospital

Unaudited Interim Consolidated Financial Statements and Supplementary Information

As of and For the Three Months Ended March 31, 2016

Contents

Unaudited Interim Consolidated Financial Statements

Unaudited Consolidated Statements of Financial Position ...... 1 Unaudited Interim Consolidated Statements of Operations ...... 3 Unaudited Interim Consolidated Statements of Changes in Net Assets ...... 4 Unaudited Interim Consolidated Statements of Cash Flows ...... 5 Notes to Unaudited Interim Consolidated Financial Statements ...... 6

Supplementary Information

Unaudited Interim Consolidating Statement of Financial Position ...... 19 Unaudited Interim Consolidating Statement of Operations ...... 21 The New York and Presbyterian Hospital

Unaudited Consolidated Statements of Financial Position (In Thousands)

(Unaudited) (Audited) March 31 December 31 2016 2015 Assets Current assets: Cash, cash equivalents and short-term investments: Cash and cash equivalents $ 298,431 $ 276,147 Short-term investments 1,187,268 1,175,753 Total cash, cash equivalents and short-term investments 1,485,699 1,451,900

Patient accounts receivable, less allowance for uncollectibles (2016 - $272,807; 2015 - $252,638) 695,662 659,763 Other current assets 161,031 142,535 Assets limited as to use - current portion 40,834 43,502 Professional liabilities insurance recoveries receivable and related deposit - current portion 71,744 71,745 Beneficial interest in net assets held by related organizations - current portion 63,900 73,635 Due from related organizations - net 72 Total current assets 2,518,870 2,443,152

Assets limited as to use - noncurrent 2,307,757 2,359,209 Property, buildings, and equipment - net 3,202,857 3,080,559 Other noncurrent assets - net 21,387 20,953 Professional liabilities insurance recoveries receivable and related deposit - noncurrent 202,159 201,672 Beneficial interest in net assets held by related organizations - noncurrent 1,632,266 1,659,973

Total assets $ 9,885,296 $ 9,765,518

Continued on following page.

1 The New York and Presbyterian Hospital

Unaudited Consolidated Statements of Financial Position (continued) (In Thousands)

(Unaudited) (Audited) March 31 December 31 2016 2015

Liabilities and net assets Current liabilities: Long-term debt - current portion $ 70,418 $ 72,300 Accounts payable and accrued expenses 506,590 480,644 Accrued salaries and related liabilities 247,352 256,030 Due to related organizations - net 1,083 Pension and postretirement benefit liabilities - current portion 16,822 16,822 Proressionalliabilities and other - current portion 81,764 81,264 Other current liabilities 195,648 192,266 Total current liabilities 1,119,677 1,099,326

Long-term debt 1,916,034 1,931,625 Proressionalliabilities and other 434,500 437,370 Pension liability 419,200 330,090 Postretirement benefit liability 50,960 50,602 Deferred revenue 2,077 2,266 Other noncurrent liabilities 415,948 398,535 Total liabilities 4,358,396 4,249,814

Corrnnitments and contingencies

Net assets: Unrestricted 3,797,371 3,749,026 Temporarily restricted: NYP !Lawrence Hospital 14,175 14,136 NYP !Hudson Valley Hospital 1,560 1,543 NYP /Queens 2,163 1,927 Held by related organizations 1,453,141 1,486,642 Total temporarily restricted 1,471,039 1,504,248 Permanently restricted: NYP !Lawrence Hospital 4,685 4,684 NYP!Hudson Valley Hospital 1,675 1,675 NYP /Queens 9,105 9,105 Held by related organizations 243,025 246,966 Total permanently restricted 258,490 262,430 Total net assets 5,526,900 5,515,704 Total liabilities and net assets $ 9,885,296 $ 9,765,518

See accompanying notes. 2 The New York and Presbyterian Hospital

Unaudited Interim Consolidated Statements of Operations (In Thousands)

(Unaudited) Three Months Ended March 31 2016 2015 (As Adjusted) Operating revenues Net patient service revenue $ 1,538,397 $ 1,349,494 Provision for bad debts (21,674) (20,315) Net patient service revenue, less provision for bad debts 1,516,723 1,329,179 Other revenue 81,915 78,487 Total operating revenues 1,598,638 1,407,666

Operating expenses Salaries and wages 715,634 652,517 Employee benefits 202,223 189,876 Supplies and other expenses 491,296 440,068 Interest and amortization of deferred financing fees 19,398 18,581 Depreciation and amortization 79,563 76,044 Total operating expenses 1,508,114 1,377,086

Operating income 90,524 30,580

Investment return 22,869 41,830 Excess of revenues over expenses before inherent contribution of unrestricted net assets received in the acquisition of NYPlHudson Valley Hospital 113,393 72,410 Inherent contribution of unrestricted net assets received in the acquisition ofNYP/Hudson Valley Hospital 102,818 Excess of revenues over expenses 113,393 175,228

Other changes in unrestricted net assets: Net assets transfer to related parties (2,078) Distnbutions from New York-Presbyterian Fund, Inc. for the purchase offixed assets 31,214 43,998 Change in pension and postretirement benefit liabilities to be recognized in future periods (94,184) (31,271) Change in unrestricted net assets $ 48,345 $ 187,955

See accompanying notes.

3 The New York and Presbyterian Hospital

Unaudited Interim Consolidated Statements of Changes in Net Assets (In Thousands)

Beneficial Interest In Temporarily and Permanently Restricted Net Assets Held by Related Organizations Total Temporarily Permanently Plant Specific Fndowment Te m poraril y Permanently Total Unrestricted Restricted - Restricted - Replacement Purpose Earnings Restricted Restricted Net Assets (Unalldited)

Net assets at January 1,2015, as adjusted $ 3,341,999 $ 20,383 $ 13,784 $ 768,042 $ 542,261 $ 216,944 $ 1,527,247 $ 249,621 $ 5,153,034 Change in unrestricted net assets 187,955 187,955 Inherent contnbution of restricted net assets received in the acquistion of NYP/Hudson Valley Hospital 1,323 1,675 2,998 Restricted investment return and other 406 407 Changes in beneficial interest in net assets held by related organizations (34,421) 8,967 2,433 (23,021) (913) (23,934) Change in net assets forthe three rrvnths ended March 31,2015 187,955 1,729 1,676 (34,421) 8,967 2,433 (23,021) (913) 167,426 Net assets at March 31,2015 S 3,529,954 S 22,112 $ 15,460 S 733,621 $ 551,228 $ 219,377 $ 1,504,226 $ 248,708 $ 5,320,460

Net assets at January 1,20\6 $ 3,749,026 $ 17,606 $ 15,464 $ 753 ,154 $ 540,439 $ 193,049 $ 1,486,642 $ 246,966 $ 5,515,704 Change in unrestricted net assets 48,345 48,345 Restricted investment return and other 292 293 Changes in beneficial interest in net assets held by related organizations (11,\38) (17,084) (5,279) (33,501) (3,941) (37,442) Change in net assets for the three rrvnths ended March 31,2016 48,345 292 (1\,\38) (17,084) (5,279) (33,501) (3,941) 1\,1% Net assets at March 31,2016 $ 3,797,371 $ 17,898 $ 15,465 $ 742,016 $ 523,355 $ 187,770 $ 1,453,141 $ 243,025 S 5,526,900

See accompanying noles.

4 The New York and Presbyterian Hospital

Unaudited Interim Consolidated Statements of Cash Flows (In Thousands) (Unaudited) Three Months Ended March 31 2016 2015 (As Adjusted) Ope rating activities Change in net assets $ 11,196 $ 167,426 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 79,563 76,044 Amortization of deferred fmancing costs and mortgage discount and other 1,098 (987) Distnbution from New York-Presbyterian Fund Inc. for the purchase of fIXed assets (31,214) (43,998) Equity in earnings of common collective/commingled trusts and ahemative investments 8,634 (10,211) Net realized gains on sales of investment companies 10,083 4,362 Change in unrealized gains (30,157) (24,405) Change in interest in pooled investments held by New York-Presbyterian Fund, Inc. 800 169 Equity in income from investee (2,118) Inherent contnbution received in the acquisition of NYP/Hudson Valley Hospital (105,816) Change in operating assets and liabilities Patient accounts receivable (35,899) (25,194) Other assets (18,412) (3,971) Beneficial interest in net assets held by related organizations 37,442 23,934 Accounts payable and accrued expenses 25,946 (4,415) Accrued salaries and related liabilities (8,678) 15,809 Due to/from related organizations-net 1,155 (2,176) Other liabilities 20,606 10,799 Professional liabilities and other and related insurance recoveries receivable (2,856) (7,715) Pension and post retirement benefrt liabilities 89,468 34,882 NET CASH PROVIDED BY OPERATING ACTIVITIES 156,657 104,537

Investing activities Net purchases of short term investments (11,202) (43,857) Acquisitions of property, buildings, and equipment (197,830) (150,012) Net purchases of assets lirnited as to use 64,447 (642,808) Distnbutions from investee 1,600 Cash received in acquisition on NYP/Hudson Vaney Hospital 10,312 NET CASH USED IN INVESTING ACTIVITIES (142,985) (826,365)

Financing activitie s Repayments of long-term debt (22,602) (33,342) Proceeds from issuance of long-term debt 750,000 Payment of deferred fmancing costs (29,808) Distnbutions from New York-Presbyterian Fund Inc. for the purchase of fIXed assets 31,214 43,998 NET CASH PROVIDED BY FINANCING ACTIVITIES 8,612 730,848

NET INCREASE IN CASH AND CASH EQUIVALENTS 22,284 9,020 Cash and cash equivalents at beginning of period 276,147 217,863 Cash and cash equivalents at end of period $ 298,431 $ 226,883

Supplemental disclosure of cash flow information Assets acquired under capital lease obligations $ 4,031 $ 7,203

See accompanying notes. 5 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31,2016

1. Organization and Summary of Significant Accounting Policies Interim Financial Statements

The New York and Presbyterian Hospital (the Hospital or NYPH) presumes that users of this unaudited interim consolidated financial information have read or have access to the Hospital's audited financial statements which include certain disclosures required by U.S. generally accepted accounting principles. The audited financial statements of the Hospital for the years ended December 31, 2015 and 2014, are on file with the Municipal Securities Rulemaking Board and are accessible through its Electronic Municipal Market Access Database (EMMA). Accordingly, footnotes and other disclosures that would substantially duplicate the disclosures contained in the Hospital's most recent financial statements have been omitted from the unaudited interim consolidated financial information.

In the opinion of management, all adjustments considered necessary for a fair presentation of the results of the interim periods have been included in the accompanying unaudited interim consolidated financial statements. All such adjustments are considered by management to be of a normal, recurring nature, except as noted otherwise.

Patient volumes and net operating revenues are subject to seasonal variations caused by a number of factors, included, but not necessarily limited to, climate and weather conditions, vacation patterns of hospital patients and admitting physicians and other factors relating to the timing of elective hospital procedures. Monthly operating results are not necessarily representative of operations for a full year for various reasons, including levels of occupancy and other patient volumes, interest rates, unusual or non-recurring items and other seasonal fluctuations.

Organization and Basis of Presentation: The accompanying consolidated financial statements include the accounts of the Hospital, NYP Community Services, Inc. (NYP Community Services), and NYP Community Programs, Inc. (NYP Community Programs), of which NYPH is the sole member. The reporting entity resulting from the consolidation of these entities is referred to herein as the "Hospital." All significant intercompany balances and transactions have been eliminated in consolidation.

The Hospital is a tax-exempt organization that was incorporated under New York State not-for-profit corporation law. The Hospital is a major academic medical center, providing a full range of inpatient and outpatient services, mainly to residents of the New York metropolitan area. The Board of Trustees of the Hospital consists of persons who have first been elected as members of New York-Presbyterian Foundation, Inc. (Foundation, Inc.), a New York State not-for-profit corporation. Foundation, Inc. is related to a number of organizations.

6 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31,2016

1. Organization and Summary of Significant Accounting Policies (continued)

Hudson Valley Hospital Acquisition: On January 26, 2015 (the Hudson Valley Acquisition Date), NYP Community Programs acquired Hudson Valley Hospital Center, Westchester Putnam Health Management System, Inc. and their subsidiaries (collectively referred to herein as NYP!Hudson Valley or Hudson Valley). Hudson Valley consists of a 128-bed acute care hospital located in Cortlandt Manor, Westchester County, New York, a foundation, a physician practice and certain other entities primarily formed to purchase and lease space. NYP Community Programs acquired NYP!Hudson Valley by means of an inherent contribution, in which no consideration was transferred by NYP Community Programs or the Hospital. NYP Community Programs accounted for this business combination by applying the acquisition method and, accordingly, the inherent contribution received was valued as the excess of the value of NYP !Hudson Valley's assets over liabilities. In determining the inherent contribution received, all assets and liabilities were measured at fair value as of the Hudson Valley Acquisition Date. The results of Hudson Valley's operations have been included in the unaudited interim consolidated financial statements since the Hudson Valley Acquisition Date.

New York Hospital Medical Center of Queens Acquisition: On July 1, 2015 (the Queens Acquisition Date), sole membership of The New York Hospital Medical Center of Queens and its controlled affiliates was transferred to NYP Community Programs. NYP Community Programs became the entity's active parent and renamed it NewYork-PresbyterianiQueens (referred to herein as Queens or NYP/Queens). NYP/Queens consists of a 535-bed acute care hospital located in Queens County, New York, a physician practice and certain other entities. As NYP/Queens and NYPH were entities under common control as of the Queens Acquisition Date, the change in control was accounted for in a manner similar to a pooling of interests with retrospective adjustment in prior period financial statements for the period in which the entities were under common control. Therefore, the accompanying unaudited interim consolidated financial statements as of and for the three months ended March 31, 2016 and 2015 reflect the financial position, operations, changes in net assets and cash flows of the Hospital, including NYP/Queens, as if the acquisition had been completed on January 1,2014; all relevant disclosures have been adjusted.

New York Hospital Medical Center of Queens Restatement: The 2014 financial statements of New York Hospital Medical Center of Queens have been restated to increase accrued pension and postretirement liabilities by $10.0 million. See New York Hospital Medical Center Queens audited financial statements for the year ended December 31, 2015 posted on EMMA for more details. The information for the three months ended March 31, 2015 also has been adjusted for the restatement.

7 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2016

1. Organization and Summary of Significant Accounting Policies (continued)

A summary of significant accounting policies follows:

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, such as estimated uncollectibles for accounts receivable for services to patients, valuation of alternative investments, and liabilities, such as estimated settlements with third-party payors, professional insurance liabilities, and pension and postretirement benefits liabilities, and disclosures of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the amounts of revenue and expenses reported during the period. There is at least a reasonable possibility that certain estimates will change by material amounts in the near term. Actual results could differ from those estimates.

Net Patient Service Revenue

Net patient service revenue is reported at the estimated net realizable amounts from patients, third• party payors and others for services rendered and includes estimated retroactive revenue adjustments due to ongoing and future audits, reviews and investigations. Retroactive adjustments are considered in the recognition of revenue on an estimated basis in the period the related services are provided, and such amounts are adjusted in future periods as adjustments become known or as years are no longer subject to such audits, reviews and investigations. The Hospital has agreements with third-party payors that provide for payment for services rendered at amounts different from its established rates. The notes to the audited financial statements of the Hospital for the years ended December 31, 2015 and 2014, include additional disclosures which describe the Hospital's accounting for net patient service revenue and related matters.

8 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31,2016

1. Organization and Summary of Significant Accounting Policies (continued)

The Hospital cannot assess or predict the ultimate effect on its operations which may result from existing or future reimbursement legislation or regulations.

For the three months ended March 31, 2016 and 2015, the net effect of the Hospital's revisions to prior year estimates resulted in net patient service revenue increasing by approximately $14.6 million and $3.3 million, respectively.

Investments

Investments consist of money market funds, fixed income securities (including U.S. government bonds, non-U.S. government bonds, agency notes, mortgage and asset backed and corporate bonds), equity securities (including readily tradeable stocks, exchange traded funds and mutual funds), real asset investments (including individual investments and mutual funds invested in natural resources, energy and commodities), interests in common collective/commingled trusts and alternative investments (including hedge funds, investments in private equity firms and real asset funds). All investments (excluding interests in common collective/commingled trusts and alternative investments) are carried at fair value based on quoted market prices and are classified as trading investments.

Alternative investment interests generally are structured such that the Hospital holds a limited partnership interest or an interest in an investment management company. The Hospital's ownership structure does not provide for control over the related investees and the Hospital's financial risk is limited to the carrying amount reported for each investee, in addition to any unfunded capital commitment.

Individual investment holdings within the alternative investments include non-marketable and market-traded debt, equity and real asset securities and interests in other alternative investments. The Hospital may be exposed indirectly to securities lending, short sales of securities and trading in futures and forward contracts, options and other derivative products. Alternative investments often have liquidity restrictions under which the Hospital's capital may be divested only at specified times.

Alternative investments, excluding those held in the Hospital's defined benefit plans and interests in common collective/commingled trusts are reported in the accompanying consolidated statements of financial position based upon net asset values derived from the application of the equity method of accounting. Alternative investments held in the Hospital's defined benefit plans are stated at fair value, as estimated in an unquoted market. Fair value for alternative investments is determined for each investment using net asset values as a practical expedient, as permitted by generally accepted accounting principles, rather than using another valuation method to independently estimate fair value. Financial information used by the Hospital to evaluate its alternative investments is provided

9 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31,2016

1. Organization and Summary of Significant Accounting Policies (continued)

by the investment manager or general partner and includes fair value valuations (quoted market prices and values determined through other means) of underlying securities and other financial instruments held by the investee, and estimates that require varying degrees of judgment. The financial statements of the investee companies are audited annually by independent auditors, although the timing for reporting the results of such audits does not coincide with the Hospital's annual financial statements reporting. There is uncertainty in the accounting for alternative investments arising from factors such as lack of active markets (primary and secondary), lack of transparency into underlying holdings and time lags associated with reporting by the investee companies. As a result, there is at least a reasonable possibility that estimates will change in the near term.

Tax Status

The Hospital is a Section 501(c)(3) organization exempt from Federal income taxes under Section 501(a) of the Internal Revenue Code. The Hospital also is exempt from New York State and City income taxes.

2. Pension and Similar Benefit Plans

The Hospital provides pension and similar benefits to its employees through several plans, including various multi-employer plans for union employees and several defined benefit plans. Additionally, the Hospital has defined contribution pension plans for certain employees. The Hospital also has several postretirement benefit plans that provide certain health care and life insurance benefits to its employees.

The Hospital funds the noncontributory defined benefit plans in accordance with the minimum funding requirement of the Employee Retirement Income Security Act of 1974 (ERISA), plus additional amounts that the Hospital may deem appropriate from time to time. Amounts contributed to the pension plans are based on actuarial valuations.

The Hospital contributed $16.7 million and $13.7 million to its defined benefit pension plans for the three months ended March 31, 2016 and 2015, respectively. The Hospital expects to contribute approximately $50.1 million to its defined benefit pension plans for the remainder of2016.

The Hospital contributed $1.0 million and $1.3 million to its postretirement benefit pension plans for the three months ended March 31,2016 and 2015, respectively. The Hospital expects to contribute approximately $3.0 million to its postretirement benefit pension plans for the remainder of2016.

10 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31,2016

2. Pension and Similar Benefit Plans (continued)

The Hospital recognizes in its consolidated statements of financial position an asset, for a defined benefit postretirement plan's overfunded status, or a liability, for a plan's underfunded status; measures a defined benefit postretirement plan's assets and obligations that determine funded status as of the end of the Hospital's fiscal year; and recognizes the periodic change in the funded status of a defined benefit postretirement plan as a component of changes in unrestricted net assets in the year in which the change occurs. Amounts that are recognized as a component of changes in unrestricted net assets will be subsequently recognized as net periodic benefit cost.

Net periodic benefit cost consists of the following for the three months ended March 31, 2016 and 2015 (in thousands):

Postretirement Pension Plans Benefit Plans 2016 2015 2016 2015 (Unaudited) (Unaudited)

Service cost $ 18,818 $ 18,716 $ 258 $ 432 Interest cost 24,506 16,673 352 528 Expected return on plan assets (37,288) (26,355) Net amortization 39 163 (113) (195) Recognized actuarial loss 14,359 9,431 231 397 Recognized actuarial loss (gain) due to curtailment 69 (825) Net periodic pension cost and postretirement benefits cost $ 20,503 $ 17,803 $ 728 $ 1,162

11 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2016

3. Professional Liability Insurance Program

In 1978, the Hospital, in conjunction with a number of unrelated health care entities, participated in the formation of captive insurance companies (collectively, the Captive) to provide professional liability and general liability insurance to its participants. The premiums are based on a modified claims-made coverage and are actuarially determined based on the actual experience of the Captive, Hospital• specific experience, and estimated current exposure. The Captive has reinsurance coverage from reinsurers for certain amounts above its coverage level per claim limits. Rights to equity in the Captive were transferred to New York-Presbyterian Fund, Inc. (Fund, Inc.), a related party. Accordingly, insurance premiums are paid by the Hospital initially to Fund, Inc. The notes to the audited consolidated financial statements of the Hospital for the years ended December 31, 2015 and 2014, include additional disclosures which describe the Hospital's accounting for its professional liability insurance program and related matters. The Hospital's estimates for professional liabilities are based upon complex actuarial calculations which utilize factors such as historical claims experience for the Hospital and related industry factors, trending models, estimates for the payment patterns of future claims and present value discount factors. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. Revisions to estimated amounts resulting from actual experience differing from projected expectations are recorded in the period the information becomes known or when changes are anticipated.

4. Fair Value Measurements The Hospital uses various methods of calculating fair value of its financial assets and liabilities, when applicable. The Hospital defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a framework for measuring fair value. Fair value measurements are applied based on the unit of account from the Hospital's perspective. The unit of account determines what is being measured by reference to the level at which the asset or liability is aggregated (or disaggregated).

Levell: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable inputs that are based on inputs not quoted in active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

12 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31,2016

4. Fair Value Measurements (continued)

A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. In determining fair value, the Hospital uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers non-performance risk in its assessment of fair value.

The following table presents financial instruments carried at fair value, excluding assets invested in the Hospital's pension plans, as of March 31,2016 and December 31, 2015 (in thousands):

March 31, 2016 (Unaudited) Total Levell Level 2 Level 3

Cash and cash equivalents - held for investment $ 379,506 $ 342,189 $ 37,317 $ Fixed income: U.S. government 841,357 841,357 Non-U.S. government 3,353 3,353 Corporate 416,597 37,045 379,552 Mortgage and asset backed 363,878 66,365 297,513 Other 13,782 13,782 Equities: U.S. equities(a) 182,362 182,362 Non-U.S. equities(b) 56,213 56,213 Real assets 53,662 53,662 Mutual funds 49,035 49,035 $ 2,359,745 $ 1,645,363 $ 714,382 $

13 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31,2016

4. Fair Value Measurements (continued) December 31,2015 (Audited) Total Levell Level 2 Level 3

Cash and cash equivalents - held for investment $ 241,016 $ 203,708 $ 37,308 $ Fixed income: U.S. government 999,251 999,251 Non-U.S. government 3,345 3,345 Corporate 479,966 7,661 472,305 Mortgage and asset backed 379,659 379,659 Other 19,997 19,997 Equities: U.S. equities(a) 173,417 173,417 Non-U.S. equities(b) 58,187 58,187 Real assets 43,328 43,328 Mutual funds 48,662 48,662 $ 2,446,828 $ 1,557,556 $ 889,272 $

The Hospital's alternative investments and common collective/commingled trusts and pooled investments held by a related organization are reported using the equity method of accounting and, therefore, are not included in the tables above (see Note 1).

14 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31,2016

4. Fair Value Measurements (continued)

Financial instruments invested in the Hospital's pension plans at fair value are classified in the table below in one of the three categories described above as of March 31,2016 and December 31,2015 (in thousands):

March 31, 2016 (Unaudited) Total Levell Level 2 Level 3

Cash and cash equivalents $ 30,409 $ 30,409 $ - $ Fixed income: u.s. government 165,476 165,476 Non-U.S. government 21,154 21,154 Corporate bonds 177 177 Equities: U.S. equities(a) 73,964 73,964 Non-U.S. equities(b) 1,869 1,869 Real assets 36,393 36,393 $ 329,442 $ 329,442

Asset measured at net asset value as a practical expedient: Common collective fixed income(c) 36,518 Common collective equity funds (d) 471,302 Hedge funds(e) 196,368 Private equity(!) 163,453

Private real assets(g) 1152729

:II 1!3121812

15 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2016

4. Fair Value Measurements (continued) December 31,2015 (Audited) Total Levell Level 2 Level 3

Cash and cash equivalents $ 34,250 $ 34,250 $ - $ Fixed income: U.S. government 157,661 157,661 Non-U.S. government 11,051 11,051 Corporate bonds 176 176 Equities: U.S. equities(a) 74,204 74,204 Non-U.S. equities(b) 1,921 1,921 Real assets 32,206 32,206 Mutual funds 16,800 16,800 $ 328,269 $ 328,269

Asset measured at net asset value as a practical expedient: Common collective fixed income(c) 32,596 Common collective equity funds (d) 466,238 Hedge funds(e) 215,740 Private equity(1) 152,682 Private real assets(g) 112,598 $ IJlQ8, 123

(a) Equity portfolios invested in common stock of corporations primarily domiciled in the United States.

(b) Equity portfolios invested in common stock of corporations primarily domiciled outside the United States, including emerging market countries.

(d) Common collective/commingled trusts invested in common stock of corporations domiciled in the United States and outside the United States, including emerging market countries.

(e) Hedge funds include long and short equity, multi-strategy, event driven and relative value funds invested with managers who invest with different strategies and typically employ some leverage. In long and short equity, fund managers create a portfolio of long positions in stocks expected to appreciate over time and short positions in stocks expected to depreciate. Event driven managers create a portfolio designed to profit from corporate events, such as mergers, spin-offs, defaults and bankruptcy. Relative value managers invest in long and short positions, but typically have a more neutral net market position than long and short. Multi-strategy is a fund employing a variety of hedge fund strategies.

(I) Private equity investments include limited partnership investments in funds pursuing strategies in corporate buyouts, venture capital, growth equity, distressed and turnaround investments.

(g) Real estate and natural resources investments.

16 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31,2016

4. Fair Value Measurements (continued)

The following is a description of the Hospital's valuation methodologies for assets measured at fair value. The fair value methodologies are not necessarily indicators of investment risk, but are descriptive of the measures used to arrive at fair value pricing. Fair value for Levell is based upon quoted market prices. Investments classified as Level 2 are primarily valued using techniques that are consistent with the market approach. Valuations for Level 2 are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Inputs, which include broker/dealer quotes, reported/comparable trades, and benchmark yields are obtained from various sources including market participants, dealers and brokers. Common collective/commingled trusts and alternative investments are measured at net asset value. The valuation for alternative investments is described in Note 1. The methods described above may produce a fair value that is not indicative of net realizable value or reflective of future fair values. Furthermore, while the Hospital believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The following is a summary of investments (by major class) that have restrictions on the Hospital's ability to redeem its investments at the measurement date, any unfunded capital commitments and the investments strategies of the investees as of March 31, 2016 (including investments accounted for using the equity method) (in thousands):

Redemption Frequency Redemption Description of Fair Unfunded (If Currently Notice Investment Value Commitments Elig!hle) Period Common collective/ commingled trusts $ 1,205,898 $ Daily to quarterly 3 to 30 days Hedge funds 389,550 Monthly to tri-annually 45 to 180 days Private equity 335,063 237,913 * * Private real assets 205,738 205,760 * * $ 2,136,249 $ 443,673

* The Hospital's liquidity restrictions range from several months to ten years for certain private equity and real asset investments. Liquidity restrictions may apply to all or portions of a particular invested amount.

17 The New York and Presbyterian Hospital

Notes to Unaudited Interim Consolidated Financial Statements

March 31,2016

4. Fair Value Measurements (continued)

The carrying values of cash and cash equivalents, receivables, accounts payable and accrued expenses, other current assets and liabilities are reasonable estimates of fair value due to the short-term nature of these financial instruments. Carrying value approximates fair value for other noncurrent financial instruments, excluding long-term debt obligations and financial instruments included in the fair value tables. At March 31,2016 and December 31,2015, the fair value oflong-term debt obligations totaled approximately $2,144.9 million and $2,085.2 million, excluding capital leases and unamortized fair value adjustments. The fair value of long-term debt is classified as Level 2 in the fair value hierarchy, using techniques consistent with the market approach. Valuations for long-term debt are based on quoted market prices for related bonds.

5. Commitments and Contingencies

Various investigations, lawsuits and claims arising in the normal course of operations are pending or on appeal against the Hospital. While the ultimate effect of such actions cannot be determined at this time, it is the opinion of management that the liabilities which may arise from such actions would not materially affect the consolidated financial position or results of operations of the Hospital.

6. Subsequent Events

Subsequent events have been evaluated through May 27,2016, which is the date the interim unaudited consolidated financial statements were issued.

18 The New York and Presbyterian Hospital

Supplementary Information for the Three Months Ended March 31, 2016

Consolidating Information

The following table summarizes the unaudited interim consolidating statement of financial position at March 31,2016 (in thousands):

Non-Obligated Group Obligated NVP Community NVP Community Group Services, Inc. Programs, Inc. Eliminations! NVPH NVP/Lawrence NVP/Hudson Valley NVP/Queens Reclasses Consolidated (Unalldited) Assets CWTentassets: Cash, cash equivalents and short-tenn investments: Cash and cash equivalents $ 244,962 $ 15,450 $ 18,751 $ 19,268 $ - $ 298,431 Short-tenn investments 1,098,113 38,957 50,198 1,187,268 Total cash, cash equivalents and short-tenn investments 1,343,075 15,450 57,708 69,466 1,485,699

Patient accounts receivable, less allowance for uncollecttbles 556,017 33,575 21,909 84,161 695,662 Other CWTentassets 131,035 6,368 5,115 18,851 (338) 161,031 Assets limited as to use - CWTentportion 27,158 3,041 10,635 40,834 Professional liabilities insurance recoveries receivable and related deposit - CWTentportion 69,322 2,414 8 71,744 BenefICial interest in net assets held by related organizations - CWTentportion 63,900 63,900 Due from (to) related organizations - net 11,450 (400) (9,580) (1,470) Total CWTentassets 2,201,957 58,434 86,746 173,541 (1,808) 2,518,870

Assets limited as to use - noncWTent 2,076,210 100,410 9,500 121,637 2,307,757 Property, buildings, and equipment - net 2,666,763 128,612 132,446 275,036 3,202,857 Other nonCWTentassets net 3,029 2,991 15,367 21,387 Professional liabilities insurance recoveries receivable and related deposit - nonCWTent 171,702 22,570 6,542 1,345 202,159 BenefICial interest in net assets held by related organizations - nonCWTent 1,632,266 1,632,266 Total assets $ 8,751.927 $ 310,026 $ 238,225 $ 586,926 $ (1,808) $ 9,885,296

19 The New York and Presbyterian Hospital

Supplementary Information for the Three Months Ended March 31, 2016

Consolidating Information (continued)

Non-Obligated Group Obligated NYP Community NYP Community Group Services, Inc. Programs, Inc. Eliminations! NYPH NYPlLawrence NYP/Hudson Valley NYP/Queens Reclasses Consolidated (Unaudited) Liabilities and net assets elUTent liabilities: Long-tenn debt - ClUTentportion S 53,520 $ 3,091 S 4,925 S 8,882 S $ 70,418 AccOlUltspayable and accrued expenses 421,652 23,799 8,448 55,582 (2,891) 506,590 Accrued salaries and related liabilities 206,325 13,975 7,555 19,497 247,352 Pension and postretirement benefit liabilities - ClUTentportion 16,014 808 16,822 Professional liabilities and other - ClUTentportion 69,322 2,242 2,521 7,679 81,764 Other ClUTentliabilities 185,328 4,668 4,566 1,086 195,648 Due to related organizations - net 1,083 1,083 Total ClUTentliabilities 952,161 47,775 28,015 93,534 (1,808) 1,119,677

Long-tenn debt 1,641,378 27,321 71,542 175,793 1,916,034 Professional liabilities and other 310,688 37,917 9,865 76,030 434,500 Pension liability 271,551 88,189 59,460 419,200 Postretirement benefIlliability 23,833 4,457 22,670 50,960 Deferred revenue 2,077 2,077 Other noncurrent liabilities 303,513 11,675 8,271 92,489 415,948 Total liabilities 3,505,201 217,334 117,693 519,976 (1,808) 4,358,396

Net assets: Unrestricted 3,550,560 73,832 117,297 55,682 3,797,371 Temporarily restricted: NYPlLawrence Hospital 14,175 14,175 NVPlHudson Vaney Hospital 1,560 1,560 NYP/Queens 2,163 2,163 Held by related organizations 1,453,141 1,453,141 Total temporarily restricted 1,453,141 14,175 1,560 2,163 1,471,039 Permanently restricted: NYP/Lawrence Hospital 4,685 4,685 NYPlHudson Vaney Hospital 1,675 1,675 NYPfQueens 9,105 9,105 Held by related organizations 243,025 243,025 Total permanently restri:ted 243,025 4,685 1,675 9,105 258,490 Total net assets 5,246,726 92,692 120,532 66,950 5,526,900 Total liabilities and net assets $ 8,751,927 $ 310,026 $ 238,225 $ 586,926 $ (1,808) $ 9,885,296

20 The New York and Presbyterian Hospital

Supplementary Information for the Three Months Ended March 31, 2016

Consolidating Information (continued)

The following table summarizes the unaudited interim consolidating statement of operations for the three months ended March 31,2016 (in thousands):

Non-Obligated Group Obligated NVP Community NVP Community Group Services, Inc. Programs, Inc.

NVPH NVP/Lawrence NVP/Hudson Valle~NVP/Queens Consolidated (Un all dited) Operating rewnues Net patient service revenue $ 1,238,771 $ 67,062 $ 50,581 $ 181,983 $ 1,538,397 Provision forbad debts (15,300) (2,628) (I,m) (2,634) (21,674) Net patient service revenue, less provision for bad debts 1,223,471 64,434 49,469 179,349 1,516,723 Other revenue 70,748 1,219 1,132 8,816 81,915 Total operating revenues 1,294,219 65,653 50,60\ 188,165 1,598,638

Operating expenses Salaries and wages 570,180 32,202 22,579 90,673 715,634 Employee benefits 159,102 10,055 5,379 27,687 202,223 Supplies and other expenses 391,084 22,744 16,018 61,450 491,296 Interes t and amortization 0 f deferred financing fees 16,213 110 614 2,461 19,398 Depreciation and amortization 67,858 2,409 2,969 6,327 79,563 Total operating expenses 1,204,437 67,520 47,559 188,598 1,508,114

Operating income 89,782 (1,867) 3,042 (433) 90,524

Investment return 20,492 143 88 2,146 22,869 Excess of revenues over expenses 110,274 (1,724) 3,130 1,713 113,393

Otherchanges in unrestricted net assets: Net assets transfer to related parties (2,078) (2,078) Distnbutions from New Yolk-Presbyterian Fund, Inc. for the purchase offixed assets 31,214 31,214 Change in pension and postretirement benefit liabilities to be recogni2ed in future periods (94,184) (94,184) Change in unrestricted net assets $ 45,226 $ (1,724) $ 3,130 $ 1,713 $ 48,345

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APPENDIX D

FORM OF BOND INDENTURE

[THIS PAGE INTENTIONALLY LEFT BLANK]

THE NEW YORK AND PRESBYTERIAN HOSPITAL

and

TD BANK, N.A., as Trustee ______

INDENTURE OF TRUST

______

Dated as of June 1, 2016

$______THE NEW YORK AND PRESBYTERIAN HOSPITAL TAXABLE BONDS, SERIES 2016

TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS

Section 1.01 Definitions...... 2 Section 1.02 Content of Certificates...... 8 Section 1.03 Interpretation...... 9 ARTICLE II THE BONDS

Section 2.01 Authorization of Bonds...... 9 Section 2.02 Terms of the 2016 Bonds...... 10 Section 2.03 Form of Bonds...... 11 Section 2.04 Execution of Bonds...... 11 Section 2.05 Transfer of Bonds...... 11 Section 2.06 Exchange of Bonds...... 12 Section 2.07 Bond Register...... 12 Section 2.08 Temporary Bonds...... 12 Section 2.09 Bonds Mutilated, Lost, Destroyed or Stolen...... 12 Section 2.10 Use of Securities Depository...... 13 Section 2.11 Additional Bonds...... 14 ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS

Section 3.01 Issuance of Bonds...... 15 Section 3.02 Application of Proceeds of Bonds...... 15 Section 3.03 Validity of Bonds...... 15 ARTICLE IV REDEMPTION OF BONDS

Section 4.01 Terms of Redemption...... 15 Section 4.02 Registration of Bonds in the Book-Entry System...... 16 Section 4.03 Selection of Bonds for Redemption...... 17 Section 4.04 Notice of Redemption...... 17 Section 4.05 Partial Redemption of Bonds...... 18 Section 4.06 Effect of Redemption...... 18

-i- TABLE OF CONTENTS (continued) Page

Section 4.07 Purchase in Lieu of Redemption...... 18 ARTICLE V FUNDS AND ACCOUNTS

Section 5.01 Establishment and Pledge of Indenture Fund...... 19 Section 5.02 Bond Fund...... 20 Section 5.03 Interest Account...... 21 Section 5.04 Principal Account...... 21 Section 5.05 Redemption Fund...... 21 Section 5.06 Payments by the Hospital; Allocation of Funds...... 22 Section 5.07 Investment of Moneys in Funds and Accounts Held by Trustee...... 22 Section 5.08 Amounts Remaining in Funds and Accounts...... 24 Section 5.09 Trustee Direction Regarding Obligation No. 2...... 24 ARTICLE VI PARTICULAR COVENANTS; REPRESENTATIONS AND WARRANTIES

Section 6.01 Punctual Payment...... 24 Section 6.02 Compliance With Indenture...... 24 Section 6.03 Against Encumbrances...... 24 Section 6.04 Power to Issue Bonds and Make Pledge and Assignment...... 24 Section 6.05 Accounting Records of the Trustee and Financial Statements...... 25 Section 6.06 Use of Proceeds...... 25 Section 6.07 Representations and Warranties of the Hospital...... 25 Section 6.09 Limitations on Consolidated Bonds...... 28 Section 6.10 Obligation No. 2 ...... 28 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS

Section 7.01 Events of Default...... 29 Section 7.02 Acceleration of Maturity...... 29 Section 7.03 Rights as a Secured Party...... 30 Section 7.04 Application of Moneys Collected by the Trustee...... 30 Section 7.05 Trustee to Represent Bondholders...... 31 Section 7.06 Bondholders’ Direction of Proceedings...... 31 Section 7.07 Limitation on Bondholders’ Right to Sue...... 32

-ii- TABLE OF CONTENTS (continued) Page

Section 7.08 Absolute Obligation of Hospital...... 32 Section 7.09 Termination of Proceedings...... 32 Section 7.10 Remedies Not Exclusive...... 32 Section 7.11 Delay or Omission Not Waiver...... 33 Section 7.12 Waiver of Past Defaults...... 33 Section 7.13 Undertaking for Costs...... 33 Section 7.14 Notice of Default...... 33 Section 7.15 Trustee May File Proofs of Claim...... 34 ARTICLE VIII THE TRUSTEE

Section 8.01 Duties, Immunities and Liabilities of Trustee...... 35 Section 8.02 Liability of Trustee...... 36 Section 8.03 Right of Trustee to Rely on Documents...... 38 Section 8.04 Preservation and Inspection of Documents...... 38 Section 8.05 Compensation and Indemnification...... 38 Section 8.06 Notice to Rating Agency...... 39 ARTICLE IX MODIFICATION OR AMENDMENT OF THE INDENTURE

Section 9.01 Amendments Permitted...... 39 Section 9.02 Effect of Supplemental Indenture...... 40 Section 9.03 Endorsement of Bonds; Preparation of New Bonds...... 40 Section 9.04 Amendment of Particular Bonds...... 41 ARTICLE X DEFEASANCE

Section 10.01 Discharge of Indenture...... 41 Section 10.02 Discharge of Liability on Bonds...... 42 Section 10.03 Deposit of Money or Securities With Trustee...... 42 Section 10.04 Payment of Bonds After Discharge of Indenture...... 43 ARTICLE XI MISCELLANEOUS

Section 11.01 Successor Is Deemed Included in All References to Predecessor...... 43 Section 11.02 Limitation of Rights to Parties and Bondholders...... 43 Section 11.03 Waiver of Notice...... 43

-iii- TABLE OF CONTENTS (continued) Page

Section 11.04 Destruction of Bonds...... 44 Section 11.05 Severability of Invalid Provisions...... 44 Section 11.06 Notices...... 44 Section 11.07 Evidence of Rights of Bondholders...... 44 Section 11.08 Disqualified Bonds...... 45 Section 11.09 Money Held for Particular Bonds...... 45 Section 11.10 Funds and Accounts...... 45 Section 11.11 Waiver of Personal Liability...... 45 Section 11.12 Business Days...... 45 Section 11.13 Governing Law; Venue...... 46 Section 11.14 Execution in Several Counterparts...... 46 Section 11.15 CUSIP Numbers...... 46 Section 11.16 Agreement Not for the Benefit of Other Parties...... 46 Section 11.17 Entire Agreement...... 46 Section 11.18 ERISA Provisions...... 46

Exhibit A – Form of 2016 Bond Exhibit B – ERISA Provisions

-iv-

THIS INDENTURE OF TRUST (this “Indenture”), is made and entered into as of June 1, 2016, by and between THE NEW YORK AND PRESBYTERIAN HOSPITAL, a corporation organized under the not-for-profit laws of the State of New York (the “Hospital”), and TD BANK, N.A., a national banking association and being duly qualified to accept and administer the trusts created hereby (the “Trustee”);

W I T N E S S E T H:

WHEREAS, the Hospital has the requisite power to contract, to borrow money and to issue its bonds, and desires to provide for and has authorized the issuance of its Taxable Bonds, Series 2016 (the ”2016 Bonds”) in an aggregate principal amount of $______;

WHEREAS, the proceeds of the 2016 Bonds will be used by the Hospital for (i) the eligible corporate purposes of the Hospital and its affiliates, which may include, without limitation, any or all of the following: (a) making a loan to Hudson Valley Hospital Center to refinance its outstanding 2007 FHA-insured mortgage loan, (b) making a loan to New York- Presbyterian/Queens to refinance its outstanding 2007 FHA-insured mortgage loan, (c) making a loan to Lawrence Hospital Center to refinance its outstanding Westchester County IDA debt (d) refinancing of outstanding debt of the Hospital and other outstanding debt of certain Hospital affiliates, and (e) financing of one or more projects of the Hospital and certain Hospital affiliates, and (ii) costs of issuance relating to the 2016 Bonds;

WHEREAS, in order to provide for the authentication and delivery of the 2016 Bonds, to establish and declare the terms and conditions upon which the 2016 Bonds are to be issued and secured and to secure the payment of the principal or Make-Whole Redemption Price (as defined herein) thereof and of the interest thereon, the Hospital has authorized the execution and delivery of this Indenture;

WHEREAS, the 2016 Bonds, and the Trustee’s certificate of authentication and assignment to appear thereon, shall be in substantially the form attached hereto as Exhibit A, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Indenture; and

WHEREAS, the Hospital has entered into that certain Master Trust Indenture dated as of January 1, 2015 (as supplemented to date, the “Master Indenture”) between the Hospital and TD Bank, N.A., as master trustee (the “Master Trustee”), to secure obligations of the Hospital;

WHEREAS, the Hospital is the Obligated Group Representative and, currently, the sole Member of the Obligated Group;

WHEREAS, pursuant to the Master Indenture, in connection with the issuance of the 2016 Bonds, the Hospital shall enter a Supplemental Master Indenture for Obligation No. 2, dated as of June 1, 2016 (the “Supplemental Master Indenture No. 2”);

WHEREAS, pursuant to the Supplemental Master Indenture No. 2, the Hospital shall issue an obligation under the Master Indenture (“Obligation No. 2”) to evidence the Obligated Group’s obligations arising under the 2016 Bonds;

WHEREAS, Obligation No. 2 and all obligations issued from time to time under the Master Indenture are secured under the Master Indenture on an equal and ratable basis;

WHEREAS, Obligation No. 2 will be held by the Trustee on behalf of the holders of the 2016 Bonds;

WHEREAS, all acts and proceedings required by law necessary to make the 2016 Bonds, when executed by the Hospital, authenticated and delivered by the Trustee and duly issued, the valid and binding obligations of the Hospital, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth, in accordance with its terms, have been done and taken, and the execution and delivery of this Indenture have been in all respects duly authorized.

NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment of the principal (or Make-Whole Redemption Price) of, and the interest on, all Bonds, including the 2016 Bonds, at any time issued and outstanding under this Indenture, according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued and received, and for and in consideration of the premises and mutual covenants herein contained, of the acceptance by the Trustee of the trusts hereby created, of the purchase and acceptance of the Bonds by the Holders (as defined herein) thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the Hospital and the Trustee have executed and delivered this Indenture;

TO HAVE AND TO HOLD the same unto the Trustee and its successors in trust forever;

IN TRUST, NEVERTHELESS, upon the terms and trusts herein set forth for the benefit and security of those who shall hold or own the Bonds issued and to be issued hereunder, or any of them, without preference of any of the Bonds over any others thereof for any reason whatsoever, except as otherwise provided herein;

IT IS HEREBY COVENANTED, DECLARED AND AGREED by and between the parties hereto that all the Bonds to be issued hereunder are to be issued, authenticated and delivered, and that all property subject or to become subject hereto, is to be held and applied, upon and subject to the further covenants, conditions, uses and trusts hereinafter set forth; and the Hospital, for itself and its successors, does hereby covenant and agree to and with the Trustee and its successors in trust, for the benefit of all those who shall hold the Bonds, or any of them, as follows:

ARTICLE I

DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS

SECTION 1.01 Definitions. Unless the context otherwise requires, the terms defined in this Section 1.01 shall, for all purposes of this Indenture and of any indenture supplemental hereto and of any certificate, opinion or other document herein mentioned, have

the meanings herein specified, to be equally applicable to both the singular and plural forms of any of the terms herein defined.

“2016 Bonds” means The New York and Presbyterian Hospital Taxable Bonds, Series 2016 authorized by, and at any time Outstanding pursuant to, this Indenture.

“Additional Bonds” means bonds issued under this Indenture subsequent to the initial issuance of The New York and Presbyterian Hospital Taxable Bonds, Series 2016 that are consolidated with such bonds or which are issued as a separate series. The Additional Bonds consolidated with the 2016 Bonds shall be treated as a single series of 2016 Bonds for all purposes hereof.

“Affiliate” means any corporation, partnership, joint venture, association, business trust or similar entity organized under the laws of the United States of America or any state thereof that (a) directly or indirectly controls or is controlled by, or is under common control by the same person or entity as, the Hospital or (b) directly or indirectly controls or is controlled by, or is under common control by the same person or entity as, any entity referred to in clause (a) of this sentence. For purposes of this definition, "control" means with respect to: (i) a corporation having stock, ownership, directly or indirectly, of more than 50% of the securities (as defined in Section 2(1) of the Securities Act of 1933, as amended) of any class, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the members of the board of directors or other governing body of such corporation; (ii) a nonprofit corporation not having stock, having the power to elect or appoint, directly or indirectly, a majority of the board of directors, trustees or other governing body of such corporation; and (iii) any other entity, having the power to direct the management of such entity through the ownership of at least a majority of its voting securities or the right to designate or elect a majority of the members of the board of directors or other governing body of such entity.

“Authorized Denomination” means $1,000 or any multiple integral thereof.

“Authorized Representative” means the Hospital’s Chief Executive Officer, President, Chief Financial Officer, Senior Vice President or any other Person designated as an Authorized Representative of the Hospital by a Certificate of the Hospital signed by the Hospital’s Chief Executive Officer, President, Chief Financial Officer or Senior Vice President and filed with the Trustee.

“Beneficial Owner” means any Person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any of the Bonds (including any Person holding Bonds through nominees, depositories or other intermediaries) established to the reasonable satisfaction of the Trustee or the Hospital.

“Bond Fund” means the fund by that name established pursuant to Section 5.02.

“Bonds” means bonds authorized by, and at any time Outstanding pursuant to, this Indenture, including any Additional Bonds.

“Book-Entry Form” or “Book-Entry System” means a form or system, as applicable, under which physical bond certificates in fully registered form are registered only in the name of a Securities Depository or its nominee as Bondholder, with the physical bond certificates held by and “immobilized” in the custody of the Securities Depository and the book-entry system maintained by and the responsibility of others than the Hospital or the Trustee is the record that identifies and records the transfer of the interests of the owners of book-entry interests in those Bonds.

“Business Day” means any day other than (A) a Saturday or Sunday or legal holiday or a day on which banking institutions in the city or cities in which the Designated Office of the Trustee is located are authorized by law or executive order to close or (B) a day on which the New York Stock Exchange is closed.

“Certificate,” “Statement,” “Request” and “Requisition” of the Hospital mean, respectively, a written certificate, statement, request or requisition signed in the name of the Hospital by an Authorized Representative. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. If and to the extent required by Section 1.02, each such instrument shall include the statements provided for in Section 1.02

“Code” means the Internal Revenue Code of 1986 or any successor statute thereto and any regulations promulgated thereunder.

“Comparable Treasury Issue” means the United States Treasury security or securities selected by a Designated Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Bonds to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of such Bonds.

“Comparable Treasury Price” means, with respect to any redemption date, the average of the Reference Treasury Dealer Quotations for such redemption date or, if the Designated Investment Banker obtains only one Reference Treasury Dealer Quotation, such Reference Treasury Dealer Quotation.

“Consolidated Hospital” means the Hospital and its subsidiary hospitals, as consolidated on the Hospital’s financial statements.

“Default” means any event which is or after notice or lapse of time or both would become an Event of Default.

“Designated Investment Banker” shall mean one of the Reference Treasury Dealers appointed by the Hospital.

“Designated Office” means the Designated Office of the Trustee, which as of the date of this Indenture is located at 1006 Astoria Boulevard, Cherry Hill, NJ 08034 and such other offices as the Trustee may designate from time to time by written notice to the Hospital and the Holders.

“Event of Default” means any of the events specified in Section 7.01.

“Fiscal Year” means a twelve month period beginning January 1st of a year and ending on December 31st of such year, or such other twelve month period as the Hospital may elect as its fiscal year.

“Holder” or “Bondholder,” whenever used herein with respect to a Bond, means the Person in whose name such Bond is registered.

“Indenture” means this Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture.

“Indenture Fund” means the fund by that name established pursuant to Section 5.01

“Intercreditor Agreement” means that certain Intercreditor Agreement, dated as of January 16, 2015, as amended by First Amendment to Intercreditor Agreement, dated as of June __, 2016, by and among Prudential Huntoon Paige Associates, LLC, the Dormitory Authority of the State of New York, the Hospital, the Master Trustee, the Trustee, and the U.S. Department of Housing & Urban Development acting by and through the Federal Housing Commissioner.

“Hospital” means The New York and Presbyterian Hospital, a corporation organized under the not-for-profit laws of the State of New York, or its successor or successors.

“Interest Account” means the account by that name in the Bond Fund established pursuant to Section 5.02.

“Interest Payment Date” means February 1 and August 1 of each year, commencing February 1, 2017, or, with respect to any Additional Bonds, such dates as shall be specified in the Supplemental Indenture authorizing their issuance.

“Investment Securities” means either of the following: (1) direct nonprepayable, noncallable 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 direct nonprepayable, noncallable obligations, the timely payment of the principal of and interest on which is fully guaranteed by the United States of America, including instruments evidencing a direct ownership interest in securities described in this clause such as CATS, TIGRs, and Stripped Treasury Coupons rated or assessed in the highest Rating Categories by S&P and Moody’s and held by a custodian for safekeeping on behalf of holders of such securities and (2) money market funds registered under the Investment Company Act of 1940, the shares in which are registered under the Securities Act of 1933 and that have a rating by S&P of AAAm-G, AAAm or AAm, including such funds for which the Trustee or its affiliates provide investment advisory or other management services.

“Make-Whole Redemption Price” means the greater of (1) 100% of the principal amount of any Bonds being redeemed; or (2) the sum of the present values of the remaining unpaid scheduled payments of principal and interest on any Bonds being redeemed (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semi-annual

basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus ___ basis points.

“Master Trust Indenture” means the Master Trust Indenture dated as January 1, 2015, by and between the Hospital, as initially the sole Obligated Group Member, and TD Bank, N.A., as Master Trustee.

“Moody’s” means Moody’s Investors Service, a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Hospital upon notice to the Trustee.

“Obligated Group” means the Obligated Group Members, collectively.

“Obligated Group Member” means the Hospital and any person that shall become an Obligated Group Member in accordance with the Master Trust Indenture (other than any person that shall have withdrawn from the Obligated Group in accordance with the Master Trust Indenture).

“Obligated Group Representative” means the Hospital or such other person as shall be designated as such by Notice to the Trustee executed by all of the Obligated Group Members.

“Obligation No. 2” means the Master Note dated as of June __, 2016 issued under the Master Trust Indenture pursuant to a Supplemental Master Indenture No. 2 pursuant to which the Obligated Group Members agree to make payments with respect to the 2016 Bonds.

“Offering Memorandum” means the final offering memorandum dated ______, 2016, relating to the 2016 Bonds.

“Opinion of Counsel” means a written opinion of counsel (who may be counsel for the Hospital) satisfactory to the Trustee.

“Outstanding” when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 11.08) all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under this Indenture except (1) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (2) Bonds with respect to which all liability of the Hospital shall have been discharged in accordance with Section 10.02, including Bonds (or portions of Bonds) referred to in Section 11.08; and (3) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Trustee pursuant to this Indenture.

“Parity Debt” means the Bonds and any obligation evidenced by an Obligation under the Master Trust Indenture, collectively.

“Payment Date” means an Interest Payment Date or a Principal Payment Date.

“Person” means an individual, corporation, firm, association, partnership, trust, limited liability company or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof.

“Principal Account” means the account by that name in the Bond Fund established pursuant to Section 5.02.

“Principal Payment Date” means the date of final maturity of any Bonds as set forth in Section 2.02 hereof or, with respect to any Additional Bonds, the date or dates designated in the Supplemental Indenture authorizing the issuance of such any Additional Bonds.

“Rating Agency” means Moody’s and/or Fitch.

“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.

“Record Date” means the fifteenth (15th) day (whether or not a Business Day) of the month immediately preceding each Interest Payment Date.

“Redemption Fund” means the fund by that name established pursuant to Section 5.05.

“Reference Treasury Dealer” shall mean Goldman, Sachs & Co. or its affiliates which are primary U.S. government securities dealers, and their respective successors; provided that if Goldman Sachs, & Co. or its affiliates shall cease to be a primary U.S. government securities dealer (a “Primary Treasury Dealer”), the Hospital shall substitute therefore another Primary Treasury Dealer; provided, further, that the Hospital may, at its option, substitute another Primary Treasury Dealer for Goldman, Sachs & Co. or its affiliates.

“Responsible Officer” means any officer of the Trustee assigned to administer its duties hereunder.

“S&P” means Standard & Poor’s, a division of The McGraw-Hill Companies, a corporation organized and existing under the laws of the State of New York, its successors and their assigns, or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Hospital upon notice to the Trustee.

“Securities Depository” means The Depository Trust Company and its successors and assigns, or any other securities depository selected as set forth in Section 2.10, which agrees

to follow the procedures required to be followed by such securities depository in connection with the Bonds.

“Special Record Date” means the date established by the Trustee pursuant to Section 2.02 as the record date for the payment of defaulted interest on the Bonds.

“Supplemental Indenture” means any indenture hereafter duly authorized and entered into between the Hospital and the Trustee, authorizing the issuance of Additional Bonds or supplementing, modifying or amending this Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder.

“Supplemental Master Indenture No. 2” means that certain Supplemental Master Indenture for Obligation No. 2, duly authorized and entered into between the Hospital and the Master Trustee authorizing the issuance of Obligation No. 2.

“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity or interpolated (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

“Trustee” means TD Bank, N.A., a national banking association, or its successor or successors, as Trustee hereunder as provided in Section 8.01.

“Underwriters” means, when used with respect to the 2016 Bonds, Goldman, Sachs & Co.

“Uniform Commercial Code” means the Uniform Commercial Code as in effect in the State of New York from time to time.

SECTION 1.02 Content of Certificates. Every certificate provided for in this Indenture to be given by or on behalf of the Hospital with respect to compliance with any provision hereof shall include (1) a statement that the Person making or giving such certificate has read such provision and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the certificate is based; (3) a statement that, in the opinion of such Person, he or she has made or caused to be made such examination or investigation as is necessary to enable him or her to express an informed opinion with respect to the subject matter referred to in the instrument to which his or her signature is affixed; and (4) a statement as to whether, in the opinion of such Person, such provision has been complied with.

Any such certificate made or given by an officer of the Hospital may be based, insofar as it relates to legal, accounting or management matters, upon a certificate or opinion of or representation by counsel, an accountant or a management consultant, unless such officer knows, or in the exercise of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which such certificate or statement may be based, as aforesaid, is erroneous. Any such certificate or opinion made or given by counsel, an accountant or a management consultant may be based, insofar as it relates to factual matters

(with respect to which information is in the possession of the Hospital) upon a certificate or opinion of or representation by an officer of the Hospital, unless such counsel, accountant or management consultant knows, or in the exercise of reasonable care should have known, that the certificate or opinion or representation with respect to the matters upon which such person’s certificate or opinion or representation may be based, as aforesaid, is erroneous. The same officer of the Hospital, or the same counsel, accountant or management consultant, as the case may be, need not certify to all of the matters required to be certified under any provision of this Indenture, but different officers, counsel, accountants or management consultants may certify to different matters, respectively.

SECTION 1.03 Interpretation.

(A) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to mean and include the neuter, masculine or feminine gender, as appropriate.

(B) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof.

(C) All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Indenture; the words “herein,” “hereof,” “hereby,” “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof.

ARTICLE II

THE BONDS

SECTION 2.01 Authorization of Bonds. An issue of Bonds to be issued hereunder in order to obtain funds to carry out the purposes indicated herein for the benefit of the Hospital is hereby created. Such Bonds are designated as “The New York and Presbyterian Hospital Taxable Bonds, Series 2016.” Nothing contained herein shall be deemed to preclude or restrict the consolidation of any Additional Bonds issued pursuant hereto with The New York and Presbyterian Hospital Taxable Bonds, Series 2016 theretofore issued or restrict the issuance of one or more series of Additional Bonds; provided, however, that each of the conditions and other requirements contained herein for the authorization and issuance of Additional Bonds shall be met and complied with. The Additional Bonds consolidated with The New York and Presbyterian Hospital Taxable Bonds, Series 2016 shall be treated as a single series of Bonds for all purposes hereof. The aggregate principal amount of Bonds that may be issued and Outstanding under this Indenture is not limited. This Indenture constitutes a continuing agreement with the Holders from time to time of the Bonds to secure the full payment of the principal or Make-Whole Redemption Price of and interest on all such Bonds subject to the covenants, provisions and conditions contained herein and in the Bonds.

SECTION 2.02 Terms of the 2016 Bonds.

(A) The 2016 Bonds shall be issued as fully registered Bonds in Authorized Denominations. The 2016 Bonds shall be registered initially in the name of Cede & Co., as nominee of the Securities Depository, and shall be evidenced by one 2016 Bond for each maturity in the principal amount of the 2016 Bonds of such maturity. Registered ownership of the 2016 Bonds, or any portion thereof, may not thereafter be transferred except as set forth in Section 2.10. The 2016 Bonds shall be dated as of the date of first authentication and delivery by the Trustee and shall be numbered from R-1 upward. The 2016 Bonds shall be issued in the principal amounts, bear interest at the following rates per annum and mature (subject to prior redemption) on the following dates:

Principal Amount Interest Rate Maturity Date $______% ______

(B) The principal or Make-Whole Redemption Price of the Bonds shall be payable by check or by wire transfer of immediately available funds in lawful money of the United States of America at the Designated Office of the Trustee.

Interest on the 2016 Bonds will accrue beginning on the date of issuance of the Bonds and will be payable on each Interest Payment Date. Payment of the interest on each Interest Payment Date shall be made to the Person whose name appears on the bond registration books of the Trustee as the Holder thereof as of the close of business on the Record Date for each Interest Payment Date, such interest to be paid by check mailed by first class mail to such Holder at its address as it appears on such registration books, or, upon the written request of any Holder of at least $1,000,000 in aggregate principal amount of 2016 Bonds, submitted to the Trustee at least one (1) Business Day prior to the Record Date, by wire transfer in immediately available funds to an account within the United States designated by such Holder.

Notwithstanding the foregoing, as long as the Securities Depository is the Holder of all or part of the 2016 Bonds in Book-Entry Form, said principal or Make-Whole Redemption Price and interest payments shall be made to the Securities Depository by wire transfer in immediately available funds. CUSIP number identification shall accompany all payments of principal or Make-Whole Redemption Price and interest, whether by check or by wire transfer.

(C) Interest on the 2016 Bonds shall be calculated on the basis of a three hundred sixty (360) day year consisting of twelve (12) thirty (30) day months.

(D) Any such interest not so punctually paid or duly provided for with respect to any 2016 Bond shall forthwith cease to be payable to the Bondholder on such Record Date and shall be paid to the Person in whose name the 2016 Bond is registered at the close of business on a “Special Record Date” for the payment of such defaulted interest to be fixed by the Trustee, notice whereof to be given by first class mail to the Holders of such 2016 Bonds not less than ten (10) days prior to such Special Record Date.

(E) The 2016 Bonds shall be subject to redemption as provided in ARTICLE IV.

SECTION 2.03 Form of Bonds. The 2016 Bonds, and the Trustee’s certificate of authentication and assignment to appear thereon, shall be in substantially the form attached hereto as Exhibit A, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Indenture.

SECTION 2.04 Execution of Bonds. The Bonds shall be executed in the name and on behalf of the Hospital with the manual or facsimile signature of its Chief Executive Officer, President or Chief Financial Officer and attested to with the manual or facsimile signature of its Corporate Secretary or other authorized officer. The Bonds shall then be delivered to the Trustee for authentication by it. In case any officer who shall have signed any of the Bonds shall cease to be such officer of the Hospital before the Bonds so signed shall have been authenticated or delivered by the Trustee or issued by the Hospital, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Hospital as though those who signed the same had continued to be such officer of the Hospital, and also any Bond may be signed on behalf of the Hospital by such Person as at the actual date of execution of such Bond shall be the proper officer of the Hospital although at the nominal date of such Bond any such Person shall not have been such officer of the Hospital.

Only such of the Bonds as shall bear thereon a certificate of authentication substantially in the form hereinbefore recited, manually executed by an authorized signatory of the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this Indenture.

SECTION 2.05 Transfer of Bonds. Any Bond may, in accordance with its terms and subject to the limitations provided in Section 2.10, be transferred upon the books required to be kept pursuant to the provisions of Section 2.07 by the Person in whose name it is registered, in person or by its duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form approved by the Trustee.

Whenever any Bond or Bonds shall be surrendered for transfer, the Hospital shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds of the same series, bearing interest at the same rate and maturing on the same date, for a like aggregate principal amount in Authorized Denominations. The Trustee may require the Bondholder requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer, and the Trustee may also require the Bondholder requesting such transfer to pay a reasonable sum to cover any expenses incurred by the Hospital in connection with such transfer. The Trustee shall not be required to transfer (i) any Bond during the fifteen (15) days next preceding the selection of Bonds for redemption or (ii) any Bond called for redemption.

SECTION 2.06 Exchange of Bonds. Bonds may be exchanged at the Designated Office of the Trustee for a like aggregate principal amount of Bonds of the same series, bearing interest at the same rate and maturing on the same date of other Authorized Denominations. The Trustee may require the Bondholder requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange, and the Trustee may also require the Bondholder requesting such exchange to pay a reasonable sum to cover any expenses incurred by the Hospital in connection with such exchange. The Trustee shall not be required to exchange (i) any Bond during the fifteen (15) days next preceding the selection of Bonds for redemption or (ii) any Bond called for redemption.

SECTION 2.07 Bond Register. The Trustee shall keep or cause to be kept sufficient books for the registration and transfer of the Bonds, which shall at all times (during regular business hours at the location where such books are kept) be open to inspection by any Bondholder, the Hospital or their respective agents duly authorized in writing; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such books, Bonds as hereinbefore provided.

SECTION 2.08 Temporary Bonds. The Bonds may be issued in temporary form exchangeable for definitive Bonds when ready for delivery. Any temporary Bond may be printed, lithographed or typewritten, shall be of such denomination as may be determined by the Hospital, shall be in fully registered form without coupons and may contain such reference to any of the provisions of this Indenture as may be appropriate. A temporary Bond may be in the form of a single fully registered Bond payable in installments, each on the date, in the amount and at the rate of interest established for the Bonds. Every temporary Bond shall be executed by the Hospital and be authenticated by the Trustee upon the same conditions and in substantially the same manner as the definitive Bonds. If the Hospital issues temporary Bonds it will issue definitive Bonds as promptly thereafter as practicable, and thereupon the temporary Bonds may be surrendered, for cancellation, in exchange therefor at the Designated Office of the Trustee, and the Trustee shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of the same series, bearing interest at the same rate and maturing on the same date of Authorized Denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Indenture as definitive Bonds authenticated and delivered hereunder.

SECTION 2.09 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Hospital, at the expense of the Holder of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by it and delivered to, or upon the order of, the Hospital. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence be satisfactory to it and indemnity satisfactory to the Trustee and the Hospital shall be given, the Hospital, at the expense of the Holder, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall be about to mature, instead of issuing a substitute Bond, the Trustee may pay the same without surrender thereof). The Trustee may

require payment of a sum not exceeding the actual cost of preparing each new Bond issued under this Section 2.09 and of the expenses which may be incurred by the Hospital and the Trustee in complying with this Section 2.09. Any Bond issued under the provisions of this Section 2.09 in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Hospital whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be entitled to the benefits of this Indenture with all other Bonds secured by this Indenture.

SECTION 2.10 Use of Securities Depository. Notwithstanding any provision of this Indenture to the contrary:

(A) The Bonds shall be initially issued as provided in Section 2.02. Registered ownership of the Bonds, or any portion thereof, may not thereafter be transferred except:

(1) To any successor of the Securities Depository or its nominee, or to any substitute depository designated pursuant to clause (2) of this subsection (A) (“substitute depository”); provided that any successor of the Securities Depository or substitute depository shall be qualified under any applicable laws to provide the service proposed to be provided by it;

(2) To any substitute depository designated by the Hospital and not objected to by the Trustee, upon (i) the resignation of the Securities Depository or its successor (or any substitute depository or its successor) from its functions as depository or (ii) a determination by the Hospital that the Securities Depository or its successor (or any substitute depository or its successor) is no longer able to carry out its functions as depository; provided that any such substitute depository shall be qualified under any applicable laws to provide the services proposed to be provided by it; or

(3) To any Person as provided below, upon (i) the resignation of the Securities Depository or its successor (or substitute depository or its successor) from its functions as depository; provided that no substitute depository which is not objected to by the Trustee can be obtained or (ii) a determination by the Hospital that it is in the best interests of the Hospital to remove the Securities Depository or its successor (or any substitute depository or its successor) from its functions as depository.

(B) In the case of any transfer pursuant to clause (1) or clause (2) of subsection (A), upon receipt of the Outstanding Bonds by the Trustee, together with a Certificate of the Hospital to the Trustee, new Bonds for each maturity shall be executed and delivered in the principal amount of the Bonds of such maturity, registered in the name of such successor or such substitute depository, or their nominees, as the case may be, all as specified in such Certificate of the Hospital. In the case of any transfer pursuant to clause (3) of subsection (A), upon receipt of the Outstanding Bonds by the Trustee together with a Certificate of the Hospital to the Trustee, new Bonds shall be executed and delivered in such denominations and registered in the names of such persons as are requested in such a Certificate of the Hospital, subject to the limitations of Section 2.02, provided the Trustee shall not be required to deliver such new Bonds within a period less than sixty (60) days from the date of receipt of such a Certificate of the Hospital.

(C) In the case of partial redemption or an advance refunding of the Bonds evidencing all or a portion of the principal amount Outstanding, the Securities Depository shall make an appropriate notation on the Bonds indicating the date and amounts of such reduction in principal, in form acceptable to the Trustee.

(D) The Hospital and the Trustee shall be entitled to treat the Person in whose name any Bond is registered as the Bondholder thereof for all purposes of the Indenture and any applicable laws, notwithstanding any notice to the contrary received by the Hospital or the Trustee.

(E) So long as the Outstanding Bonds are registered in the name of the Cede & Co. or its registered assign, the Hospital and the Trustee shall cooperate with Cede & Co., as sole registered Bondholder, and its registered assigns, in effecting payment of the principal or Make-Whole Redemption Price of and interest on the Bonds by arranging for payment in such manner that funds for such payments are properly identified and are made immediately available on the date they are due, all in accordance with the letter of representations of the Hospital to the Securities Depository or as otherwise agreed by the Trustee and the Securities Depository.

SECTION 2.11 Additional Bonds. Additional Bonds shall be authorized by a Supplemental Indenture. The Additional Bonds so authorized shall from time to time and in such amounts as directed by the Hospital be authenticated by the Trustee and by it delivered to or upon the order of the Hospital upon receipt of the consideration therefor. Each Supplemental Indenture authorizing the issuance of Bonds shall specify the following:

(A) The authorized principal amount of Additional Bonds to be issued;

(B) The purpose for which the Additional Bonds are to be issued;

(C) To the extent such Additional Bonds are consolidated with the 2016 Bonds, the first Interest Payment Date for the Additional Bonds;

(D) For Additional Bonds which are not consolidated with the 2016 Bonds, the Interest Payment Dates (including the first Interest Payment Date), Principal Payment Date and the Maturity Dates for the Additional Bonds;

(E) Directions for the applications of the proceeds of the Additional Bonds;

(F) Delivery of an Obligation under the Master Trust Indenture to evidence such Bonds; and

(G) Such other provisions as the Hospital deems advisable.

ARTICLE III

ISSUANCE OF BONDS; APPLICATION OF PROCEEDS

SECTION 3.01 Issuance of Bonds. At any time after the execution of this Indenture, the Hospital may execute and the Trustee shall authenticate and, upon Request of the Hospital, deliver the Bonds.

SECTION 3.02 Application of Proceeds of Bonds. The proceeds from the sale of the 2016 Bonds (net of underwriter’s discount and original issue discount, if any) shall be transferred by the Underwriters to the Hospital. The proceeds of any Additional Bonds shall be applied in accordance with the Supplemental Indenture authorizing the issuance thereof.

SECTION 3.03 Validity of Bonds. The recital contained in Bonds duly authenticated in accordance with this Indenture that such Bonds are issued pursuant to the Indenture shall be conclusive evidence of their validity and of compliance with the provisions of the Indenture in their issuance.

ARTICLE IV

REDEMPTION OF BONDS

SECTION 4.01 Terms of Redemption. The 2016 Bonds are redeemable prior to maturity at the written direction of the Hospital to the Trustee and with notice delivered pursuant to Section 4.04 hereof. Such redemption shall be in accordance with the terms of the Bonds, as a whole or in part on any Business Day in such order of maturity as directed by the Hospital at the Make-Whole Redemption Price, together with the interest, if any, accrued thereon from the most recent Interest Payment Date to which interest has been paid or duly provided for to the date fixed for redemption, as described in the form of Bonds in Exhibit A. Additional Bonds shall be subject to such redemption provisions as are set forth in the Supplemental Indenture authorizing the issuance thereof.

The Make-Whole Redemption Price shall be determined by an independent accounting firm or financial advisor retained by the Hospital (which accounting firm or financial advisor shall be subject to the Trustee’s approval) and such accounting firm or financial advisor shall perform all actions and make all calculations required to determine the Make-Whole Redemption Price. The Trustee and the Hospital may conclusively rely on such accounting firm’s or financial advisor’s calculations in connection with, and determination of, the Make- Whole Redemption Price, and shall bear no liability for such reliance.

Notwithstanding the giving of notice of the redemption of Outstanding Bonds, no such Bonds shall be redeemed unless there shall be on deposit with the Trustee on the redemption date and available for the payment of the Make-Whole Redemption Price of such Bonds an amount sufficient to redeem at the Make-Whole Redemption Price all of the Bonds the Hospital has so elected to redeem, together with the interest, if any, accrued thereon from the most recent Interest Payment Date to which interest has been paid or duly provided for to the date fixed for redemption.

SECTION 4.02 Registration of Bonds in the Book-Entry System.

(A) The provisions of this section shall apply with respect to any Bond registered to Cede & Co. or any other nominee of the Securities Depository while the Book- Entry System is in effect.

(B) On the date of original delivery thereof, the Bonds shall be registered in the registry books of the Trustee in the name of Cede & Co., as nominee of the Securities Depository as agent for the Hospital in maintaining the Book-Entry System. With respect to Bonds registered in the registry books kept by the Trustee in the name of Cede & Co., as nominee of the Securities Depository, the Hospital and the Trustee shall have no responsibility or obligation to any Participant (which means securities brokers and dealers, banks, trust companies, clearing corporations and various other entities, some of whom or their representatives own the Securities Depository) or to any Beneficial Owner (which means, when used with reference to the Book-Entry System, the Person who is considered the beneficial owner of the Bonds pursuant to the arrangements for book entry determination of ownership applicable to the Securities Depository) with respect to the following: (1) the accuracy of the records of the Securities Depository, Cede & Co. or any Participant with respect to any ownership interest in the Bonds, (2) the delivery to any Participant, any Beneficial Owner or any other Person, other than the Securities Depository, of any notice with respect to the Bonds, including any notice of redemption, or (3) the payment to any Participant, any Beneficial Owner or any other Person, other than the Securities Depository, of any amount with respect to the principal or Make-Whole Redemption Price of and interest on the Bonds only to or upon the order of the Securities Depository, and all such payments shall be valid and effective fully to satisfy and discharge the Hospital’s obligations with respect to the principal or Make-Whole Redemption Price of and interest on the Bonds to the extent of the sum or sums so paid. No Person other than the Securities Depository shall receive an authenticated Bond evidencing the obligation of the Hospital to make payments of principal or Make-Whole Redemption Price of and interest pursuant to this Indenture. Upon delivery by the Securities Depository to the Trustee of written notice to the effect that the Securities Depository has determined to substitute a new nominee in place of Cede & Co., the words “Cede & Co.” in this Indenture shall refer to such new nominee of the Securities Depository.

(C) In the event the Hospital determines that it is in the best interests of the Beneficial Owners that they be able to obtain Bond certificates, the Hospital may so notify the Securities Depository and the Trustee, whereupon the Securities Depository will notify the Participants of the availability through the Securities Depository of Bond certificates. In such event, the Trustee shall issue, transfer and exchange Bond certificates as requested by the Securities Depository in appropriate amounts and in authorized denominations. Whenever the Securities Depository requests the Hospital and the Trustee to do so, the Trustee and the Hospital will cooperate with the Securities Depository in taking appropriate action after reasonable notice to make available Bonds registered in whatever name or names the Beneficial Owners transferring or exchanging Bonds shall designate.

(D) Notwithstanding any other provision of this Indenture to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of the Securities Depository, all payments with respect to the principal or Make-Whole Redemption Price of and

interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, to the Securities Depository as provided in the Representation Letter, which is on file with the Hospital.

(E) Notwithstanding any provision in ARTICLE IV to the contrary, so long as all of the Bonds Outstanding are held in the Book-Entry System, if less than all of such Bonds are to be redeemed upon any redemption of Bonds hereunder, the particular Bonds or portions of Bonds to be redeemed shall be selected by the Securities Depository in such manner as the Securities Depository may determine.

SECTION 4.03 Selection of Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of less than all of the Bonds of a maturity, the Trustee shall select the Bonds to be redeemed from all Bonds subject to redemption or such given portion thereof not previously called for redemption, pro rata in any manner that is customary in the industry; provided, the Hospital may select the maturity if there is more than one maturity then outstanding.

SECTION 4.04 Notice of Redemption.

(A) Notice of redemption shall be mailed by the Hospital to the Trustee by first class mail, not less than forty-five (45) days, nor more than sixty (60) days prior to the redemption date, or such fewer days as may be agreed to between the Hospital and the Trustee. Notice of redemption shall be mailed by the Trustee by first class mail, not less than thirty (30) days, nor more than sixty (60) days prior to the redemption date, to the respective Holders of any Bonds designated for redemption at their addresses appearing on the bond registration books of the Trustee. If the Bonds are no longer held by the Securities Depository or its successor or substitute, the Trustee shall also give notice of redemption by overnight mail to such securities depositories and/or securities information services as shall be designated in a Certificate of the Hospital. Each notice of redemption shall state the date of such notice, the date of issue of the Bonds, the redemption date, the method of calculating the Make-Whole Redemption Price, the interest rate, the place or places of redemption (including the name and appropriate address or addresses of the Trustee), the maturity (including CUSIP number, if any), and, in the case of Bonds to be redeemed in part only, the portion of the principal amount thereof to be redeemed. Each such notice shall also state that on said date there will become due and payable on each of said Bonds the Make-Whole Redemption Price thereof or of said specified portion of the principal amount thereof in the case of a Bond to be redeemed in part only, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered.

(B) Notice of redemption of Bonds shall be given by the Trustee, at the expense of the Hospital, for and on behalf of the Hospital.

(C) Failure by the Trustee to give notice pursuant to this Section 4.04 to any one or more of the securities information services or depositories designated by the Hospital, or the insufficiency of any such notice shall not affect the sufficiency of the proceedings for redemption. Failure by the Trustee to mail notice of redemption pursuant to this Section 4.04 to

any one or more of the respective Holders of any Bonds designated for redemption shall not affect the sufficiency of the proceedings for redemption with respect to the Holders to whom such notice was mailed.

(D) The Hospital may instruct the Trustee to provide conditional notice of redemption, which may be conditioned upon the receipt of moneys or any other event. If such conditions are not met, the Trustee shall give notice, as soon thereafter as practicable, in the same manner, to the same Persons, as notice of such redemption was given pursuant to this Section 4.04. Additionally, any conditional notice given pursuant to this Section 4.04(D) may be rescinded by written notice given to the Trustee by the Hospital no later than five (5) Business Days prior to the date specified for redemption. The Trustee shall give notice of such rescission, as soon thereafter as practicable, in the same manner, to the same Persons, as notice of such redemption was given pursuant to this Section 4.04.

SECTION 4.05 Partial Redemption of Bonds. Upon surrender of any Bond redeemed in part only, the Hospital shall execute (but need not prepare) and the Trustee shall prepare or cause to be prepared, authenticate and deliver to the Holder thereof, at the expense of the Hospital, a new Bond or Bonds of the same series, bearing interest at the same rate and maturing on the same date of Authorized Denominations, equal in aggregate principal amount to the unredeemed portion of the Bond surrendered.

SECTION 4.06 Effect of Redemption.

(A) Notice of redemption having been duly given as aforesaid, and moneys for payment of the Make-Whole Redemption Price of, together with interest accrued to the date fixed for redemption on, the Bonds (or portion thereof) so called for redemption being held by the Trustee, on the date fixed for redemption designated in such notice, the Bonds (or portion thereof) so called for redemption shall become due and payable at the Make-Whole Redemption Price specified in such notice and interest accrued thereon to the date fixed for redemption, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or portion thereof) shall cease to be entitled to any benefit or security under this Indenture, and the Holders of said Bonds shall have no rights in respect thereof except to receive payment of said Make- Whole Redemption Price and accrued interest to the date fixed for redemption from funds held by the Trustee for such payment.

(B) All Bonds redeemed pursuant to the provisions of this ARTICLE IV shall be cancelled by the Trustee upon surrender thereof and delivered to, or upon the order of, the Hospital.

SECTION 4.07 Purchase in Lieu of Redemption.

The Bonds are subject to purchase in lieu of redemption by the Trustee at the direction of the Hospital prior to maturity on the same terms that would apply to the Bonds if the Bonds were then being optionally redeemed.

ARTICLE V

FUNDS AND ACCOUNTS

SECTION 5.01 Establishment and Pledge of Indenture Fund.

(A) The Trustee hereby establishes for the sole benefit of the Bondholders, a master fund referred to herein as the “Indenture Fund” containing the Bond Fund and the Redemption Fund and each of the accounts contained therein. The Indenture Fund and each of the funds and accounts in the Indenture Fund shall be identified on the books of the Trustee with reference hereto and shall be maintained by the Trustee and held in trust apart from all other moneys and securities held under this Indenture or otherwise, and the Trustee shall have the exclusive and sole right of withdrawal therefrom in accordance with the terms of this Indenture. All amounts deposited with the Trustee pursuant to this Indenture shall be held, disbursed, allocated and applied by the Trustee only as provided in this Indenture.

(B) Subject only to the provisions of this Indenture permitting or requiring the application thereof for the purposes and on the terms and conditions set forth herein, the Indenture Fund and all amounts held therein are hereby pledged, assigned and transferred by the Hospital to the Trustee for the benefit of the Bondholders to secure the full payment of the principal or Make-Whole Redemption Price of and interest on the Bonds in accordance with their terms and the provisions of this Indenture. The Hospital hereby grants to the Trustee a security interest in and acknowledges and agrees that the Indenture Fund and all amounts on deposit therein shall constitute collateral security to secure the full payment of the principal or Make- Whole Redemption Price of and interest on the Bonds in accordance with their terms and the provisions of this Indenture. For purposes of creating, perfecting and maintaining the security interest of the Trustee on behalf of the Bondholders in and to the Indenture Fund and all amounts on deposit therein, the parties hereto agree as follows:

(1) this Indenture shall constitute a “security agreement” for purposes of the Uniform Commercial Code;

(2) the Trustee shall maintain on its books records reflecting the interest, as set forth in this Indenture, of the Bondholders in the Indenture Fund and/or the amounts on deposit therein;

(3) the Indenture Fund and the amounts on deposit therein and any proceeds thereof shall be held by the Trustee acting in its capacity as an agent of the Bondholders, and the holding of such items by the Trustee (including the transfer of any items among the funds and accounts in the Indenture Fund) is deemed possession of such items on behalf of the Bondholders; and

(4) notwithstanding anything to the contrary contained herein, the Trustee shall not be responsible for any initial or continuation filings of any financing statements or the information contained therein (including the exhibits thereto), the perfection of any such security interests, or the accuracy or sufficiency of any description of collateral in such initial filings or for filing any modifications or amendments to the

initial or continuation filings required by any amendments to Article 9 of the Uniform Commercial Code.

(C) Nothing in this Indenture or in the Bonds, expressed or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or otherwise in the assets of the Hospital other than in any interest of the Hospital in the Indenture Fund and/or the amounts on deposit therein and as provided in ARTICLE VI. No recourse for the payment of the principal or Make-Whole Redemption Price of or interest on any Bond, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Hospital in this Indenture or in any Supplemental Indenture or in any Bond, or because of the creation of any indebtedness represented thereby, shall be had against any employee, agent, or officer, as such, past, present or future, of the Hospital or of any successor entity, either directly or through any successor entity, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Bonds.

(D) No officer or agent of the Hospital, nor any Person executing the Bonds, shall in any event be subject to any personal liability or accountability by reason of the issuance of the Bonds.

(E) The funds and accounts created pursuant to this Article V may create one or more accounts and sub-accounts, as the Hospital shall direct in writing or pursuant to a Supplemental Indenture.

SECTION 5.02 Bond Fund.

(A) Upon the receipt thereof, the Trustee shall deposit all payments received from the Hospital (other than proceeds from the sale of the Bonds which are to be applied pursuant to Section 3.02, amounts which are to be applied pursuant to Section 5.05 or income or profit from investments which are to be applied pursuant to Section 5.07), and, if a deficiency exists with respect to the Bonds after the application of payments pursuant to Section 5.06 hereof, any payment received under Obligation No. 2, in a special fund designated the “Bond Fund” which the Trustee shall establish and maintain and hold in trust and which shall be disbursed and applied only as authorized in this ARTICLE V.

(B) At the times specified below, the Trustee shall allocate within the Bond Fund in the following order of priority the following amounts to the following accounts or funds, each of which the Trustee shall establish and maintain and hold in trust and each of which shall be disbursed and applied only as hereinafter authorized:

(1) On each Interest Payment Date, the Trustee shall deposit in the “Interest Account” the aggregate amount of interest becoming due and payable on such Interest Payment Date on all Bonds then Outstanding, until the balance in said account is equal to said aggregate amount of interest; and

(2) On each Principal Payment Date, the Trustee shall deposit in the “Principal Account” the aggregate amount of principal becoming due and payable on such Principal Payment Date, until the balance in said account is equal to said aggregate amount of such principal.

(C) At least six (6) but not more than twenty (20) Business Days before each Interest Payment Date, the Trustee shall determine the amount, if any, credited or to be credited to the Bond Fund during the period from the day after the last Interest Payment Date to the next succeeding Interest Payment Date from any source. The Trustee shall give notice to the Hospital of such amount and the amount due, which notice shall be mailed, sent by facsimile transmission or delivered in such manner that the Hospital will receive such notice by the Business Day before such next succeeding Interest Payment Date. Any oral or telephonic notice shall be supplemented by notice given in accordance with the preceding sentence.

(D) The Hospital may at any time surrender to the Trustee for cancellation by it any Bonds that the Hospital may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. All Bonds after such surrender and cancellation shall be destroyed by the Trustee.

SECTION 5.03 Interest Account. All amounts in the Interest Account of the Bond Fund shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds redeemed prior to maturity pursuant to this Indenture).

SECTION 5.04 Principal Account. All amounts in the Principal Account of the Bond Fund shall be used and withdrawn by the Trustee solely to pay at maturity the Bonds.

SECTION 5.05 Redemption Fund.

(A) Upon the receipt thereof, the Trustee shall deposit the following amounts in a special fund designated the “Redemption Fund” which the Trustee shall establish and maintain and hold in trust:

(1) all moneys deposited by the Hospital with the Trustee directed to be deposited in the Redemption Fund; and

(2) all interest, profits and other income received from the investment of moneys in the Redemption Fund.

(B) All amounts deposited in the Redemption Fund shall be used and withdrawn by the Trustee solely for the purpose of redeeming Bonds, in the manner and upon the terms and conditions specified in Section 4.01, at the date of redemption for which notice has been given; provided that, at any time prior to the selection of Bonds for such redemption, the Trustee shall, upon direction of the Hospital, apply such amounts to the purchase of Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as the Hospital may direct, except that the purchase price (exclusive of accrued interest) may not exceed the Make-Whole Redemption Price then applicable to such Bonds (or, if such Bonds are not then

subject to redemption, the par value of such Bonds); and provided further that in lieu of redemption at such date of redemption, or in combination therewith, amounts in such account may be transferred to the Principal Account as set forth in a Request of the Hospital.

SECTION 5.06 Payments by the Hospital; Allocation of Funds.

(A) On or before 11:00 AM on each Payment Date, until the principal of and interest on the Bonds shall have been fully paid or provision for such payment shall have been made as provided in this Indenture, the Hospital shall pay to the Trustee a sum equal to the amount payable on such Payment Date as principal of and interest on the Bonds. Such payments shall be made in federal funds or other funds immediately available at the Designated Office of the Trustee and shall be promptly deposited by the Trustee upon receipt thereof in the Bond Fund.

Each payment made pursuant to this (A) shall at all times be sufficient to pay the total amount of interest and principal (whether at maturity or upon acceleration) becoming due and payable on the Bonds on such Payment Date. If on any Payment Date the amounts held by the Trustee in the accounts within the Bond Fund are insufficient to make any required payments of principal of (whether at maturity or upon acceleration) and interest on the Bonds as such payments become due, the Hospital shall forthwith pay such deficiency to the Trustee.

(B) The obligations of the Hospital to make the payments required by (A) hereof and to perform and observe the other agreements on its part contained herein shall be a general obligation of the Hospital, absolute and unconditional, irrespective of any defense or any rights of set-off, recoupment or counterclaim it might otherwise have against the Trustee, and during the term of this Indenture, the Hospital shall pay all payments required to be made under (A) (which payments shall be net of any other obligations of the Hospital) as prescribed therein and all other payments required hereunder, free of any deductions and without abatement, diminution or set-off. Until such time as the principal of and interest on the Bonds shall have been fully paid, or provision for the payment thereof shall have been made as required by this Indenture, the Hospital (i) will not suspend or discontinue any payments provided for in (A) hereof; (ii) will perform and observe all of its other covenants contained in this Indenture; and (iii) except as provided in ARTICLE IV or ARTICLE X hereof, will not terminate this Indenture for any cause, including, without limitation, the occurrence of any act or circumstances that may constitute failure of consideration, destruction of or damage to all or a portion of the projects financed with the proceeds of the Bonds, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State of New York or any political subdivision of either of these, or any failure of the Trustee to perform and observe any covenant, whether express or implied, or any duty, liability or obligation arising out of or connected with this Indenture, except to the extent permitted by this Indenture.

SECTION 5.07 Investment of Moneys in Funds and Accounts Held by Trustee.

(A) Moneys held in the Indenture Fund shall be invested by the Trustee, upon written direction of the Hospital, solely in Investment Securities. Investment Securities shall be purchased at such prices as the Hospital may direct. All Investment Securities shall be acquired subject to the limitations as to maturities hereinafter in this Section 5.07 set forth and such

additional limitations or requirements consistent with the foregoing as may be established by Request of the Hospital. No Request of the Hospital shall impose any duty on the Trustee inconsistent with its responsibilities hereunder. In the absence of directions from the Hospital, the Trustee shall invest in Investment Securities specified in clause (2) of the definition thereof in Section 1.01, if possible; otherwise, the amounts in the Indenture Fund shall be held by the Trustee uninvested. The Trustee may conclusively rely upon the Hospital’s written instructions as to both the suitability and legality of the directed investments. Ratings of permitted investments shall be determined at the time of purchase of such permitted investments and without regard to ratings subcategories. The Trustee may make any and all such investments through its own investment department or that of its affiliates or subsidiaries, and may charge its ordinary and customary fees for such trades, including investment maintenance fees.

(B) Moneys in such funds and accounts shall be invested in Investment Securities maturing not later than the date on which it is estimated that such moneys will be required for the purposes specified in this Indenture.

(C) All interest, profits and other income received from the investment of moneys in the Redemption Fund shall be deposited when received in the Redemption Fund. All interest, profits and other income received from the investment of moneys in the Bond Fund shall be deposited when received in the Bond Fund.

(D) Investment Securities acquired as an investment of moneys in any fund or account established under this Indenture shall be credited to such fund or account. Registrable Investment Securities held by the Trustee shall be registered in the name of the Trustee. In making any valuations of investments hereunder, the Trustee may utilize and rely on computerized securities pricing services that are available to it, including those available through its regular accounting system.

(E) The Trustee may commingle any of the funds or accounts established pursuant to this Indenture into a separate fund or funds for investment purposes only, provided that all funds or accounts held by the Trustee hereunder shall be accounted for separately as required by this Indenture. The Trustee or its affiliates may act as sponsor, depository, advisor, principal or agent in the making or disposing of any investment. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section 5.07, to deal with itself (in its individual capacity) or with any one or more of its affiliates, whether it or such affiliate is acting as an agent of the Trustee or for any third person or dealing as principal for its own account. The Trustee may sell at the best price reasonably obtainable by it, or present for redemption, any Investment Securities so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such Investment Security is credited, and, subject to the provisions of Section 8.02, the Trustee shall not be liable or responsible for any loss resulting from any investment made in accordance with provisions of this Section 5.07. The Trustee shall not be responsible for any tax, fee or other charge in connection with any investment, reinvestment or the liquidation thereof.

(F) The parties hereto acknowledge that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Hospital the right to

receive brokerage confirmations of security transactions as they occur, the Hospital specifically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the Hospital with monthly account statements detailing all funds and accounts and investment transactions made by the Trustee hereunder.

SECTION 5.08 Amounts Remaining in Funds and Accounts. When there are no longer any Bonds Outstanding, all reasonable fees, charges and expenses of the Trustee, including reasonable fees and expenses of outside counsel to the Trustee, have been paid or provided for and this Indenture has been discharged and satisfied, the Trustee shall pay any amounts remaining in any of the funds or accounts created under this Indenture to the Hospital on the date of discharge and satisfaction.

SECTION 5.09 Trustee Direction Regarding Obligation No. 2. Upon a deficiency in the payments for the Bonds received from the Hospital pursuant to the provisions Section 5.06 hereof, the Trustee is directed to (i) request payment of the amount of such deficiency pursuant to Obligation No. 2 and the Supplemental Master Indenture issued concurrently with the issuance of the 2016 Bonds, and (ii) deposit the amount of such payments into the Bond Fund.

ARTICLE VI

PARTICULAR COVENANTS; REPRESENTATIONS AND WARRANTIES

SECTION 6.01 Punctual Payment. The Hospital shall punctually pay the principal or Make-Whole Redemption Price and interest to become due in respect of all the Bonds, in strict conformity with the terms of the Bonds and of this Indenture, according to the true intent and meaning thereof. When and as paid in full, all Bonds shall be delivered to the Trustee and shall forthwith be cancelled by the Trustee and delivered to, or upon the order of, the Hospital.

SECTION 6.02 Compliance With Indenture. The Hospital covenants not to issue, or permit to be issued, any Bonds in any manner other than in accordance with the provisions of this Indenture, and shall not suffer or permit any Default (within its power to prevent) to occur under this Indenture, but shall faithfully observe and perform all the covenants, conditions and requirements of this Indenture. Nothing herein shall limit the ability of the Hospital to incur indebtedness or other obligations.

SECTION 6.03 Against Encumbrances. The Hospital shall not create or suffer to be created any pledge, lien, charge or other encumbrance upon all or any part of the Indenture Fund or any of the amounts held therein pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by this Indenture and any statutory liens or other liens arising by operation of law. The Hospital will assist, at the Hospital’s cost and expense, the Trustee in contesting any pledge, lien, charge or other encumbrance that does not comply with the provisions of this Section 6.03.

SECTION 6.04 Power to Issue Bonds and Make Pledge and Assignment. The Hospital is duly authorized to issue the Bonds and to enter into this Indenture and to pledge and

assign the funds and accounts purported to be pledged and assigned under this Indenture in the manner and to the extent provided in this Indenture. The Bonds are and will be legal, valid and binding obligations of the Hospital in accordance with their terms, and the Hospital and the Trustee shall at all times, to the extent permitted by law, defend, preserve and protect said pledge and assignment of funds and accounts and all the rights of the Bondholders under this Indenture against all claims and demands of all Persons whomsoever, subject to the limitations set forth in ARTICLE VIII relating to the Trustee.

SECTION 6.05 Accounting Records of the Trustee and Financial Statements. With respect to each fund or account established and maintained by the Trustee pursuant to this Indenture, the Trustee shall at all times keep, or cause to be kept, proper books of record and account prepared in accordance with corporate trust accounting standards, in which complete and accurate entries shall be made of all transactions relating to the receipt, investment, disbursement, allocation and application of payments received from the Hospital and the proceeds of the Bonds. Such books of record and account shall be available for inspection by the Hospital and any Bondholder, or his or her agent or representative duly authorized in writing, at reasonable hours and under reasonable circumstances.

SECTION 6.06 Use of Proceeds. The Hospital shall apply the proceeds of the Bonds (a) for lawful eligible corporate purposes of the Hospital and its affiliates, which may include, without limitation, any or all of the following: (i) making a loan to Hudson Valley Hospital Center to refinance its outstanding 2007 FHA-insured mortgage loan, (ii) making a loan to New York-Presbyterian/Queens to refinance its outstanding 2007 FHA-insured mortgage loan, (iii) making a loan to Lawrence Hospital Center to refinance its outstanding Westchester County IDA debt, (iv) refinancing of outstanding debt of the Hospital and other outstanding debt of certain Hospital affiliates, and (v) financing of one or more projects of the Hospital and certain Hospital affiliates, and (b) to pay costs of issuance of the Bonds.

SECTION 6.07 Representations and Warranties of the Hospital.

(A) Corporate Organization, Authorization and Powers. The Hospital represents and warrants that it is a corporation organized and validly existing and in good standing under the laws of the State of New York, with the power to enter into and perform this Indenture, that it is a not-for-profit corporation within the State and that by proper corporate action it has duly authorized the execution and delivery of this Indenture. The Hospital further represents and warrants that the execution and delivery of this Indenture and the consummation of the transactions contemplated herein will not, in any material respect, conflict with or constitute a breach of or default under any bond, indenture, note or other evidence of indebtedness of the Hospital, the charter or by-laws of the Hospital, any gifts, bequests or devises pledged to or received by the Hospital, or any contract, lease or other instrument to which the Hospital is a party or by which it is bound or cause the Hospital to be in violation of any applicable statute or rule or regulation of any governmental authority.

(B) Tax Matters. (1) The Hospital represents and warrants that (a) it is an organization described in Section 501(c)(3) of the Code and it is not a “private foundation” as defined in Section 509 of the Code; (b) it has received letters from the Internal Revenue Service to that effect; (c) such letters have not been modified, limited or revoked; (d) it is in compliance

with all terms, conditions and limitations, if any, contained in such letters; (e) the facts and circumstances which form the basis of such letters continue substantially to exist as represented to the Internal Revenue Service; and (f) it is exempt from federal income taxes under Section 501(a) of the Code. To the extent consistent with its status as a nonprofit corporation, the Hospital agrees that it will not take any action or omit to take any action if such action or omission would cause any revocation or adverse modification of the Hospital’s status as an organization described in Section 501(c)(3) of the Code except as otherwise permitted by the Master Trust Indenture.

(C) Securities Law Status. The Hospital represents and warrants that it is an organization organized and operated exclusively for charitable purposes and not for pecuniary profit and that no part of its net earning inures to the benefit of any Person, private stockholder or individual, all within the meaning of the Securities Act of 1933, as amended. The Hospital shall not take any action or omit to take any action if such action or omission would change its status as set forth in this section unless there is delivered to the Trustee evidence satisfactory to the Trustee that the failure to maintain such status will not result in any requirement that the Bonds be registered under the Securities Act of 1933, as amended or that this Indenture be qualified under the Trust Indenture Act of 1939, as amended.

(D) Reporting Requirements; Access to Records. Consistent with the continuing disclosure requirements of SEC Rule 15c2-12 relating to its tax-exempt publicly traded bonds, the Hospital is obligated to file an annual financial report with the Municipal Securities Rulemaking Board (the “MSRB”) pursuant to continuing disclosure agreements relating to such tax-exempt debt offerings. These annual financial reports are currently available from the MSRB. In addition, the Hospital is obligated to file unaudited financial statements at the end of each fiscal quarter and the Hospital is current with all such required filings. The Hospital also agrees to file the information described in the following paragraphs at the times and in the manner as described in below. Copies of the reports and statements required to be filed with the Trustee pursuant to this Section shall be filed with the Trustee in sufficient quantity to permit the Trustee to mail a copy to each Bondholder who requests it, and, if not made available to the Trustee, on the Hospital’s website or a national repository.

consistent basis, except that such audited financial statements may contain such changes as are in accordance with U.S. generally accepted accounting principles, and shall include such statements and narrative explanations as reasonably necessary for a fair presentation of financial position, statement of activity and changes in net assets and cash flows of such fiscal reporting period.

Within 60 days after the end of each of the Hospital’s first three fiscal quarters of each fiscal year, the Hospital shall post on its website or furnish to the Trustee and to Bondholders requesting the same, copies of its unaudited financial statements, consisting of the balance sheet as of the end of such quarter, the statement of operations, changes in the net assets and cash flows, and shall include such statements and narrative explanations as reasonably necessary for a fair presentation of such financial and operating data. The failure of the Hospital to comply with the covenants under this heading “Reporting Requirements, Access to Records” shall not be considered an Event of Default under this Indenture, the Master Indenture or any Supplemental Indenture. As the sole and exclusive remedy for the Hospital’s failure to comply with these covenants the Trustee may (and, at the request of the holders of at least 51% of the aggregate principal amount in the Outstanding Bonds, shall) or any Bondholder or owner of a beneficial interest in a Bond or Bonds may take such actions to seek specific performance by court order and to cause the Hospital to comply with its obligations under this section and no person, including any Holder or any Beneficial Owner of the Bonds, may recover monetary damages. The foregoing undertakings are intended to set forth a general description of the type of financial information and operating data that will be provided; the descriptions are not intended to state more than general categories of financial information and operating data; and where an undertaking calls for information that no longer can be generated because the operations to which it related have been materially changed or discontinued, a statement to that effect will be provided. Any agreement regarding continuing disclosure, however, maybe amended or modified under certain circumstances without the consent of the Holders of the Series 2016 Bonds. Any such agreement when executed by the parties thereto will be on file at the principal office of the Hospital.

(E) Access to Records. At any and all reasonable times and from time to time, permit the Trustee or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account (other than those books and records that by law must be treated as confidential) of, and visit the properties of the Hospital and its Affiliates and to discuss the affairs, finances and accounts of the Hospital and its Affiliates with any of their respective officers.

(F) Maintenance of Corporate Existence. The Hospital shall maintain its existence under the laws of the State of New York and shall not dissolve or dispose of all or substantially all its assets, or consolidate with or merge into another entity or entities, or permit one or more other entities to consolidate with or merge into it, except that it may consolidate with or merge into one or more other entities or permit one or more other entities to consolidate with or merge into it, or transfer all or substantially all of its assets to one or more other entities (and thereafter dissolve or not dissolve as it may elect), if (1) the surviving, resulting or transferee entity or entities each is a corporation having the status and powers set forth in (A), (B) and (C) of this Section 6.07 (to the extent required by such paragraphs), (2) the transaction

does not result in a conflict, breach or default referred to in (A), (3) the surviving, resulting or transferee entity or entities each (a) assumes by written agreement with the Trustee all the obligations of the Hospital hereunder, (b) notifies the Trustee of any change in the name of the Hospital, and (c) executes, delivers, registers, records and files such other instruments the Trustee may reasonably require to confirm, perfect or maintain the security granted hereunder.

SECTION 6.08 Limitations on Consolidated Bonds. The Hospital covenants and agrees that:

(A) Additional Bonds that are consolidated with The New York and Presbyterian Hospital Taxable Bonds, Series 2016 constitute a part of the 2016 Bonds;

(B) The Additional Bonds that are consolidated with The New York and Presbyterian Hospital Taxable Bonds, Series 2016, shall mature on the same date as the Bonds, bear interest at the same rate per annum as the Bonds, and shall be subject to redemption at the same times and at the same Redemption Price as the Bonds.

(C) Each Additional Bond to be consolidated with The New York and Presbyterian Hospital Taxable Bonds, Series 2016 shall have the same minimum denominations; and

(D) As a condition to the issuance of such Additional Bonds to be consolidated with The New York and Presbyterian Hospital Taxable Bonds, Series 2016, there shall be delivered to the Trustee a certificate of the Hospital, certifying that, after consultation with counsel experienced in federal securities and tax laws, the issuance and consolidation of such Additional Bonds will not cause (i) any adverse tax impact on the Holders of Outstanding The New York and Presbyterian Hospital Taxable Bonds, Series 2016, (ii) the Outstanding The New York and Presbyterian Hospital Taxable Bonds, Series 2016 are not required to be registered under the Securities Act of 1933, as amended or (iii) the Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended.

The limitations and conditions in paragraph (A), (B), (C) and (D) of this Section 6.09 shall not apply to any Additional Bonds issued under this Indenture which will not be consolidated with The New York and Presbyterian Hospital Taxable Bonds, Series 2016.

SECTION 6.09 Obligation No. 2. The Bonds are general obligations of the Hospital and are further evidenced by Obligation No. 2 issued under the Master Trust Indenture, which is secured equally and ratably under the Master Trust Indenture with all other Obligations of the Obligated Group Members issued.

ARTICLE VII

EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS

SECTION 7.01 Events of Default. The following events shall be “Events of Default”:

(A) default in the due and punctual payment of the principal or Make-Whole Redemption Price of any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by acceleration or otherwise;

(B) default in the due and punctual payment of any interest on any Bond when and as such interest shall become due and payable;

(D) the Hospital fails to duly and punctually observe any other covenant or agreement herein contained and such failure continues for thirty (30) days after written notice thereof shall have been given to the Hospital; provided, however, that if, in the determination of the Trustee, such failure cannot be cured within such thirty (30) day period but can be cured by appropriate action, it shall not constitute an Event of Default hereunder if the Hospital within such thirty (30) day period initiates corrective action and thereafter diligently pursues the same;

(E) any representation or warranty made by the Hospital herein or in the Master Trust Indenture or in any certificate, agreement, instrument or statement made in connection herewith or with the sale and issuance of Bonds shall prove to have been false or misleading in any material respect;

(F) the Master Trust Indenture or any material provision of this Indenture shall cease for any reason to be valid and binding, or the Hospital or the Obligated Group Representative shall initiate legal proceedings or assert in legal proceedings that (i) this Indenture or the Master Trust Indenture or any material provision of this Indenture or the Master Trust Indenture is invalid or (ii) the Hospital has no liability on this Indenture or (C) the Obligated Group Members have no liability on the Master Trust Indenture.

SECTION 7.02 Acceleration of Maturity. If an Event of Default shall occur, then, and in each and every such case during the continuance of such Event of Default, but subject to the terms of the Intercreditor Agreement, the Trustee may, upon notice in writing to the Hospital, declare the principal of all the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately at the Make-Whole Redemption Price, together with interest payable thereon to the accelerated payment date, and upon any such declaration by the Trustee the same shall become and shall be immediately due and payable, anything in this Indenture or in the Bonds contained to the contrary notwithstanding.

Any such declaration, however, is subject to the condition that if, at any time after such declaration and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, there shall be deposited with the Trustee a sum sufficient to pay

all the principal or Make-Whole Redemption Price of and interest on the Bonds payment of which is overdue, with interest on such overdue principal at the rate borne by the Bonds, and the reasonable charges and expenses of the Trustee, and any and all other Defaults known to the Trustee (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then, and in every such case, the Trustee shall, on behalf of the Holders of all of the Bonds, by written notice to the Hospital, rescind and annul such declaration and its consequences and waive such Default; but no such rescission and annulment shall extend to or shall affect any subsequent Default, or shall impair or exhaust any right or power consequent thereon.

SECTION 7.03 Rights as a Secured Party. The Trustee, as appropriate, may exercise all of the rights and remedies of a secured party under the Uniform Commercial Code with respect to securities in the Indenture Fund, including without limitation the Bond Fund and the Redemption Fund, including the right to sell or redeem such securities and the right to retain the securities in satisfaction of the obligation of the Hospital hereunder. Notice sent by registered or certified mail, postage prepaid, or delivered during business hours, to the Hospital at least seven (7) days before an event under Uniform Commercial Code Sections 9-610 and 9-611, or any successor provision of law shall constitute reasonable notification of such event.

SECTION 7.04 Application of Moneys Collected by the Trustee. If an Event of Default shall occur and be continuing, all moneys then held or thereafter received by the Trustee under any of the provisions of this Indenture (subject to Section 11.09) shall be applied by the Trustee as follows and in the following order:

(A) To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Holders of the Bonds and payment of reasonable fees and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under this Indenture; and

(B) To the payment of the principal or Make-Whole Redemption Price of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of this Indenture, as follows:

(1) Unless the principal of all of the Bonds shall have become or have been declared due and payable,

First: To the payment to the Persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments due on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the Persons entitled thereto, without any discrimination or preference; and

Second: To the payment to the Persons entitled thereto of the unpaid principal or Make-Whole Redemption Price of any Bonds which shall have become due, whether at maturity or by call for redemption, in the order of their due dates, with interest

on the overdue principal at the rate borne by the Bonds, and, if the amount available shall not be sufficient to pay in full all the Bonds due on any date, together with such interest, then to the payment thereof ratably, according to the amounts of principal or Make-Whole Redemption Price due on such date to the Persons entitled thereto, without any discrimination or preference.

(2) If the principal of all of the Bonds shall have become or have been declared due and payable, to the payment of the principal and interest then due and unpaid upon the Bonds, with interest on the overdue principal at the rate borne by the Bonds, and, if the amount available shall not be sufficient to pay in full the whole amount so due and unpaid, then to the payment thereof ratably, without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or preference.

SECTION 7.05 Trustee to Represent Bondholders. The Trustee is hereby irrevocably appointed (and the successive respective Holders of the Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney-in-fact of the Holders of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Holders under the provisions of the Bonds, this Indenture and applicable provisions of any law. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Bondholders, the Trustee in its discretion may, and upon the written request of the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of such Holders by such appropriate action, suit, mandamus or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee, or in such Holders under the Bonds, this Indenture or any applicable law; and upon instituting such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the amounts pledged under this Indenture, pending such proceedings. All rights of action under this Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of all the Holders of such Bonds, subject to the provisions of this Indenture.

SECTION 7.06 Bondholders’ Direction of Proceedings. The Holders of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, and upon indemnifying the Trustee to its satisfaction therefor, to direct the time, method and place of conducting all remedial proceedings taken by the Trustee hereunder, provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture, and that

the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would be unjustly prejudicial to Bondholders not parties to such direction.

SECTION 7.07 Limitation on Bondholders’ Right to Sue. No Holder of any Bond shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under this Indenture or any applicable law with respect to such Bond, unless (1) such Holder shall have given to the Trustee written notice of the occurrence of an Event of Default; (2) the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; (3) such Holder or said Holders shall have tendered to the Trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request; and (4) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee.

Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Holder of Bonds of any remedy hereunder or under law; it being understood and intended that no one or more Holders of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Indenture or the rights of any other Holders of Bonds, or to enforce any right under this Indenture or applicable law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Holders of the Outstanding Bonds, subject to the provisions of this Indenture.

SECTION 7.08 Absolute Obligation of Hospital. Notwithstanding any other provision of this Indenture, or in the Bonds, nothing shall affect or impair the obligation of the Hospital, which is absolute and unconditional, to pay the principal or Make-Whole Redemption Price of and interest on the Bonds to the respective Holders of the Bonds at their respective dates of maturity, or upon call for redemption, as herein provided, or, subject to Section 7.07, affect or impair the right of such Holders to enforce such payment by virtue of the contract embodied in the Bonds.

SECTION 7.09 Termination of Proceedings. In case any proceedings taken by the Trustee or any one or more Bondholders on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Bondholders, then in every such case the Hospital, the Trustee and the Bondholders, subject to any determination in such proceedings, shall be restored to their former positions and rights hereunder, severally and respectively, and all rights, remedies, powers and duties of the Hospital, the Trustee and the Bondholders shall continue as though no such proceedings had been taken.

SECTION 7.10 Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Holders of the Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be

cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise.

SECTION 7.11 Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of the Bonds to exercise any right or power arising upon the occurrence of any Default shall impair any such right or power or shall be construed to be a waiver of any such Default or an acquiescence therein; and every power and remedy given by this Indenture to the Trustee or to the Holders of the Bonds may be exercised from time to time and as often as may be deemed expedient.

SECTION 7.12 Waiver of Past Defaults. The Trustee may, and upon request of the Holders of not less than a majority in aggregate principal amount of the Outstanding Bonds shall, on behalf of the Holders of all the Bonds waive any past Default hereunder and its consequences, except a Default:

(A) In the payment of the principal or Make-Whole Redemption Price of or interest on any Bond, or

(B) In respect of a covenant or other provision of this Indenture which, pursuant to Section 9.01, cannot be modified or amended without the consent of the Holder of each Outstanding Bond affected.

Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

SECTION 7.13 Undertaking for Costs. Subject to the provisions of Section 8.05, the parties to this Indenture agree, and each Holder of any Bond by such Person’s acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 7.13 shall not apply to any suit instituted by the Trustee or to any suit instituted by any Bondholder or group of Bondholders holding in the aggregate more than a majority in aggregate principal amount of the Outstanding Bonds.

SECTION 7.14 Notice of Default.

(A) Upon a Responsible Officer’s actual knowledge of the existence of any Default under this Indenture, the Trustee shall notify the Hospital in writing as soon as practicable, but in any event within five (5) Business Days.

(B) Upon a Responsible Officer’s actual knowledge of the existence of any Event of Default under this Indenture, the Trustee shall transmit by mail to all Bondholders, as their names and addresses appear in the bond register, notice of such Event of Default hereunder

within thirty (30) days; provided, however, that, except in the case of an Event of Default in the payment of the principal or Make-Whole Redemption Price of or interest on any Bond, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Bondholders.

SECTION 7.15 Trustee May File Proofs of Claim.

(A) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Hospital or any other obligor upon the Bonds or the property of the Hospital or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Bonds shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Hospital for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(1) To file and prove a claim for the whole amount of principal (or Make-Whole Redemption Price) and interest owing and unpaid in respect of the Bonds and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel including expenses and fees of outside counsel and allocated costs of internal legal counsel) and of the Bondholders allowed in such judicial proceeding; and

(2) To collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any receiver, assignee, trustee, liquidator or sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Bondholder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Bondholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel including expenses and fees of outside counsel and allocated costs of internal legal counsel, and any other amounts due the Trustee under this Indenture.

(B) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Bondholder any plan of reorganization, arrangement, adjustment or composition affecting the Bonds or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Bondholder in any such proceeding.

ARTICLE VIII

THE TRUSTEE

SECTION 8.01 Duties, Immunities and Liabilities of Trustee.

(A) The Trustee shall, prior to an Event of Default, and after the curing or waiver of all Events of Default which may have occurred, perform such duties and only such duties as are specifically set forth in this Indenture, and, except to the extent required by law, no implied covenants or obligations shall be read into this Indenture against the Trustee. The Trustee shall, during the existence of any Event of Default (which has not been cured or waived), exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(B) The Hospital may remove the Trustee at any time unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the Trustee shall cease to be eligible in accordance with subsection (E) of this Section 8.01, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee, and thereupon shall appoint a successor Trustee by an instrument in writing.

(C) The Trustee may at any time resign by giving written notice of such resignation to the Hospital and by giving the Bondholders notice of such resignation by mail at the addresses shown on the registration books maintained by the Trustee. Upon receiving such notice of resignation, the Hospital shall promptly appoint a successor Trustee by an instrument in writing. The Trustee shall not be relieved of its duties until such successor Trustee has accepted appointment.

(D) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. If no successor Trustee shall have been appointed and have accepted appointment within thirty (30) days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Bondholder (on behalf of itself and all other Bondholders) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under this Indenture, shall signify its acceptance of such appointment by executing and delivering to the Hospital and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless at the request of the successor Trustee, such predecessor Trustee shall

execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor Trustee, the Hospital shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in this subsection, the successor Trustee shall mail or cause to be mailed (at the expense of the Hospital) a notice of the succession of such Trustee to the trusts hereunder to the Bondholders at the addresses shown on the registration books maintained by the Trustee.

(E) Any successor Trustee shall be a trust company or bank having trust powers in the State of New York, having a combined capital and surplus of (or if such trust company or bank is a member of a bank holding system, its bank holding company shall have a combined capital and surplus of) at least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or state of authority. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this subsection the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this subsection (E), the Trustee shall resign immediately in the manner and with the effect specified in this Section 8.01.

(F) Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under subsection (E) of Section 8.01, shall be the successor to such Trustee without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding.

SECTION 8.02 Liability of Trustee.

(A) The Trustee assumes no responsibility for the correctness of the recitals of fact herein except as they specifically apply to the Trustee, and makes no representations as to the validity or sufficiency of this Indenture or of the Bonds, nor shall the Trustee incur any responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon it and except for any recital or representation specifically relating to the Trustee or its powers. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligent action, negligent failure to act or willful misconduct.

(B) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts.

(C) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority (or such lesser or greater number as this Indenture may permit to direct the Trustee) in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture.

(D) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Bondholders pursuant to the provisions of this Indenture unless such Bondholders shall have offered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities which may be incurred therein or thereby. The Trustee has no obligation or liability to the Holders for the payment of interest, principal or Make-Whole Redemption Price with respect to the Bonds from its own funds; but rather the Trustee’s obligations shall be limited to the performance of its duties hereunder.

(E) Except with respect to Events of Default specified in Section 7.01(A) or Section 7.01(B), the Trustee shall not be deemed to have knowledge of any Event of Default unless and until a Responsible Officer shall have actual knowledge thereof or the Trustee shall have received written notice thereof from the Hospital or the holders of at least five percent (5%) in aggregate principal amount of the Outstanding Bonds at the Designated Office. The Trustee shall not be responsible for the validity or effectiveness of any collateral given to or held by it.

(F) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through attorneys-in-fact, agents or receivers. The Trustee shall be entitled to advice of counsel and other professionals concerning all matters of trust and its duty hereunder.

(G) The Trustee shall not be concerned with or accountable to anyone for the subsequent use or application of any moneys or Bond proceeds that shall be released or withdrawn in accordance with the provisions hereof.

(H) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this ARTICLE VIII.

(I) The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds and shall have no responsibility for compliance with any state or federal securities laws in connection with the Bonds.

(J) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty.

SECTION 8.03 Right of Trustee to Rely on Documents. The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, opinion, bond, statement, requisition, facsimile transmission, electronic mail or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel of or to the Hospital, with regard to legal questions, and the opinion or written advice of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith.

The Trustee shall not be bound to recognize any Person as the Holder of a Bond unless and until such Bond is submitted for inspection, if required, and such Person’s title thereto is satisfactorily established, if disputed.

Whenever in the administration of the trusts imposed upon it by this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Certificate of the Hospital, and such Certificate shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of this Indenture in reliance upon such Certificate, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may deem reasonable.

SECTION 8.04 Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Indenture shall be retained in its possession and shall be subject upon prior written notice to the inspection of the Hospital and any Bondholder, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions, until ninety (90) days after the termination of this Indenture.

SECTION 8.05 Compensation and Indemnification.

(A) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers, if it has not received the agreed compensation for such services or, in cases where the Trustee has a right to reimbursement or indemnification for such performance or exercise, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(B) The Hospital further covenants and agrees to indemnify and hold harmless the Trustee, and its officers, directors, employees, and agents against any loss, expense and liabilities that it may incur arising out of or in connection with (1) the exercise and performance of the Trustee’s powers and duties hereunder in accordance with the provisions hereof or (2) the sale of any Bonds and the carrying out of any of the transactions contemplated by the Bonds or related documents, including the costs and expenses of defending against any claim of liability, but excluding liabilities that are due to the Trustee’s negligence or willful misconduct. The obligations of the Hospital under this Section 8.05 shall survive resignation or removal of the Trustee under this Indenture and payment of the Bonds and discharge of this Indenture.

SECTION 8.06 Notice to Rating Agency. The Trustee shall give written notice to each Rating Agency then rating the Bonds if (1) a successor Trustee is appointed hereunder, (2) if this Indenture is amended or supplemented, (3) if the Bonds are paid and this Indenture defeased pursuant to Section 10.01, (4) if the Bonds are accelerated pursuant to Section 7.02, or (5) if the Bonds are redeemed in whole or in part pursuant to Section 4.01, provided that the Trustee shall incur no liability for failure to give any such notice.

ARTICLE IX

MODIFICATION OR AMENDMENT OF THE INDENTURE

SECTION 9.01 Amendments Permitted.

(A) This Indenture and the rights and obligations of the Hospital and of the Holders of the Bonds and of the Trustee may be modified or amended from time to time and at any time by an indenture or indentures supplemental hereto, which the Hospital and the Trustee may enter into when the written consent of the Holders of a majority in aggregate principal amount of the Bonds then Outstanding shall have been filed with the Trustee. No such modification or amendment shall (1) extend the fixed maturity of any Bond, or reduce the amount of principal thereof, or reduce the rate of interest thereon, or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, without the consent of the Holder of each Bond so affected or (2) reduce the aforesaid percentage of Bonds the consent of the Holders of which is required to effect any such modification or amendment, or permit the creation of any lien on the Indenture Fund or the amounts pledged under this Indenture prior to or on a parity with the lien created by this Indenture, or deprive the Holders of the Bonds of the lien created by this Indenture on the Indenture Fund and such amounts (except as expressly provided in this Indenture), without the consent of the Holders of all Bonds then Outstanding. It shall not be necessary for the consent of the Bondholders to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Hospital and the Trustee of any Supplemental Indenture pursuant to this subsection (A), the Trustee shall mail a notice, setting forth in general terms the substance of such Supplemental Indenture, to the Bondholders at the addresses shown on the registration books maintained by the Trustee. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture.

(B) This Indenture and the rights and obligations of the Hospital, of the Trustee and of the Holders of the Bonds may also be modified or amended from time to time and at any time by an indenture or indentures supplemental hereto, which the Hospital and the Trustee may enter into without the necessity of obtaining the consent of any Bondholders, but only to the extent permitted by law and only for any one or more of the following purposes:

(1) to add to the covenants and agreements of the Hospital contained in this Indenture other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Hospital, provided that such covenant,

agreement, pledge, assignment or surrender shall not materially adversely affect the interests of the Holders of the Bonds;

(2) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in this Indenture, or in regard to matters or questions arising under this Indenture, as the Hospital or the Trustee may deem necessary or desirable and not inconsistent with this Indenture, and which shall not materially adversely affect the interests of the Holders of the Bonds;

(3) to modify, amend or supplement this Indenture or any Supplemental Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Holders of the Bonds (provided, however, that such modifications, amendments, supplements and additions shall be permitted under this subsection (B) only if qualification under said act or similar federal statute is required by applicable law now or hereafter in effect);

(4) to provide for the procedures required to permit any Bondholder, at its option, to utilize an uncertificated system of registration of its Bond or to facilitate the registration of the Bonds in the name of a nominee of the Securities Depository in accordance with the provisions of Section 2.10; or

(5) to authorize the issuance of Additional Bonds in accordance with the provisions of Section 2.11.

(C) The Trustee may in its discretion, but shall not be obligated to, enter into any such Supplemental Indenture authorized by subsections (A) or (B) of this Section 9.01 which materially adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

SECTION 9.02 Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to this ARTICLE IX, this Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Hospital, the Trustee and all Holders of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

SECTION 9.03 Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the execution of any Supplemental Indenture pursuant to this ARTICLE IX may, and if the Hospital so determines shall, bear a notation by endorsement or otherwise in form approved by the Hospital and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand of the Holder of any Bond

Outstanding at the time of such execution and presentation of such Bond for the purpose at the Designated Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation shall be made on such Bond. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Hospital (which may be based on an Opinion of Counsel, in the sole discretion of the Hospital), to any modification or amendment contained in such Supplemental Indenture, shall be prepared by the Trustee at the expense of the Hospital, executed by the Hospital and authenticated by the Trustee, and, subject to the provisions of Section 4.02, while the Bonds remain in the Book-Entry System, upon demand of the Holders of any Bonds then Outstanding shall be exchanged at the Designated Office of the Trustee, without cost to any Bondholder, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amounts of the same series and maturity and bearing interest at the same rate.

SECTION 9.04 Amendment of Particular Bonds. The provisions of this ARTICLE IX shall not prevent any Bondholder from accepting any amendment as to the particular Bonds held by such Bondholder, provided that due notation thereof is made on such Bonds.

ARTICLE X

DEFEASANCE

SECTION 10.01 Discharge of Indenture. The Bonds may be paid or discharged by the Hospital or the Trustee on behalf of the Hospital in any of the following ways:

(A) by paying or causing to be paid the principal or Make-Whole Redemption Price of and interest on all Bonds Outstanding, as and when the same become due and payable;

(B) by depositing with the Trustee, in trust, at or before maturity, moneys or securities in the necessary amount (as provided in Section 10.03) to pay when due or redeem all Bonds then Outstanding; or

If the Hospital shall also pay or cause to be paid all other sums payable hereunder by the Hospital, then and in that case at the election of the Hospital (evidenced by a Certificate of the Hospital filed with the Trustee signifying the intention of the Hospital to discharge all such indebtedness and this Indenture), and notwithstanding that any Bonds shall not have been surrendered for payment, this Indenture and the pledge of the Indenture Fund and all amounts held therein made under this Indenture and all covenants, agreements and other obligations of the Hospital under this Indenture (except as otherwise provided in Section 8.05) shall cease, terminate, become void and be completely discharged and satisfied and the Bonds shall be deemed paid. In such event, upon the request of the Hospital, the Trustee shall cause an accounting for such period or periods as may be requested by the Hospital to be prepared and filed with the Hospital and shall execute and deliver to the Hospital all such instruments as may be necessary to evidence such discharge and satisfaction, and the Trustee shall pay over, transfer,

assign or deliver to the Hospital all moneys or securities or other property held by it pursuant to this Indenture which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption.

SECTION 10.02 Discharge of Liability on Bonds. Upon the deposit with the Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem any Outstanding Bond (whether upon or prior to the maturity or the redemption date of such Bond), provided that, if such Bond is to be redeemed prior to maturity, notice of such redemption shall have been given as in ARTICLE IV provided or provision satisfactory to the Trustee shall have been made for the giving of such notice and any conditions to the redemption set forth in such notice shall have been satisfied, then all liability of the Hospital in respect of such Bond shall cease, terminate and be completely discharged, and such Bond shall be deemed paid, except only that thereafter the Holder thereof shall be entitled to payment of the principal or Make-Whole Redemption Price of and interest on such Bond by the Hospital, and the Hospital shall remain liable for such payments, but only out of such money or securities deposited with the Trustee as aforesaid for its payment, subject, however, to the provisions of Section 10.04.

The Hospital may at any time surrender to the Trustee for cancellation by it any Bonds previously issued and delivered, which the Hospital may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired.

SECTION 10.03 Deposit of Money or Securities With Trustee. Whenever in this Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held may include money or securities held by the Trustee in the funds and accounts established pursuant to this Indenture and shall be:

(A) lawful money of the United States of America in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as in ARTICLE IV provided or provision satisfactory to the Trustee shall have been made for the giving of such notice, the amount to be deposited or held shall be the principal amount or Make-Whole Redemption Price of such Bonds and all unpaid interest thereon to the redemption date; or

(B) Investment Securities described in clause (1) of the definition thereof in Section 1.01 (not callable by the holder thereof prior to maturity), the principal of and interest on which when due will provide money sufficient to pay the principal or Make-Whole Redemption Price of and all unpaid interest to maturity, or to the redemption date, as the case may be, on the Bonds to be paid or redeemed, as such principal or Make-Whole Redemption Price and interest become due; provided that, in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as in ARTICLE IV provided or provision satisfactory to the Trustee shall have been made for the giving of such notice; provided, in each case, that the Trustee shall have been irrevocably instructed (by the terms of

this Indenture or by direction of the Hospital) to apply such money to the payment of such principal or Make-Whole Redemption Price and interest with respect to such Bonds.

SECTION 10.04 Payment of Bonds After Discharge of Indenture. Notwithstanding any provisions of this Indenture, any moneys held by the Trustee in trust for the payment of the principal or Make-Whole Redemption Price of, or interest on, any Bonds and remaining unclaimed for three years (or, if shorter, one day before such moneys would escheat to the State of New York under then applicable New York law) after such principal, Make-Whole Redemption Price or interest, as the case may be, has become due and payable (whether at maturity or upon call for redemption), shall be repaid to the Hospital free from the trusts created by this Indenture upon receipt of an indemnification agreement acceptable to the Hospital and the Trustee indemnifying the Hospital and the Trustee with respect to claims of Holders of Bonds which have not yet been paid, and all liability of the Trustee and the Hospital with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Hospital as aforesaid, the Trustee may (at the cost of the Hospital) first mail to the Holders of Bonds which have not yet been paid, at the addresses shown on the registration books maintained by the Trustee, a notice, in such form as may be deemed appropriate by the Trustee with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Hospital of the moneys held for the payment thereof.

ARTICLE XI

MISCELLANEOUS

SECTION 11.01 Successor Is Deemed Included in All References to Predecessor. Whenever in this Indenture either the Hospital or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Indenture contained by or on behalf of the Hospital or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not.

SECTION 11.02 Limitation of Rights to Parties and Bondholders. Nothing in this Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any Person other than the Hospital, the Trustee and the Holders of the Bonds, any legal or equitable right, remedy or claim under or in respect of this Indenture or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Hospital, the Trustee and the Holders of the Bonds.

SECTION 11.03 Waiver of Notice. Whenever in this Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the Person entitled to receive such notice and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

SECTION 11.04 Destruction of Bonds. Whenever in this Indenture provision is made for the cancellation by the Trustee and the delivery to, or upon the order of, the Hospital of any Bonds, the Trustee may, in lieu of such cancellation and delivery, destroy such Bonds.

SECTION 11.05 Severability of Invalid Provisions. If any one or more of the provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Indenture and such invalidity, illegality or unenforceability shall not affect any other provision of this Indenture, and this Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.

SECTION 11.06 Notices. Any notice, direction, instruction or demand given or made pursuant to this Indenture shall be given or made in writing and shall be served by: (i) United States first-class mail, postage prepaid, addressed to the requisite party as set forth in this paragraph; (ii) hand delivery, addressed to the requisite party as set forth in this paragraph; or (iii) confirmed facsimile, addressed to the requisite party as set forth in this paragraph. Any notice, direction or instruction to or demand upon the Trustee shall be addressed to the Trustee at the Designated Office of the Trustee. Any notice to or demand upon the Hospital shall be addressed to the Hospital at: 333 East 38th Street, 8th Floor, New York, NY 10016, Attention: Chief Financial Officer (or such other address as may have been filed in writing by the Hospital with the Trustee).

The Trustee shall have the right to accept and act upon instructions or directions pursuant to this Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that the Hospital shall provide to the Trustee an incumbency certificate listing designated persons with the authority to provide such instructions and containing specimen signatures of such designated persons, which incumbency certificate shall be amended whenever a person is to be added or deleted from the listing.

SECTION 11.07 Evidence of Rights of Bondholders.

(A) Any request, consent or other instrument required or permitted by this Indenture to be signed and executed by Bondholders may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Bondholders in Person or by an agent or agents duly appointed in writing.

(B) The fact and date of the execution by any Person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the Person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer.

(D) Any request, consent, or other instrument or writing of the Holder of any Bond shall bind every future Holder of the same Bond and the Holder of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Hospital in accordance therewith or reliance thereon.

SECTION 11.08 Disqualified Bonds. In determining whether the Holders of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are known to the Trustee to be owned or held by or for the account of the Hospital, or by any Affiliate of the Hospital or any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section 11.08 if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote such Bonds and that the pledgee is not an Affiliate of the Hospital or any other obligor on the Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel selected by it with due care shall be full protection to the Trustee.

SECTION 11.09 Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest, principal or Make-Whole Redemption Price due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held uninvested in trust by it for the Holders of the Bonds entitled thereto, subject, however, to the provisions of Section 10.04.

SECTION 11.10 Funds and Accounts. Any fund required by this Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds shall at all times be maintained in accordance with customary standards of the corporate trust industry, to the extent practicable, and with due regard for the requirements of Section 6.05 and for the protection of the security of the Bonds and the rights of every Holder thereof. The Trustee may establish such additional funds and accounts as it deems necessary or appropriate to perform its obligations hereunder.

SECTION 11.11 Waiver of Personal Liability. No member, officer, agent or employee of the Hospital shall be individually or personally liable for the payment of the principal or Make-Whole Redemption Price of or interest on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof or the performance of any duty hereunder; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or by this Indenture.

SECTION 11.12 Business Days. If any date specified herein shall not be a Business Day, any action required on such date may be made on the next succeeding Business Day with the same effect as if made on such date.

SECTION 11.13 Governing Law; Venue. This Indenture shall be construed in accordance with and governed by the Constitution and the laws of the State of New York applicable to contracts made and performed in the State of New York. This Indenture shall be enforceable in the State of New York, provided, however, that any action arising hereunder shall (unless waived by the Hospital and the Trustee) be filed and maintained in the State of New York.

SECTION 11.14 Execution in Several Counterparts. This Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Hospital and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument.

SECTION 11.15 CUSIP Numbers. Neither the Trustee nor the Hospital shall be liable for any defect or inaccuracy in the CUSIP number that appears on any Bond or in any redemption notice. The Trustee may, in its discretion, include in any redemption notice a statement to the effect that the CUSIP numbers on the Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the Holders and that neither the Trustee nor the Hospital shall be liable for any inaccuracies in such numbers.

SECTION 11.16 Agreement Not for the Benefit of Other Parties. This Indenture is not intended for the benefit of and shall not be construed to create rights in parties other than the Hospital, the Trustee, and the Bondholders.

SECTION 11.17 Entire Agreement. This Indenture constitutes the entire agreement of the parties hereto and is not subject to modification, amendment, qualification or limitation except as expressly provided herein.

SECTION 11.18 ERISA Provisions. As specifically set forth in the Offering Memorandum, the ERISA provisions set forth on Exhibit B attached hereto are hereby applicable to the Bonds.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the Hospital has caused this Indenture to be signed in its name by its Authorized Representative, and the Trustee, in token of its acceptance of the trusts created hereunder, has caused this Indenture to be signed in its corporate name by its duly authorized officer all as of the day and year first above written.

THE NEW YORK AND PRESBYTERIAN HOSPITAL

By ______Name: Title:

TD BANK, N.A., as Trustee

By ______Authorized Officer

S-1 Indenture

EXHIBIT A

FORM OF BOND

B-1

EXHIBIT B

ERISA PROVISIONS

The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the Code generally prohibit certain transactions between employee benefit plans under ERISA or tax-qualified retirement plans under the Code, (collectively, the “Plans”) and persons who, with respect to a Plan, are fiduciaries or other “parties in interest” within the meaning of ERISA or “disqualified persons” within the meaning of the Code. In addition, each fiduciary of a Plan (a “Plan Fiduciary”) must give appropriate consideration to the facts and circumstances that are relevant to an investment in the Bonds, including the roles that such an investment in the Bonds would play in the Plan’s overall investment portfolio. Each Plan Fiduciary, before deciding to invest in the Bonds, must be satisfied that such investment in the Bonds is a prudent investment for the Plan, that the investments of the Plan, including the investment in the Bonds, are diversified so as to minimize the risk of large losses and that an investment in the Bonds complies with the documents of the Plan and related trust, to the extent such documents are consistent with ERISA. All Plan Fiduciaries, in consultation with their advisers, should carefully consider the impact of ERISA and the Code on an investment in any Bond, including the applicability to such investment of the fiduciary responsibility and prohibited transaction provisions of ERISA and the Code or similar laws.

B-2

APPENDIX E

FORMS OF THE MASTER INDENTURE AND SUPPLEMENTAL INDENTURE

[THIS PAGE INTENTIONALLY LEFT BLANK] THE NEW YORK AND PRESBYTERIAN HOSPITAL OBLIGATED GROUP

MASTER TRUST INDENTURE

by and between

THE NEW YORK AND PRESBYTERIAN HOSPITAL

and

TD BANK, N.A.,

as Master Trustee

Dated as of January 1, 2015

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS AND OTHER PROVISIONS CONCERNING INTERPRETATION

Section 1.01. Definitions...... 1 Section 1.02. Interpretation...... 10

ARTICLE II

INDEBTEDNESS, AUTHORIZATION, ISSUANCE AND TERMS OF OBLIGATIONS

Section 2.01. Amount of Indebtedness...... 11 Section 2.02. Designation of Obligations...... 11 Section 2.03. Appointment of Obligated Group Representative...... 11 Section 2.04. Execution and Authentication of Obligations...... 12 Section 2.05. Supplement Creating Obligations...... 12 Section 2.06. Conditions to Issuance of Obligations Hereunder...... 12

ARTICLE III

PARTICULAR COVENANTS OF THE OBLIGATED GROUP

Section 3.01. General Obligation; Restrictions on Encumbering Property; Joint and Several Obligation; Payment of Principal and Interest...... 13 Section 3.02. Covenants as to Corporate Existence, Maintenance of Properties, Etc...... 13 Section 3.03. Insurance...... 14 Section 3.04. Insurance and Condemnation Proceeds...... 15 Section 3.05. Limitations on Creation of Liens...... 16 Section 3.06. Long-Term Debt Service Coverage Ratio...... 19 Section 3.07. Merger, Consolidation, Sale or Conveyance...... 19 Section 3.08. Filing of Combined Group Financial Statements; Certificate of No Default; Other Information...... 20 Section 3.09. Parties Becoming Members of the Obligated Group...... 21 Section 3.10. Withdrawal from the Obligated Group...... 21 Section 3.11. Designation and De-designation of Designated Affiliates...... 22 Section 3.12. Transfers from Designated Affiliates...... 22

ARTICLE IV

DEFAULT AND REMEDIES

Section 4.01. Events of Default...... 23 Section 4.02. Acceleration; Annulment of Acceleration...... 24 Section 4.03. Additional Remedies and Enforcement of Remedies...... 24 Section 4.04. Application of Moneys after Default...... 25 Section 4.05. Remedies Not Exclusive...... 26 Section 4.06. Remedies Vested in the Master Trustee...... 26 Section 4.07. Holders’ Control of Proceedings...... 26 Section 4.08. Termination of Proceedings...... 27 Section 4.09. Waiver of Event of Default...... 27 Section 4.10. Appointment of Receiver...... 27 Section 4.11. Remedies Subject to Provisions of Law...... 28 Section 4.12. Notice of Default...... 28

ARTICLE V

THE MASTER TRUSTEE

Section 5.01. Certain Duties and Responsibilities...... 28 Section 5.02. Certain Rights of Master Trustee...... 29 Section 5.03. Right to Deal in Obligations and Related Bonds and With Members of the Obligated Group...... 30 Section 5.04. Removal and Resignation of the Master Trustee...... 30 Section 5.05. Compensation and Reimbursement...... 30 Section 5.06. Recitals and Representations...... 31 Section 5.07. Separate or Co-Master Trustee...... 31 Section 5.08. Disclosure...... 32

ARTICLE VI

SUPPLEMENTS AND AMENDMENTS; REPLACEMENT MASTER TRUST INDENTURE

Section 6.01. Supplements Not Requiring Consent of Holders...... 32 Section 6.02. Supplements Requiring Consent of Holders...... 34 Section 6.03. Execution and Effect of Supplements...... 35 Section 6.04. Replacement Master Indenture...... 35

ARTICLE VII

SATISFACTION AND DISCHARGE OF INDENTURE

Section 7.01. Satisfaction and Discharge of Indenture...... 36 Section 7.02. Payment of Obligations after Discharge of Lien...... 36

ARTICLE VIII

CONCERNING THE HOLDERS

Section 8.01. Evidence of Acts of Holders...... 37 Section 8.02. Obligations or Related Bonds Owned by Members of Obligated Group...... 37 Section 8.03. Instruments Executed by Holders Bind Future Holders...... 38

ARTICLE IX

MISCELLANEOUS PROVISIONS

Section 9.01. Limitation of Rights...... 38 Section 9.02. Severability...... 38 Section 9.03. Holidays...... 38 Section 9.04. Governing Law...... 39 Section 9.05. Counterparts...... 39 Section 9.06. Immunity of Individuals...... 39 Section 9.07. Binding Effect...... 39 Section 9.08. Notices...... 39

THIS MASTER TRUST INDENTURE, dated for convenience of reference as of the first day of January, 2015, by and between The New York and Presbyterian Hospital, a New York not-for-profit corporation (the “Hospital”), and TD Bank, N.A., a national banking association and being duly qualified to accept and administer the trusts created hereby, as (the “Master Trustee”).

W I T N E S S E T H:

WHEREAS, the Hospital is authorized and deems it necessary and desirable to enter into this Master Trust Indenture for the purpose of (i) providing for the issuance from time to time of Obligations (as defined herein) to finance or refinance health care facilities or for other lawful and proper corporate purposes and (ii) forming an Obligated Group, of which the Hospital shall initially be the sole Member; and

WHEREAS, all acts and things necessary to constitute this Master Trust Indenture a valid indenture and agreement according to its terms have been done and performed, the Hospital has duly authorized the execution and delivery of this Master Trust Indenture, and the Hospital, in the exercise of the legal rights and powers vested in it, executes this Master Trust Indenture and proposes to make, execute, issue and deliver Obligations hereunder; and

WHEREAS, the Master Trustee agrees to accept and administer the trusts created hereby, and

WHEREAS, to secure the performance and observance of the covenants and agreements set forth in this Master Trust Indenture, each Member of the Obligated Group does hereby assign, pledge and grant a security interest to the Master Trustee in all of its right, title and interest to all funds and accounts established under this Master Trust Indenture, including all moneys and investment therein and income thereon, all such security to be held by the Master Trustee in trust for the equal and ratable benefit and security of the holders of Obligations issued hereunder without preference or priority (except as specifically permitted herein) of any one Obligation over any other Obligation.

NOW, THEREFORE, in consideration of the premises, of the acceptance by the Master Trustee of the trusts hereby created, and of the giving of consideration for and acceptance of Obligations issued hereunder by the registered owners thereof, and for the purpose of fixing and declaring the terms and conditions upon which Obligations are to be issued, authenticated, delivered and accepted by all persons who shall from time to time be or become registered owners thereof, the Member of the Obligated Group covenant and agree with the Master Trustee, for the equal and proportionate benefit of the respective registered owners from time to time of Obligations issued hereunder, as follows:

ARTICLE I

DEFINITIONS AND OTHER PROVISIONS CONCERNING INTERPRETATION

Section 1.01. Definitions. For the purposes hereof unless the context otherwise indicates, the following words and phrases shall have the following meanings:

“Accelerable Instrument” means any Obligation or any mortgage, indenture, loan agreement or other instrument under which there has been issued or incurred, or by which there is secured, any Indebtedness evidenced by an Obligation, which Obligation or instrument provides that, upon the occurrence of an event of default under such Obligation or instrument, the holder thereof (or a credit enhancer exercising the rights of such holder) may, or may request that the Master Trustee, declare such Obligation or Indebtedness due and payable prior to the date on which it would otherwise become due and payable.

“Accountant” means any independent auditors or certified public accountant or firm of such auditors or accountants selected by the Obligated Group Representative.

“Affiliate” means a corporation, partnership, limited liability company, joint venture, association, business trust or similar entity organized under the laws of the United States of America or any state thereof which

is directly or indirectly controlled by a Member of the Obligated Group or their respective successors or assigns or by any Person which directly or indirectly controls a Member of the Obligated Group and any joint ventures in which any of the Members of the Obligated Group participate. For purposes of this definition, control means the power to direct the management and policies of a Person through the ownership of not less than a majority of its voting securities or the right to designate or elect not less than a majority of the members of its board of directors or other governing board or body by contract or otherwise.

“Authorized Representative” means, with respect to the Obligated Group Representative, the Chairperson of its Governing Body, its Chief Executive Officer, its Chief Operating Officer or its Chief Financial Officer and, with respect to each Member of the Obligated Group, the Chairperson of its Governing Body, its Chief Executive Officer, its Chief Operating Officer or its Chief Financial Officer, or any other person or persons designated an Authorized Representative of such Member by an Officer’s Certificate of the Obligated Group Representative or such Member of the Obligated Group, respectively, signed by the Chairperson of its Governing Body, its Chief Executive Officer, its Chief Operating Officer or its Chief Financial Officer and filed with the Master Trustee.

“Book Value” when used in connection with Property, Plant and Equipment or other Property of any Person, means the value of such property, net of accumulated depreciation, as it is carried on the books of such Person in conformity with GAAP, and when used in connection with Property, Plant and Equipment or other Property of the Obligated Group, means the aggregate of the values so determined with respect to such Property, Plant and Equipment or other Property of the Obligated Group determined in such a manner that no portion of such value of Property, Plant and Equipment or other Property is included more than once.

“Code” means the Internal Revenue Code of 1986, as amended.

“Combined Group” or “Combined Group Members” means all Obligated Group Members and Designated Affiliates.

“Combined Group Financial Statements” means the consolidated (or combined, to the extent applicable) financial statements of the Combined Group and its affiliates (under GAAP), if such financial statements are prepared and audited, or the consolidated financial statements of the Hospital and its affiliates (under GAAP), for a 12-month period, or for such other period for which an audit has been performed, prepared in accordance with GAAP, which have been audited and reported upon by an Independent Auditor. The Combined Group Financial Statements shall include sufficient consolidating (or combining) information separating the financial position and results of the Members of the Combined Group from any entities included in such financial statements that are not Members of the Combined Group.

“Corporate Charter” means, with respect to any corporation, the articles of incorporation, certificate of incorporation, corporate charter or other organic document pursuant to which such corporation is organized and existing under the laws of the United States of America or any state thereof.

“Corporate Trust Office” means an office of the Master Trustee at which corporate trust business is conducted, which at the date hereof is located in Cherry Hill, New Jersey.

“Credit Facility” means a financial guaranty insurance policy, line of credit, letter of credit, standby bond purchase agreement or similar credit enhancement or liquidity facility established in connection with the issuance of Indebtedness to provide credit or liquidity support for such Indebtedness.

“Credit Facility Issuer” means the firm, association, corporation or other Person, if any, which has issued a Credit Facility that provides credit or liquidity support with respect to Indebtedness or Related Bonds.

“Defeasance Obligations” means, unless modified by the terms of a particular Supplement, (i) non-callable, non-prepayable Government Obligations, (ii) evidences of ownership of a proportionate interest in specified non-callable, non-prepayable Government Obligations, which Government Obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the 2

capacity of custodian, (iii) Defeased Municipal Obligations, (iv) evidences of ownership of a proportionate interest in specified Defeased Municipal Obligations, which Defeased Municipal Obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity as custodian, and (v) stripped securities where the principal-only and interest-only strips of non-callable obligations are issued by the U.S. Treasury or Resolution Funding Corp. or securities stripped by the Federal Reserve Bank of New York.

“Defeased Municipal Obligations” means obligations of state or local government municipal bond issuers rated the highest rating by S&P, Fitch or Moody’s, respectively, provision for the payment of the principal of and interest on which shall have been made by irrevocable deposit with a trustee or escrow agent of (i) non-callable, non-prepayable Government Obligations or (ii) evidences of ownership of a proportionate interest in specified non- callable, non-prepayable Government Obligations, which Government Obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity as custodian, the maturing principal of and interest on such Government Obligations or evidences of ownership, when due and payable, shall provide sufficient money to pay the principal of, redemption premium, if any, and interest on such obligations of state or local government municipal bond issuers.

“Defeased Obligations” means Obligations issued under a Supplement that have been discharged, or provision for the discharge of which has been made, pursuant to the terms hereof and of such Supplement.

“Demand Obligation” means any Indebtedness the payment of all or a portion of which is subject to the demand of the holder thereof.

“Derivative Agreement” means, without limitation,

(a) any contract known as or referred to or which performs the function of an interest rate swap agreement, currency swap agreement, forward payment conversion agreement or futures contract;

(b) any contract providing for payments based on levels of, or changes or differences in, interest rates, currency exchange rates, or stock or other indices;

(d) any type of contract called, or designed to perform the function of, interest rate floors or caps, options, puts or calls, to hedge or minimize any type of financial risk, including, without limitation, payment, currency, rate or other financial risk; and

(e) any other type of contract or arrangement that the Member of the Combined Group entering into such contract or arrangement determines is to be used, or is intended to be used, to manage or reduce the cost of Indebtedness, to convert any element of Indebtedness from one form to another, to maximize or increase investment return, or minimize investment risk or to protect against any type of financial risk or uncertainty.

“Derivative Period” means the period during which a Derivative Agreement is in effect.

“Designated Affiliate” means any Person which has been so designated by the a Member or Members of the Obligated Group in accordance with Section 3.11(a) hereof so long as such Person has not been further de-designated as a Designated Affiliate in accordance with Section 3.11(d).

“Event of Default” means any one or more of those events set forth in Section 4.01 of this Master Trust Indenture.

“Excluded Property” means any Property of a Member of the Combined Group that is not Health Care Facilities. 3

“Fair Market Value,” when used in connection with Property, means the fair market value of such Property as determined by either:

(a) an appraisal of the portion of such Property which is real property and the permanent improvements thereof made within five (5) years of the date of determination by a “Member of the Appraisal Institute” and an appraisal of any material portion of such Property which is not real property made within five (5) 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 (5) 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;

(b) a bona fide offer for the purchase of such Property made on an arm’s- length basis within six (6) months of the date of determination, as established by an Officer’s Certificate; or

(c) an Authorized Representative of the Obligated Group Representative (whose determination shall be made in good faith and set forth in an Officer’s Certificate filed with the Master Trustee) if the fair market value of such Property is less than or equal to the greater of one hundred million dollars ($100,000,000) or ten percent (10%) of cash and equivalents as shown on the Combined Group Financial Statements.

“FHA” means the United States Secretary of Housing and Urban Development, acting through the Federal Housing Commissioner or his or her authorized agents.

“FHA-Insured Loan” means a mortgage and note executed and delivered by a Member of the Combined Group and duly endorsed for insurance by FHA pursuant to Section 242 of Title II of the National Housing Act, as amended or such other section of the National Housing Act providing equivalent benefits.

“FHA-Insured Loan Documents” the documents evidencing and securing an FHA-Insured Loan, including without limitation one or more mortgages, mortgage notes, security agreements, and regulatory agreements.

“FHA Project” means a project financed with the proceeds of an FHA-Insured Loan.

“Fiscal Year” means the fiscal year of each Member of the Combined Group, which shall be the period commencing on January 1 of any year and ending on December 31 of such year unless the Master Trustee is notified in writing by the Obligated Group Representative of a change in such period, in which case the Fiscal Year shall be the period set forth in such notice.

“Fitch” means Fitch Inc., its successors and their assigns, and, if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Obligated Group Representative by notice in writing to the Master Trustee.

“GAAP” means accounting principles generally accepted in the United States of America, consistently applied.

“Governing Body” means, when used with respect to any Member of the Obligated Group and the Obligated Group Representative, its board of directors, board of trustees, or other board or group of individuals by, or under the authority of which, corporate powers of such Member of the Obligated Group or the Obligated Group Representative are exercised.

“Government Obligation” means a direct obligation of the United States of America, an obligation the timely payment of principal of, and interest on, which are fully and unconditionally guaranteed by the United 4

States of America, an obligation (other than an obligation subject to variation in principal repayment) to which the full faith and credit of the United States of America is pledged, an obligation of any of the following instrumentalities or agencies of the United States of America: (a) Federal Home Loan Bank System; (b) Export- Import Bank of the United States; (c) Federal Financing Bank; (d) Government National Mortgage Association; (e) Farmers Home Administration; (f) Federal Home Loan Mortgage Company; (g) Federal Housing Administration; (h) Private Export Funding Corp.; (i) Federal National Mortgage Association, and (j) upon the approval of all Applicable Credit Facility Issuers, (A) an obligation of any federal agency and a certificate or other instrument which evidences the ownership of, or the right to receive all or a portion of the payment of the principal of or interest on, direct obligations of the United States of America or (B) an obligation of any other agency or instrumentality of the United States of America created by Act of Congress, provided such obligation is rated at least “A” by S&P and Moody’s at all times;

“Governmental Restrictions” means federal, state or other applicable governmental laws, regulations, rulings, judgments, court orders or consent decrees affecting any Member of the Combined Group and its health care facilities, including without limitation (a) Articles 28 and 28-B of the New York Public Health Law, and (b) those placing restrictions and limitations on the (i) fees and charges to be fixed, charged and collected by any Member of the Obligated Group or (ii) the amount or timing of the receipt of such fees or charges.

“Guaranty” means any obligation of any Member of the Combined Group guaranteeing in any manner, directly or indirectly, any obligation of any Person that is not a Member of the Combined Group which obligation of such other Person would, if such obligation were the obligation of a Member of the Combined Group, constitute Indebtedness hereunder.

“Health Care Facilities” means the Property now or hereafter used by any Member of the Combined Group to provide for the care, maintenance, diagnosis and treatment of patients or to otherwise provide health care services. Any Property whose primary function or functions is other than the care, maintenance, diagnosis and treatment of patients and which has incidental health care services provided on its premises shall be deemed not to be Health Care Facilities.

“Holder” means an owner of any Obligation issued in other than bearer form.

“Income Available for Debt Service” means, with respect to amounts derived from the Combined Group Financial Statements as to any period of time, the change in unrestricted net assets before depreciation, amortization, and interest expense (including receipts and payments relating to any Derivative Agreement identified to the Master Trustee in a Certificate of the Obligated Group Representative in accordance with the provisions of clause (vi) of the defined term “Long-Term Debt Service Requirement” below), as determined in accordance with GAAP and as shown on or derived from the Combined Group Financial Statements and the Combined Group Members’ financial records; provided, that no determination thereof shall take into account:

(a) gifts, grants, bequests, donations or contributions, to the extent (i) temporarily restricted by the donor specifically for capital purposes, including the purchase of Property, Plant and Equipment funded through the release of such restrictions, or (ii) permanently restricted by the donor specifically to a particular purpose other than (1) payment of principal of, redemption premium and interest on Indebtedness, (2) release into unrestricted funds, or (3) payment of operating expenses;

(b) the net proceeds of casualty insurance and condemnation awards;

(d) any gain, loss or other change in unrestricted net assets resulting from the sale, exchange or other disposition (or receipt) of assets not in the ordinary course of business;

(e) any gain or loss resulting from any discontinued operations, and any restructuring charges;

(f) any gain or loss resulting from pension terminations, settlements or curtailments;

(g) noncash adjustments to the value of assets or liabilities resulting from changes in GAAP in the year of such change;

(h) unrealized gains or losses on investments, including “other than temporary” declines in Book Value, change in the equity in income on alternative investments, and investment returns of captive insurance companies;

(i) gains or losses resulting from changes in valuation of any hedging, derivative, interest rate exchange or similar contract (including Derivative Agreements);

(j) any termination payment or other similar payment made by a Combined Group Member under a Derivative Agreement that is not a regularly scheduled payment thereunder;

(k) unrealized gains or losses from the write-down, reappraisal, impairment or revaluation of assets;

(l) changes in the pension liability to be recognized in future periods (as determined under GAAP); or

(m) other nonrecurring items which do not involve the receipt, expenditure or transfer of assets.

“Indebtedness” means (i) all indebtedness of Members of the Combined Group for borrowed money, (ii) all installment sales, conditional sales and capital lease obligations incurred or assumed by any Member of the Combined Group, and (iii) all Guaranties, whether constituting Long-Term Indebtedness or Short-Term Indebtedness. Indebtedness shall not include obligations of any Member of the Combined Group to another Member of the Combined Group. Derivative Agreements, trade payables, accrued expenses in the normal course of business, physician income guaranties or other credit/funding extension, any obligation to reimburse a bond insurer, financial institution or other Person which has guaranteed or otherwise assured the performance of a Combined Group Member’s obligations under a Derivatives Agreement, or any obligation to repay moneys deposited by patients or others with a Combined Group Member as security for or as prepayment of the cost of patient care, or any rights of residents of life care, elderly housing or similar facilities to endowment or similar funds deposited by or on behalf of such residents, shall not constitute Indebtedness.

“Independent Consultant” means a firm (but not an individual) selected by a Combined Group Member which (1) does not have any direct financial interest or any material indirect financial interest in any Combined Group Member (other than the agreement or agreements pursuant to which such firm is retained), (2) is not connected with any Combined Group Member as an officer or employee, and (3) in the good faith opinion of the Combined Group Member making such selection, is qualified to pass upon questions relating to the financial affairs of organizations similar to the Combined Group or facilities of the type or types operated by the Combined Group and has the skill and experience necessary to render the particular opinion or report required by the provision hereof in which such requirement appears.

“Investment Grade” means (i) that rating of any rating agency with a rating then in effect with respect to any Obligation or Related Bonds that represents the lowest rating that any of such rating services recognizes as being investment grade and (ii) each rating above such rating.

“Insurance Consultant” means a firm or Person which is not, and no member, stockholder, director, trustee, officer or employee of which is, an officer, director, trustee or employee of any Member of the Obligated Group or an Affiliate, which is qualified to survey risks and to recommend insurance coverage for hospitals, health-related facilities and services and organizations engaged in such operations and which is selected by the Obligated Group Representative and is not unacceptable to the Master Trustee; provided that, except with

respect to the review of self-insurance programs, the term “Insurance Consultant” shall include qualified in house risk management officers employed by any Member of the Obligated Group or an Affiliate.

“Lien” means any mortgage, deed of trust or pledge of, security interest in or encumbrance on any Property of any Member of the Combined Group which secures any Indebtedness or any other obligation of any Member of the Combined Group or which secures any obligation of any Person, other than an obligation to any Member of the Combined Group.

“Loan Agreement” means a Loan Agreement by and between a Member of the Obligated Group and the issuer of Related Bonds relating to the loan of proceeds of Related Bonds.

“Long-Term Debt Service Coverage Ratio” means for any Fiscal Year the ratio determined by dividing the Income Available for Debt Service by Long-Term Debt Service Requirement.

“Long-Term Debt Service Requirement” means, for any Fiscal Year, the aggregate amount paid in respect of principal and interest (whether or not separately stated) on Outstanding Long-Term Indebtedness during such period, subject to the following:

(i) any principal installment of Long-Term Indebtedness due in such year, whether at maturity or pursuant to mandatory redemption, shall be excluded from such calculation if and to the extent the debtor paid such principal installment with available and unrestricted funds designated prior to the payment or redemption date for such payment or redemption or with the proceeds of Indebtedness incurred to refinance such principal;

(ii) interest on Long-Term Indebtedness shall be excluded from such calculation to the extent such interest is provided from the proceeds of such Long-Term Indebtedness; and

(iii) the interest on Derivative Indebtedness during any Derivative Period thereunder shall be calculated by adding (x) the amount of interest paid by a Member of the Combined Group on such Derivative Indebtedness pursuant to its terms and (y) the amount of interest paid by such Member of the Combined Group under the Derivative Agreement and subtracting (z) the amount of interest paid by the Derivative Agreement Counterparty at the rate specified in the Derivative Agreement.

(iv) . with respect to Long-Term Indebtedness incurred to finance capital improvements, debt service payable from the proceeds of such Long-Term Indebtedness (other than proceeds deposited in debt service reserve funds) held by a trustee or escrow agent for the payment of debt service shall not be included in the Long-Term Debt Service Requirement.

“Long-Term Indebtedness” means all Indebtedness having a maturity longer than one (1) year incurred or assumed by any Member of the Combined Group, including:

(i) money borrowed for an original term, or renewable at the option of the borrower for a period from the date originally incurred, longer than one (1) year;

(ii) leases which are required to be capitalized in accordance with GAAP having an original term, or are renewable at the option of the lessee for a period from the date originally incurred, longer than one (1) year;

(iii) installment sale or conditional sale contracts having an original term in excess of one (1) year;

(iv) Short-Term Indebtedness if a commitment by a financial lender exists to provide financing to retire such Short-Term Indebtedness and such commitment provides for the repayment of principal on terms which would, if such commitment were implemented, constitute Long-Term Indebtedness; and 7

(v) the current portion of Long-Term Indebtedness.

“Master Trust Indenture” means this Master Trust Indenture, dated as of January 1, 2015, including any amendments or supplements hereto.

“Master Trustee” means TD Bank, N.A., and its successors and/or assigns in the trusts created under this Master Trust Indenture.

“Member of the Obligated Group” or “Obligated Group Member” means, initially, the Hospital and thereafter any other Person becoming a Member of the Obligated Group pursuant to Section 3.09 hereof, but not including any Person which shall have withdrawn from the Obligated Group in accordance with Section 3.10 hereof.

“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall also be deemed to refer to any other nationally recognized securities rating agency designated by the Obligated Group Representative by notice in writing to the Master Trustee.

“Obligated Group” means, collectively, the Members of the Obligated Group.

“Obligated Group Representative” means The New York and Presbyterian Hospital, a New York not-for-profit corporation with its principal place of business in New York, New York, and its legal successors, and thereafter any Member of the Obligated Group as may be designated pursuant to written notice to the Master Trustee executed by all of the Members of the Obligated Group.

“Obligation” means the evidence of particular Indebtedness issued under this Master Trust Indenture as a joint and several obligation of each Member of the Obligated Group. “Obligation” may also include the evidence of a particular obligation of each Member of the Obligated Group under a Derivative Agreement.

“Officer’s Certificate” means a certificate signed by the Authorized Representative of such Member of the Obligated Group or the Obligated Group Representative as the context requires. Each Officer’s Certificate presented pursuant to this Master Trust Indenture shall state that it is being delivered pursuant to (and shall identify the section or subsection of), and shall incorporate by reference and use in all appropriate instances all terms defined in, this Master Trust Indenture. Each Officer’s Certificate shall state (i) that the terms thereof are in compliance with the requirements of the section or subsection pursuant to which such Officer’s Certificate is delivered or shall state in reasonable detail the nature of any non-compliance and the steps being taken to remedy such non-compliance and (ii) that it is being delivered together with any opinions, schedules, statements or other documents required in connection therewith.

“Opinion of Bond Counsel” means an opinion in writing signed by an attorney or firm of attorneys experienced in the field of municipal bonds whose opinions are generally accepted by purchasers of municipal bonds and who is acceptable to the Master Trustee and each Related Bond Issuer.

“Opinion of Counsel” means an opinion in writing signed by an attorney or firm of attorneys, acceptable to the Master Trustee, who may be counsel for the Obligated Group Representative or any Member of the Obligated Group or other counsel acceptable to the Master Trustee.

“Outstanding” means, as of any date of determination, (i) when used with reference to Obligations, all Obligations theretofore issued or incurred and not paid and discharged, other than (A) Obligations theretofore cancelled by the Master Trustee or delivered to the Master Trustee for cancellation, (B) Defeased Obligations and (C) Obligations in lieu of which other Obligations have been authenticated and delivered or have been paid pursuant to the provisions of the 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, and (ii) when used with reference to Indebtedness other than Indebtedness evidenced by an Obligation, all Indebtedness theretofore issued or incurred and not paid and discharged, other than Indebtedness deemed paid 8

and no longer outstanding under the documents pursuant to which such Indebtedness was incurred; provided, however, that for purposes of determining whether the Holders of the requisite principal amount of Obligations have concurred in any demands, direction, request, notice, consent, waiver or other action under this Master Trust Indenture, Obligations or Related Bonds that are owned by the Obligated Group Representative or any Member of the Obligated Group or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with such Member or the Obligated Group Representative shall be deemed not to be Outstanding, provided further, that for the purposes of determining whether the Master Trustee shall be protected in relying on any such direction, consent, or waiver, only such Obligations or Related Bonds which the Master Trustee has actual notice or knowledge are so owned shall be deemed to be not Outstanding.

“Permitted Liens” shall have the meaning given in Section 3.05(b) hereof.

“Person” means an individual, association, unincorporated organization, limited liability company, corporation, partnership, joint venture, business trust or a government or an agency or a political subdivision thereof, or any other entity.

“Property” means any and all rights, titles and interests in and to any and all property whether real or personal, tangible or intangible and wherever situated.

“Property, Plant and Equipment” means all Property of the Members of the Obligated Group which is property, plant and equipment under GAAP.

“Related Bond Indenture” means any indenture, bond resolution or other comparable instrument pursuant to which a series of Related Bonds is issued.

“Related Bond Issuer” means the issuer of any issue of Related Bonds.

“Related Bonds” means the revenue bonds or other obligations issued by any state, territory or possession of the United States or any municipal corporation or political subdivision formed under the laws thereof or any constituted authority or agency or instrumentality of any of the foregoing empowered to issue obligations on behalf thereof (i.e. a “Related Bond Issuer”) (“governmental issuer”), pursuant to a Related Bond Indenture, the proceeds of which are loaned or otherwise made available to the Obligated Group Representative or a Member of the Obligated Group in consideration of the execution, authentication and delivery of an Obligation to or for the order of such governmental issuer.

“Related Bond Trustee” means the trustee and its successors in the trusts created under any Related Bond Indenture.

“Related Credit Facility Issuer” means the Credit Facility Issuer with respect to any issue of Related Bonds.

“Related Loan Agreement” means any loan agreement, lease agreement or any similar instrument relating to the loan of proceeds of Related Bonds to a Member of the Obligated Group.

“Replacement Master Indenture” shall have the meaning given in Section 6.04 hereof.

“Restricted Moneys” means the proceeds of any grant (including without limitation any government grant), gift, bequest, contribution or other donation (and, to the extent subject to the applicable restrictions, the investment income derived from the investment of such proceeds) specifically restricted by the donor or grantor to an object or purpose inconsistent with their use for the payment of an amount payable under an Obligation or with respect to Related Bonds and for which the restriction has not been met.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies Inc., its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other nationally 9

recognized securities rating agency designated by the Obligated Group Representative by notice in writing to the Master Trustee.

“Short-Term Indebtedness” means all Indebtedness having a maturity of one (1) year or less, other than the current portion of Long-Term Indebtedness, incurred or assumed by any Member of the Obligated Group, including:

(i) money borrowed for an original term, or renewable at the option of the borrower for a period from the date originally incurred, of one (1) year or less;

(ii) leases which are capitalized in accordance with GAAP having an original term, or renewable at the option of the lessee for a period from the date originally incurred, of one (1) year or less; and

(iii) installment purchase or conditional sale contracts having an original term of one (1) year or less.

“Substitute Obligation" shall have the meaning given in Section 6.04 hereof.

“Supplement” means an indenture supplemental to, and authorized and executed pursuant to the terms of, this Master Trust Indenture.

“Tax-Exempt Organization” means a Person organized under the laws of the United States of America or any state thereof which is (i) an organization described in Section 501(c)(3) of the Code or is treated as an organization described in Section 501(c)(3) of the Code, and (ii) exempt from federal income taxes under Section 501(a) of the Code, or corresponding provisions of federal income tax laws from time to time in effect.

“Total Revenues” means, for the period of calculation in question, the sum of operating revenue (including net patient service revenue, premium revenue and other revenue and nonoperating gains (losses), but excluding realized and unrealized gains on investments), as shown on the Combined Group Financial Statements for the most recent Fiscal Year.

“UCC” means the Uniform Commercial Code of the State of New York, as amended from time to time.

“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 Obligated Group Representative, at either its Fair Market Value or its Book Value.

Section 1.02. Interpretation. (a) Any reference herein to any officer or member of the Governing Body of a Member of the Obligated Group or the Obligated Group Representative shall include those succeeding to their functions, duties or responsibilities pursuant to or by operation of law or who are lawfully performing their functions.

(b) Unless the context otherwise indicates, words importing the singular shall include the plural and vice versa, and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to mean and include the neuter, masculine or feminine gender.

(c) Unless stated otherwise, where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation, combination or other accounting computation is required to be made for the purposes of this Master Indenture or any agreement, document or certificate executed and delivered in connection with or pursuant to this Master Indenture, such determination or computation shall be done in accordance with GAAP in effect on, at the sole option of the Obligated Group Representative, (i) the date such determination or computation is made for any purpose of this Master Indenture or (ii) the date of execution and delivery of this Master Indenture if the Obligated Group Representative delivers an Officer’s Certificate to the 10

Master Trustee describing why then-current GAAP is inconsistent with the intent of the parties on the date of execution and delivery of this Master Indenture; provided that the requirements set forth herein shall prevail if inconsistent with GAAP. In all cases, intercompany balances and liabilities among the Combined Group Members shall be disregarded. For avoidance of doubt, it is the intent of the parties on the date of execution and delivery of this Master Indenture that any operating lease, as defined by the Financial Accounting Standards Board on the date of execution and delivery of this Master Indenture, and any renewal of such operating lease, shall be governed in accordance with GAAP in effect on the date of execution and delivery of this Master Indenture and shall not be treated as the incurrence of Indebtedness or the disposition of Property.

(d) Headings of articles and sections herein and in the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof.

(e) Provisions calling for the redemption of Obligations or the calling of Obligations for redemption do not mean or include the payment of Obligations at their stated maturity or maturities.

(f) Provisions calling for or referring to the delivery by each Member of the Obligated Group of financial statements for any given period shall be deemed satisfied if the combined or consolidated financial statements for such period, prepared in accordance with GAAP, of such entities are so delivered.

(g) Provisions calling for or referring to a calculation, with respect to the Combined Group in accordance with GAAP, shall be deemed not to require the consolidation of accounts of entities that are not Members of the Combined Group, as the case may be, even if GAAP would require such consolidation.

(h) Provisions calling for a forecast shall be deemed satisfied by a forecast which shall be compiled or examined based upon the most likely outcome of a stated set of assumptions that, in the opinion of the Obligated Group Representative, are reasonable.

(i) As used herein, the words “will” and “shall” are synonymous and are mandatory, not permissive.

ARTICLE II

INDEBTEDNESS, AUTHORIZATION, ISSUANCE AND TERMS OF OBLIGATIONS

Section 2.01. Amount of Indebtedness. Subject to the terms, limitations and conditions established in this Master Trust Indenture, each Member of the Obligated Group may incur Indebtedness by issuing Obligations hereunder or by creating Indebtedness under any other document. The principal amount of Indebtedness created under other documents and the number and principal amount of Obligations evidencing Indebtedness that may be created hereunder are not limited, except as limited by the provisions hereof or of any Supplement. Any Member of the Obligated Group proposing to issue an Obligation in a principal amount equal to or exceeding twenty million dollars ($20,000,000), shall, at least seven (7) days prior to the date of the issuance of such Obligation, give written notice of its intention to issue such Obligation, including in such notice the amount of the Obligation to be issued, to the Obligated Group Representative, with copies to the other Members of the Obligated Group, and the Master Trustee. Each Member of the Obligated Group shall be jointly and severally liable for each and every Obligation issued hereunder.

Section 2.02. Designation of Obligations. Obligations shall be issued in such forms as may from time to time be created by Supplements permitted hereunder. Each Obligation or series of Obligations shall be created by a different Supplement and shall be designated in such a manner as will differentiate such Obligation from any other Obligation.

Section 2.03. Appointment of Obligated Group Representative. Each Member of the Obligated Group, by becoming a Member of the Obligated Group, irrevocably appoints the Obligated Group Representative as its agent and true and lawful attorney in fact and grants to the Obligated Group Representative (a) full and exclusive 11

power to execute Supplements authorizing the issuance of Obligations or series of Obligations, (b) full power to execute Obligations for and on behalf of the Obligated Group and each Member of the Obligated Group, (c) full power to execute Supplements on behalf of the Obligated Group pursuant to Section 6.01 and 6.02 hereof and (d) full power to prepare, or authorize the preparation of, any and all documents, certificates or disclosure materials reasonably and ordinarily prepared in connection with the issuance of Obligations hereunder, or Related Bonds associated therewith, and to execute and deliver such items to the appropriate parties in connection therewith.

Section 2.04. Execution and Authentication of Obligations. All Obligations shall be executed for and on behalf of all of the Members of the Obligated Group by an Authorized Representative of the Obligated Group Representative. The signature of any such Authorized Representative may be mechanically or photographically reproduced on the Obligation. If any Authorized Representative whose signature appears on any Obligation ceases to be such Authorized Representative before delivery thereof, such signature shall remain valid and sufficient for all purposes as if such Authorized Representative had remained in office until such delivery. Each Obligation shall be manually authenticated by an authorized officer of the Master Trustee, without which authentication no Obligation shall be entitled to the benefits hereof.

The Master Trustee’s authentication certificate shall be substantially in the following form:

MASTER TRUSTEE’S AUTHENTICATION CERTIFICATE

The undersigned Master Trustee hereby certifies that this Obligation _____ is one of the Obligations described in the within-mentioned Master Indenture.

______Master Trustee

By:______Authorized Officer

Section 2.05. Supplement Creating Obligations. The Obligated Group Representative, on behalf of each Member of the Obligated Group, and the Master Trustee may from time to time enter into a Supplement in order to create an Obligation hereunder. Such Supplement shall, with respect to an Obligation evidencing Indebtedness created thereby, set forth the date thereof, and the date or dates on which the principal of and premium, if any, and interest on such Obligation shall be payable, the provisions regarding discharge thereof, and the form of such Obligation and such other terms and provisions as shall conform with the provisions hereof. Any such Obligation may be secured by such Properties and revenues of the Members of the Combined Group as may be permitted under this Master Trust Indenture as a Permitted Lien or under the provisions of a Supplement.

Obligations may be issued hereunder to evidence and secure Indebtedness or to evidence and secure any other financial obligations of any Member or Members of the Obligated Group, including but not limited to obligations under Derivative Agreements or Credit Facilities, and all references herein to payments of principal of, interest on, and premium on Obligations shall be deemed to include and refer to any and all other payments due or to become due on any Obligations. Any Obligation issued and authenticated hereunder to evidence or secure obligations that do not constitute Indebtedness shall nevertheless be equally and ratably secured hereunder with all Obligations issued hereunder, except as otherwise provided herein; provided, however, that any such Obligations that evidence or secure obligations that do not constitute Indebtedness shall be deemed to be Outstanding hereunder solely for the purpose of receiving payment hereunder and shall not be entitled to exercise any rights hereunder, including but not limited to any rights to direct the exercise of remedies, to vote or to grant consents.

Section 2.06. Conditions to Issuance of Obligations Hereunder. With respect to Indebtedness created hereunder, simultaneously with or prior to the execution, authentication and delivery of Obligations evidencing such Indebtedness pursuant to this Master Trust Indenture:

(a) All requirements and conditions to the issuance of such Obligations, if any, set forth in the Supplement or in this Master Trust Indenture shall have been complied with and satisfied, as provided in an Officer’s Certificate of the Obligated Group Representative, a certified copy of which shall be delivered to the Master Trustee;

(b) The issuer of such Obligations shall have delivered to the Master Trustee an Opinion of Counsel to the effect that (1) registration of such Obligations under the Securities Act of 1933, as amended, and qualification of this Master Trust Indenture or the Supplement under the Trust Indenture Act of 1939, as amended, is not required, or, if such registration or qualification is required, that all applicable registration and qualification provisions of said acts have been complied with, and (2) the Master Trust Indenture, the Supplement and the Obligations are valid, binding and enforceable obligations of the Members of the Obligated Group in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance and other laws affecting creditors’ rights generally and usual equity principles; and

(c) The Obligated Group Representative shall have delivered to the Master Trustee an Officer’s Certificate stating that, to the best of the knowledge of the signer thereof, each of the Persons who is to be a Holder of such Obligation upon the original issuance thereof is not acquiring the interest represented by such Obligation directly or indirectly with the assets of, or in connection with any arrangement or understanding by it in any way involving, any employee benefit plan with respect to which (i) any employee of any Member of the Obligated Group or the Master Trustee, in its individual capacity, is a participant or (ii) any Member of the Obligated Group or the Master Trustee, in its individual capacity, or any of their affiliates is otherwise a party in interest, all within the meaning of the Employee Retirement Income Security Act of 1974, as amended.

ARTICLE III

PARTICULAR COVENANTS OF THE OBLIGATED GROUP

Section 3.01. General Obligation; Restrictions on Encumbering Property; Joint and Several Obligation; Payment of Principal and Interest. (a) General Obligation. Any Obligation issued pursuant to this Master Trust Indenture shall be a general obligation of each Member of the Obligated Group.

(b) Restrictions on Encumbering Property. Each Member of the Obligated Group covenants that it will not pledge or grant a security interest in (except for Permitted Liens as set forth in Section 3.05(b) hereof or as may be otherwise provided in this Master Trust Indenture) any of its Property.

(c) Joint and Several Obligation. Each Obligation shall be a joint and several general obligation of each Member of the Obligated Group. Each Member of the Obligated Group covenants to promptly pay or cause to be paid the principal of, premium, if any, and interest on each Obligation issued pursuant to this Master Trust Indenture at the place, on the dates and in the manner provided in this Master Trust Indenture and in said Obligation according to the terms thereof whether at maturity, upon proceedings for redemption, by acceleration or otherwise.

Section 3.02. Covenants as to Corporate Existence, Maintenance of Properties, Etc. Each Member of the Obligated Group hereby covenants to do, and to cause each of its Designated Affiliates to do, the following:

(a) Except as otherwise expressly provided herein, to preserve its corporate or other legal existence and all its rights and licenses to the extent necessary or desirable in the operation of its business and affairs and be qualified to do business in each jurisdiction where its ownership of Property or the conduct of its business requires such qualifications; provided, however, that nothing herein contained shall be construed to obligate it to retain or preserve any of its rights or licenses, no longer used or, in the judgment of its Governing Body, useful in the conduct of its business.

(b) At all times to cause its Property to be maintained, preserved and kept in good repair, working order and condition and all needed and proper repairs, renewals and replacements thereof to be made; provided, however, that nothing contained in this subsection shall be construed to (i) prevent it from ceasing to 13

operate any portion of its Property, if in its judgment (evidenced, in the case of such a cessation other than in the ordinary course of business by an opinion or certificate of an Independent Consultant) it is advisable not to operate the same, or if it intends to sell or otherwise dispose of the same and within a reasonable time endeavors to effect such sale or other disposition, or (ii) to obligate it to retain, preserve, repair, renew or replace any Property, leases, rights, privileges or licenses no longer used or, in the judgment of its Governing Body, useful in the conduct of its business.

(c) To do all things reasonably necessary to conduct its affairs and carry on its business and operations in such manner as to comply with any and all applicable laws of the United States and the several states thereof and duly observe and conform to all valid orders, regulations or requirements of any governmental authority relative to the conduct of its business and the ownership of its Properties; provided, nevertheless, that nothing herein contained shall require it to comply with, observe and conform to any such law, order, regulation or requirement of any governmental authority so long as the validity thereof or the applicability thereof to it shall be contested in good faith.

(d) To pay promptly when due all lawful taxes, governmental charges and assessments at any time levied or assessed upon or against it or its Property; provided, however, that it shall have the right to contest in good faith any such taxes, charges or assessments or the collection of any such sums and pending such contest may delay or defer payment thereof.

(e) To pay promptly or otherwise satisfy and discharge all of its Indebtedness and all demands and claims against it as and when the same become due and payable, other than any thereof (exclusive of the Obligations created and Outstanding hereunder) whose validity, amount or collectability is being contested in good faith.

(f) At all times to comply with all terms, covenants and provisions of any Liens at such time existing upon its Property or any part thereof or securing any of its Indebtedness.

(g) To procure and maintain all necessary licenses and permits and maintain accreditation of its health care facilities (other than those of a type for which accreditation is not required) by The Joint Commission or other applicable recognized accrediting body; provided, however, that it need not comply with this Section 3.02(g) if and to the extent that its Governing Body shall have determined in good faith, evidenced by a resolution of the Governing Body, that such compliance is not in its best interests and that lack of such compliance would not materially impair its ability to pay its Indebtedness when due.

(h) So long as this Master Trust Indenture shall remain in force and effect, each Member of the Obligated Group which is a Tax-Exempt Organization at the time it becomes a Member of the Obligated Group agrees that, so long as all amounts due or to become due on any Related Bond have not been fully paid to the holder thereof, it shall not take any action or suffer any action to be taken by others, including any action which would result in the alteration or loss of its status as a Tax-Exempt Organization, or fail to take any action which failure, in the Opinion of Bond Counsel, would result in the interest on any Related Bonds becoming included in the gross income of the holder thereof for federal income tax purposes.

Section 3.03. Insurance.

(a) Except as may otherwise be required in a Related Loan Agreement, each Member of the Obligated Group agrees that it will maintain, or cause to be maintained, and will cause each of its Designated Affiliates to maintain, insurance (including one or more self-insurance programs considered to be adequate) covering such risks in such amounts and with such deductibles and co-insurance provisions as, in the judgment of its Governing Body, are adequate to protect it and its Property and operations.

(b) The Obligated Group Representative shall engage an Insurance Consultant to review the insurance requirements of the Members of the Combined Group from time to time (but not less frequently than biennially), and the Obligated Group shall file a copy of such report as required pursuant to Section 3.08(d) hereof. If the Insurance Consultant makes recommendations for the increase of any coverage, the applicable Member of the 14

Obligated Group shall increase or cause to be increased such coverage in accordance with such recommendations, subject to a good faith determination of the Governing Body of such Member that such recommendations, in whole or in part, are in the best interests of the Combined Group. If the Insurance Consultant makes recommendations for the decrease or elimination of any coverage, the Member of the Combined Group may decrease or eliminate such coverage in accordance with such recommendations, subject to a good faith determination of the Governing Body of the Obligated Group Representative that such recommendations, in whole or in part, are in the best interests of the Combined Group. Notwithstanding anything in this Section to the contrary, each Member of the Combined Group shall have the right, without giving rise to an Event of Default solely on such account, (i) to maintain insurance coverage below that most recently recommended by the Insurance Consultant, if the Obligated Group Representative furnishes to the Master Trustee a report of the Insurance Consultant to the effect that the insurance so provided affords either the greatest amount of coverage available for the risk being insured against at rates which in the judgment of the Insurance Consultant are reasonable in connection with reasonable and appropriate risk management, or the greatest amount of coverage necessary by reason of state or federal laws now or hereafter in existence limiting medical and malpractice liability, or (ii) to adopt alternative risk management programs which the Insurance Consultant determines to be reasonable, 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 participate in state or federal insurance programs, to take advantage of state or federal laws now or hereafter in existence limiting medical and malpractice liability, or to establish or participate in other alternative risk management programs; all as may be approved by the Insurance Consultant as reasonable and appropriate risk management by the Combined Group. If any Member of the Combined Group shall be self-insured for any coverage, the report of the Insurance Consultant mentioned above shall state whether the anticipated funding of any self-insurance fund is actuarially sound, and if not, the required funding to produce such result and such coverage shall be reviewed by the Insurance Consultant not less frequently than annually.

Section 3.04. Insurance and Condemnation Proceeds. (a) Unless otherwise provided in Related Loan Agreements, amounts that do not exceed twenty percent (20%) of the Value of the Property, Plant and Equipment of the Combined Group received by any Member of the Combined Group as insurance proceeds with respect to any casualty loss relating to the Health Care Facilities or as condemnation awards relating to the Health Care Facilities may be used in such manner as the recipient may determine, including, without limitation, applying such moneys to the payment or prepayment of any Indebtedness in accordance with the terms thereof and of any pertinent Supplement.

(b) Unless otherwise provided in the Related Loan Agreements, each Member of the Obligated Group shall, and shall cause each of its Designated Affiliates to, apply amounts that exceed twenty percent (20%) of the Value of the Property, Plant and Equipment of the Combined Group received by any Member of the Combined Group as insurance proceeds with respect to any casualty loss relating to the Health Care Facilities or as condemnation awards relating to the Health Care Facilities to repair or replace the Property (either Property serving the same function or other Property that, in the judgment of the Governing Body, is of equal usefulness) to which such proceeds relate or to the payment or prepayment of Indebtedness in accordance with the terms thereof and of any pertinent Supplement; provided, however, that, subject to the terms of the Related Loan Agreements, such amounts may be used in such manner as the recipient may determine, if the recipient notifies the Master Trustee and within twelve (12) months after the casualty loss or taking, delivers to the Master Trustee:

(i) (A) An Officer’s Certificate of the Obligated Group Representative certifying the forecasted Long-Term Debt Service Coverage Ratio for each of the two Fiscal Years following the date on which such proceeds or awards are forecasted to have been fully applied, which Long-Term Debt Service Coverage Ratio for each such period is not less than 1.50, as shown by pro forma financial statements for each such period, accompanied by a statement of the relevant assumptions including assumptions as to the use of such proceeds or awards, upon which such pro forma statements are based; and (B) if the amount of such proceeds or awards received with respect to any casualty loss or condemnation exceeds thirty percent (30%) of the Value of the Property, Plant and Equipment of the Combined Group, a written report of an Independent Consultant confirming such certification; or

(ii) A written report of an Independent Consultant stating the Independent Consultant’s recommendations, including recommendations as to the use of such proceeds or awards, to cause the Long-Term Debt Service Coverage Ratio for each of the periods described in subsection (i) of this section to be not less than 1.10, or, if in the opinion of the Independent Consultant the attainment of such level is impracticable, to the highest practicable level; and an Officer’s Certificate of the Obligated Group Representative certifying that the recipient will use such proceeds in accordance with the recommendations contained in the Independent Consultant’s report.

Each Member of the Obligated Group agrees that it will use, and will cause its Designated Affiliates to use, such proceeds or awards, to the extent permitted by law and any Related Loan Agreement, only in accordance with the assumptions described in subsection (i), or the recommendations described in subsection (ii), of this Section.

Notwithstanding anything to the contrary herein, so long as any FHA-Insured Loan is outstanding, amounts received by any Member of the Combined Group as insurance proceeds with respect to any casualty loss relating to an FHA Project shall be applied in accordance with the terms and provisions of the FHA-Insured Loan Documents.

Section 3.05. Limitations on Creation of Liens.

(a) Each Member of the Obligated Group agrees that it will not, and will cause its Designated Affiliates to not, create or suffer to be created or permit the existence of any Lien on Property now owned or hereafter acquired by it other than Permitted Liens.

(b) “Permitted Liens” means and shall consist of the following:

(i) Any judgment lien or notice of pending action against any Combined Group Member so long as the judgment or pending action is being contested and execution thereon is stayed or while the period for responsive pleading has not lapsed;

(ii) (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, assessments, 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 delinquent, 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 the amount or validity of which, are being contested or, with respect to liens of mechanics, materialmen and laborers, have been due for less than sixty (60) days, or the amount or validity of which are being contested; (iii) 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; (iv) easements, exceptions or reservations for the purpose of ingress and egress, parking, pipelines, telephone lines, telegraph lines, power lines and substations, roads, streets, alleys, highways, railroad purposes, drainage, sewerage, dikes, canals, laterals, ditches, removal of oil, gas, coal or other minerals, and other similar matters, including joint use agreements, which do not materially interfere with the use or operation of the subject Property for its intended purpose; and (v) rights 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;

(iii) Any Lien described in Appendix A to this Master Indenture which is existing on the date of execution hereof or as Appendix A may be supplemented upon addition of a Combined Group Member with respect to Liens existing on the Property of such additional Combined Group Member, provided that no such Lien (or the amount of Indebtedness or other obligations secured thereby) may be increased, extended, renewed or modified to apply to any Property of any Combined 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;

(iv) Any Lien in favor of the Master Trustee securing all Outstanding Obligations equally and ratably;

(v) Liens arising by reason of good faith deposits with any Combined Group Member in connection with leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by any Combined 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;

(vi) 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 Combined 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;

(vii) Any Lien arising by reason of any escrow or reserve fund established to pay debt service or the redemption price or purchase price of Indebtedness;

(viii) Any Lien in favor of a trustee on the proceeds of Indebtedness prior to the application of such proceeds;

(ix) Liens on moneys deposited by patients or others with any Combined Group Member as security for or as prepayment for the cost of patient care;

(x) Liens on Property received by any Combined Group Member through gifts, grants, bequests or research grants, such Liens being due to restrictions or rights reserved on such gifts, grants, bequests or research grants or the income thereon, up to the Fair Market Value of such Property;

(xi) Rights of the United States of America, including, without limitation, the Federal Emergency Management Agency (“FEMA”) or the State of New York, by reason of FEMA and other federal and State of New York funds made available to any Combined Group Member of the Combined Group under federal or State of New York statutes;

(xii) Liens on Property securing Indebtedness incurred to refinance Indebtedness previously secured by a Lien on such Property, provided that (i) the amount of such new Indebtedness does not exceed the amount of such refinanced Indebtedness, (ii) the Property securing such Indebtedness is not materially increased, and (iii) the obligor with respect to such Indebtedness, whether direct or contingent, is not changed;

(xiii) Liens granted by a Combined Group Member to another Combined Group Member;

(xiv) Liens securing nonrecourse Indebtedness;

(xv) Liens consisting of purchase money security interests (as defined in the UCC) and lessors’ interest in capitalized leases;

(xvi) Liens on the Combined Group Members’ accounts receivable securing Indebtedness in an amount not to exceed thirty percent (30%) of the Combined Group Members’ aggregate net patient accounts receivable and grant and other receivables, as shown on the Combined Group Financial Statements for the most recent year for which such financial statements are available immediately prior to the incurrence of such Indebtedness;

(xvii) Liens on revenues constituting rentals in connection with any other Lien permitted hereunder on the Property from which such rentals are derived;

(xviii) The lease or license of the use of a part of the Combined Group Members’ facilities for use in performing professional or other services necessary for the proper and economical operation of such facilities in accordance with customary business practices in the industry;

(xix) Liens created on amounts deposited by a Combined Group Member pursuant to a security annex or similar document to collateralize obligations of such Member under a Derivative Agreement;

(xx) Liens junior to Liens in favor of the Master Trustee;

(xxi) Liens in favor of banking or other depository institutions arising as a matter of law encumbering the deposits of any Combined Group Member held in the ordinary course of business by such banking institution (including any right of setoff or statutory bankers’ liens) so long as such deposit account is not established or maintained for the purpose of providing such Lien, right of setoff or bankers’ lien;

(xxii) UCC financing statements filed with the Secretary of State of the State (or such other office maintaining such records) in connection with an operating lease entered into by any Combined Group Member in the ordinary course of business so long as such financing statement does not evidence the grant of any Lien other than a Permitted Lien;

(xxiii) Rights of tenants under leases or rental agreements pertaining to (i) Excluded Property and (ii) Property, Plant and Equipment owned by any Combined Group Member so long as the lease arrangement is in the ordinary course of business of the Member, including without limitation rentals of housing to employees and rooms rented to patients and families;

(xxiv) Deposits of Property by any Combined Group Member to meet regulatory requirements for a governmental workers’ compensation, unemployment insurance or social security program, including any Lien imposed by ERISA;

(xxv) Deposits to secure the performance of another party with respect to a bid, trade contract, statutory obligation, surety bond, appeal bond, performance bond or lease, and other similar obligations incurred in the ordinary course of business of a Member;

(xxvi) Liens resulting from deposits to secure bids from or the performance of another party with respect to contracts incurred in the ordinary course of business of a Member (other than contracts creating or evidencing an extension of credit to the depositor or otherwise for the payment of Indebtedness);

(xxvii) Present or future zoning laws, ordinances or other laws or regulations restricting the occupancy, use or enjoyment of Property, Plant and Equipment of any Combined Group Member which, in the aggregate, are not substantial in amount, and which do not in any case materially impair

the use of such Property, Plant and Equipment for the purposes for which it is used or could reasonably be expected to be held or used;

(xxviii) Any Lien on Property due to the rights of third-party payors for recoupment of amounts paid to any Combined Group Member;

(xxix) Any Lien existing for not more than ten (10) days after the Combined Group Member shall have received notice thereof unless the Combined Group Member is contesting such Lien in good faith;

(xxx) Any other Lien on Property provided that the Value of all Property encumbered by all Liens permitted as described in this clause (xxx) does not exceed thirty percent (30%) of the Value of all Property of the Combined Group Members, calculated at the time of creation of such Lien;

(xxxi) Restrictions imposed in connection with the incurrence of Indebtedness permitted under this Master Indenture required to be imposed under applicable law in connection with such indebtedness such as regulatory agreements required in connection with mortgage insurance provided by state or federal governmental entities; and

(xxxii) Any Lien on Excluded Property.

Section 3.06. Long-Term Debt Service Coverage Ratio. (a) Each Member of the Obligated Group covenants to set rates and charges, and to cause each of its Designated Affiliates to set rates and charges, for its facilities, services and products such that the Long-Term Debt Service Coverage Ratio, calculated at the end of each Fiscal Year, will not be less than 1.10 for such prior Fiscal Year; provided, however, that in any case where Long- Term Indebtedness has been incurred to acquire or construct capital improvements, the Long-Term Debt Service Requirement with respect thereto shall not be taken into account in making the foregoing calculation until the first Fiscal Year commencing after the occupation or utilization of such capital improvements unless the Long-Term Debt Service Requirement with respect thereto is required to be paid from sources other than the proceeds of such Long-Term Indebtedness prior to such Fiscal Year.

(b) If at any time the Long-Term Debt Service Coverage Ratio required by subsection (a) hereof, as derived from the most recent Combined Group Financial Statements for the most recent Fiscal Year, is not met, the Obligated Group covenants to retain an Independent Consultant within thirty (30) days of the delivery of the aforementioned Combined Group Financial Statements to make recommendations to increase such Long- Term Debt Service Coverage Ratio in the following Fiscal Year to the level required or, if in the opinion of the Independent Consultant the attainment of such level is impracticable, to the highest level attainable. Any Independent Consultant so retained shall be required to submit such recommendations within forty-five (45) days after being so retained. Each Member of the Obligated Group agrees that it will, to the extent permitted by Governmental Restrictions, follow the recommendations of the Independent Consultant. So long as an Independent Consultant shall be retained and each Member of the Obligated Group shall follow such Independent Consultant’s recommendations to the extent permitted by such Governmental Restrictions, this Section shall be deemed to have been complied with even if the Long-Term Debt Service Coverage Ratio for the following Fiscal Year is below the required level; provided, however, that the Obligated Group shall not be required to retain an Independent Consultant to make recommendations pursuant to this subsection (b) more frequently than biennially.

Section 3.07. 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,

(i) the successor or surviving entity (hereinafter, the “Surviving Entity”) is an Obligated Group Member, or 19

(ii) the Surviving Entity shall

(A) be a corporation or other entity 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 Section 3.09 and comply with the provisions of Section 3.09, including without limitation 3.09(a);

(b) So long as any Related Bonds that are tax-exempt obligations are Outstanding, the Master Trustee receives an Opinion of Bond Counsel to the effect that, under the 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;

(c) The Master Trustee receives an Opinion of Counsel to the effect that (i) all conditions in this Section 3.07 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 Entity meets the conditions set forth in this Section 3.07; (iii) the Merger Transaction will not adversely affect the validity of any Obligations then Outstanding and such Obligations then Outstanding are enforceable against the Surviving Entity in accordance with their respective terms; and (iv) the Merger Transaction will not cause the Master Indenture or any Obligations then Outstanding to be subject to registration under the Securities Act of 1933, as amended, or the Trust Indenture Act of 1939, as amended (or, that any such registration, if required, has occurred); and

(d) The Surviving Entity 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 Entity shall execute and deliver to the Master Trustee appropriate documents in order to effect the substitution.

(e) From and after the effective date of such substitution (as set forth in the above-mentioned documents), the Surviving Entity shall be treated as an Obligated Group Member and shall thereafter have the right to participate in transactions hereunder relating to Obligations to the same extent as the other Obligated Group Members. All Obligations issued hereunder on behalf of a Surviving Entity shall have the same legal rank and benefit under this Master Indenture as Obligations issued on behalf of any other Obligated Group Member.

Section 3.08. Filing of Combined Group Financial Statements; Certificate of No Default; Other Information. Each Member of the Obligated Group covenants that it will:

(a) Within thirty (30) days after receipt of the audited financial statements mentioned below but in no event later than one hundred fifty (150) days after the end of each Fiscal Year, file with the Master Trustee, and with each Holder who may have so requested in writing or on whose behalf the Master Trustee may have so requested, a copy of the Combined Group Financial Statements as of the end of such fiscal reporting period and all audited financial statements from which the Combined Group Financial Statements are derived, accompanied by the applicable opinion(s) of independent certified public accountants.

(b) Within thirty (30) days after receipt of the audited financial statements mentioned above but in no event later than one hundred fifty (150) days after the end of each Fiscal Year, file with the Master Trustee, and with each Holder who may have so requested or on whose behalf the Master Trustee may have so requested, an Officer’s Certificate stating the Long-Term Debt Service Coverage Ratio for such fiscal reporting period and stating whether, to the best knowledge of the signer, any Member of the Obligated Group is in default in the performance of any covenant contained in this Master Trust Indenture and, if so, specifying each such default of which the signer may have knowledge.

(c) If an Event of Default shall have occurred and be continuing, (i) file with the Master Trustee such other financial statements and information concerning its operations and financial affairs (or of any consolidated or Obligated Group of companies, including its consolidated or combined Affiliates, including any Member of the Combined Group) as the Master Trustee may from time to time reasonably request, excluding specifically donor records, patient records and personnel records and (ii) provide access to its facilities for the 20

purpose of inspection by the Master Trustee during regular business hours or at such other times as the Master Trustee may reasonably request.

(d) Within thirty (30) days after its receipt thereof, file with the Master Trustee a copy of each report which any provision of this Master Trust Indenture requires to be prepared by an Independent Consultant or an Insurance Consultant.

(e) Cooperate, and cause each of its Designated Affiliates to cooperate, with each Obligated Group Member in order to comply with the continuing disclosure obligation of any Obligated Group Member may have under Rule 15c2-12 of the Securities Exchange Act of 1934, as amended.

Section 3.09. Parties Becoming Members of the Obligated Group. Persons which are not Members of the Obligated Group and corporations which are successor corporations to any Member of the Obligated Group through a merger or consolidation permitted by Section 3.07 hereof may, with the prior written consent of the Obligated Group Representative, become Members of the Obligated Group, if:

(a) The Person or successor corporation which is becoming a Member of the Obligated Group shall execute and deliver to the Master Trustee an appropriate instrument, satisfactory to the Master Trustee containing the agreement of such Person or successor corporation (i) to become a Member of the Obligated Group under this Master Trust Indenture and any Supplements and thereby become subject to compliance with all provisions of this Master Trust Indenture and any Supplements pertaining to a Member of the Obligated Group, and the performance and observance of all covenants and obligations of a Member of the Obligated Group hereunder, (ii) to adopt the same Fiscal Year as that of the Members of the Obligated Group, and (iii) unconditionally and irrevocably guarantee to the Master Trustee and each other Member of the Obligated Group that all Obligations issued and then Outstanding or to be issued and Outstanding hereunder will be paid in accordance with the terms thereof and of this Master Trust Indenture when due.

(b) Each instrument executed and delivered to the Master Trustee in accordance with subsection (a) of this Section, shall be accompanied by an Opinion of Counsel, addressed to and satisfactory to the Master Trustee, each Related Bond Issuer and each Related Credit Facility Issuer, to the effect that such instrument has been duly authorized, executed and delivered by such Person or successor corporation and constitutes a valid and binding obligation enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy laws, insolvency laws, other laws affecting creditors’ rights generally, equity principles and laws dealing with fraudulent conveyances and that the obligations of such Person or successor corporation created thereunder include the requirements described in subsection (a).

(c) If all amounts due or to become due on any Related Bond which bears interest which is not includable in the gross income of the recipient thereof under the Code have not been paid to the Holders thereof, there shall be filed with the Master Trustee, (i) an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, to the effect that the consummation of such transaction would not adversely affect the exclusion of the interest on any such Related Bond from the gross income of the holder thereof for purposes of federal income taxation and (ii) an Opinion of Counsel, in form and substance satisfactory to the Master Trustee, to the effect that the consummation of such transaction would not require the registration of any Obligations under the Securities Act of 1933, as amended or the Supplements under the Trust Indenture Act of 1939, as amended, or if such registration is required, that all applicable registration and qualification provisions of said acts have been complied with.

Section 3.10. Withdrawal from the Obligated Group. (a) No Member of the Obligated Group may withdraw from the Obligated Group without the prior written consent of the Obligated Group Representative; and provided further, that prior to the taking of such action, there is delivered to the Master Trustee:

(i) If all amounts due on any Related Bonds which bear interest which is not includable in the gross income of the recipient thereof under the Code have not been paid to the holders thereof, there shall be delivered to the Master Trustee an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, to the effect that under then existing law such Member’s withdrawal from the Obligated Group, whether or not contemplated on any date of delivery 21

of any Related Bond, would not cause the interest payable on such Related Bond to become includable in the gross income of the recipient thereof under the Code;

(ii) an Opinion of Counsel, addressed and satisfactory to the Master Trustee, and each Credit Facility Issuer to the effect that such withdrawal is authorized by and complies with all Governmental Restrictions and the provisions of this Master Trust Indenture and any agreements or other documents relating to this Master Trust Indenture, the Obligations or the Related Bonds.

(b) Upon the withdrawal of any Member from the Obligated Group pursuant to subsection (a) of this Section, any guaranty by such Member pursuant hereto shall be released and discharged in full and all liability of such Member of the Obligated Group with respect to all Obligations Outstanding under this Master Trust Indenture shall cease.

Section 3.11. Designation and De-designation of Designated Affiliates.

(a) Any Member(s) of the Obligated Group, with the consent of the Obligated Group Representative, may from time to time designate one or more Persons as a Designated Affiliate, provided that the Member(s) of the Obligated Group that designate such Designated Affiliate, singly or together, 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 this 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 Obligated Group Representative and such Member(s) of the Obligated Group, in the judgment of their respective Governing Bodies, deem sufficient to cause such Designated Affiliate to comply with the terms of this Master Indenture. The Obligated Group Representative shall at all times maintain an accurate and complete list of all Persons designated as Designated Affiliates (and of the Obligated Group Member(s) that control each Designated Affiliate) 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.

(b) Each Obligated Group Member shall cause each of its Designated Affiliates to provide to the Obligated Group Representative a resolution of its Governing Body accepting such Person’s designation as a Designated Affiliate and acknowledging the provisions of this Master Indenture which affect the Designated Affiliates.

(c) Each Obligated Group Member hereby covenants and agrees that it will cause each of its Designated Affiliates to comply with any and all directives given pursuant to the provisions of this Master Indenture.

(d) Any Person may cease to be a Designated Affiliate (and thus not subject to the terms of this Master Indenture) provided that prior to such Person ceasing to be a Designated Affiliate the Master Trustee receives:

(i) a resolution of the Governing Body of the Member(s) of the Obligated Group that control such Designated Affiliate and the Obligated Group Representative declaring such Person no longer a Designated Affiliate; and

(ii) an Officer’s Certificate to the effect that immediately following such Person ceasing to be a Designated Affiliate neither a Default nor an Event of Default would exist.

Section 3.12. Transfers from Designated Affiliates. Each Member of the Obligated Group hereby covenants and agrees that it shall cause each of its Designated Affiliates to pay, loan or otherwise transfer to the Obligated Group Representative such amounts as are necessary to enable the Obligated Group Members to comply with the provisions of this Master Indenture including without limitation the provisions of Section 3.01; provided, however, that nothing herein shall be construed to require any Member of the Obligated Group to cause its

Designated Affiliate to pay, loan or otherwise transfer to the Obligated Group Representative any amounts that constitute Restricted Moneys.

ARTICLE IV

DEFAULT AND REMEDIES

Section 4.01. Events of Default. Event of Default, as used herein, shall mean any of the following events:

(a) The Members of the Obligated Group shall fail to make any payment of the principal of, the premium, if any, or interest on any Obligations issued and Outstanding hereunder when and as the same shall become due and payable, whether at maturity, by proceedings for redemption, by acceleration or otherwise, in accordance with the terms thereof, of this Master Trust Indenture or of any Supplement;

(b) Any Member of the Obligated Group shall fail duly to perform, observe or comply with any covenant or agreement on its part under this Master Trust Indenture for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Members of the Obligated Group and the Obligated Group Representative by the Master Trustee, or to the Members of the Obligated Group and the Obligated Group Representative and the Master Trustee by the Holders of at least twenty- five percent (25%) in aggregate principal amount of Obligations then Outstanding or by the Credit Facility Issuer, if any, with respect to an Obligation or Related Bonds; provided, however, that if said failure be such that it cannot be corrected within thirty (30) days after the receipt of such notice, it shall not constitute an Event of Default if corrective action is instituted within such thirty (30)-day period and diligently pursued until the Event of Default is corrected;

(c) An event of default shall occur under a Related Bond Indenture, under a Related Loan Agreement, upon a Related Bond or under any mortgage that secures any Obligation issued hereunder;

(d) (i) Any Member of the Obligated Group shall fail to make any required payment with respect to any Indebtedness or Derivative Agreement (other than Obligations issued and Outstanding hereunder), which Indebtedness is in an aggregate principal amount greater than one percent (1%) of Total Revenues for the most recent Fiscal Year whether such Indebtedness now exists or shall hereafter be created, and any period of grace with respect thereto shall have expired, or (ii) there shall occur an event of default as defined in any mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any Indebtedness, which Indebtedness is in an aggregate principal amount greater than one percent (1%) of Total Revenues for the most recent Fiscal Year whether such Indebtedness now exists or shall hereafter be created, which event of default shall not have been waived by the holder of such mortgage, indenture or instrument, and as a result of such failure to pay or other event of default such Indebtedness shall have been accelerated; provided, however, that such default shall not constitute an Event of Default within the meaning of this Section if within thirty (30) days (i) written notice is delivered to the Master Trustee, signed by the Obligated Group Representative, that such Member of the Obligated Group is contesting the payment of such Indebtedness and within the time allowed for service of a responsive pleading if any proceeding to enforce payment of the Indebtedness is commenced, any Member of the Obligated Group in good faith shall commence proceedings to contest the obligation to pay such Indebtedness and if a judgment relating to such Indebtedness has been entered against such Member of the Obligated Group (A) the execution of such judgment has been stayed or (B) sufficient moneys are escrowed with a bank or trust company for the payment of such Indebtedness;

(e) The entry of a decree or order by a court having jurisdiction in the premises for an order for relief against any Member of the Obligated Group, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of such Member under the United States Bankruptcy Code or any other applicable federal or state law, or appointing a receiver, liquidator, custodian, assignee, or sequestrator (or other similar official) of such Member or of any substantial part of its Property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of ninety (90) consecutive days; and 23

(f) The institution by any Member of the Obligated Group of proceedings for an order for relief, or the consent by it to an order for relief against it, or the filing by it of a petition or answer or consent seeking reorganization, arrangement, adjustment, composition or relief under the United States Bankruptcy Code or any other similar applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, custodian, assignee, trustee or sequestrator (or other similar official) of such Member of the Obligated Group or of any substantial part of its Property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due.

(g) The occurrence of any additional event specified in a Supplement as an “Event of Default”.

Section 4.02. Acceleration; Annulment of Acceleration. (a) Upon the occurrence and during the continuation of an Event of Default hereunder, the Master Trustee may and, upon the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of Obligations Outstanding or the holder of any Accelerable Instrument under which Accelerable Instrument an event of default exists (which event of default permits the holder thereof to request that the Master Trustee declare such Indebtedness evidenced by an Obligation due and payable prior to the date on which it would otherwise become due and payable), shall, by notice to the Members of the Obligated Group declare all Obligations Outstanding immediately due and payable, whereupon such Obligations shall become and be immediately due and payable, anything in the Obligations or in any other section of this Master Trust Indenture to the contrary notwithstanding. In the event Obligations are accelerated there shall be due and payable on such Obligations an amount equal to the total principal amount of all such Obligations, plus all interest accrued thereon to the date of acceleration and, to the extent permitted by applicable law, which accrues to the date of payment.

(b) At any time after the principal of the Obligations shall have been so declared to be due and payable and before the entry of final judgment or decree in any suit, action or proceeding instituted on account of such default, if (i) the Obligated Group has paid or caused to be paid or deposited with the Master Trustee money sufficient to pay all matured installments of interest and interest on installments of principal and interest and principal or redemption prices then due (other than the principal then due only because of such declaration) of all Obligations Outstanding; (ii) the Obligated Group has paid or caused to be paid or deposited with the Master Trustee money sufficient to pay the charges, compensation, expenses, disbursements, advances, fees and liabilities of the Master Trustee; (iii) all other amounts then payable by the Obligated Group hereunder shall have been paid or a sum sufficient to pay the same shall have been deposited with the Master Trustee; and (iv) every Event of Default (other than a default in the payment of the principal of such Obligations then due only because of such declaration) shall have been remedied or waived pursuant to Section 4.09 hereof, then the Master Trustee may, and upon the written request of Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Obligations Outstanding or the holder of any Accelerable Instrument described in Section 4.02(a) above shall, annul such declaration and its consequences with respect to any Obligations or portions thereof not then due by their terms. No such annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon.

Section 4.03. Additional Remedies and Enforcement of Remedies. (a)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 twenty-five percent (25%) in aggregate principal amount of the Obligations Outstanding or the holder of any Accelerable Instrument or upon the request of the Credit Facility Issuer, if any, with respect to any series of Obligations or Related Bonds, together with indemnification of the Master Trustee to its satisfaction therefor, shall, proceed forthwith to protect and enforce its rights and the rights of the Holders hereunder by such suits, actions or proceedings as the Master Trustee, being advised by counsel, shall deem expedient, including but not limited to:

(i) Enforcement of the right of the Holders to collect and enforce the payment of amounts due or becoming due under the Obligations;

(ii) Bring suit upon all or any part of the Obligations;

(iii) Civil action to require any Person holding moneys, documents or other property pledged to secure payment of amounts due or to become due on the Obligations to account as if it were the trustee of an express trust for the Holders;

(iv) Civil action to enjoin any acts or things, which may be unlawful or in violation of the rights of the Holders;

(v) Enforcement of any rights the Master Trustee may have hereunder or under any Supplement as a secured party under the UCC;

(vi) Enforcement of any mortgage granted by any Member of the Obligated Group to secure any one or more Obligations; and

(vii) Enforcement of any other right of the Holders conferred by law or hereby.

(b) Regardless of the happening of an Event of Default, the Master Trustee, if requested in writing by the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Obligations then Outstanding or the Credit Facility Issuer, if any, with respect to a series of Obligations or Related Bonds, shall, upon being indemnified to its satisfaction therefor, institute and maintain such suits and proceedings as it may be advised shall be necessary or expedient (i) to prevent any impairment of the security hereunder by any acts which may be unlawful or in violation hereof, or (ii) to preserve or protect the interests of the Holders, provided that such request and the action to be taken by the Master Trustee are not in conflict with any applicable law or the provisions hereof and, in the sole judgment of the Master Trustee, are not unduly prejudicial to the interest of the Holders not making such request.

(c) In addition to any remedies enforceable pursuant to the Master Trust Indenture, upon the occurrence and continuance of any Event of Default under the Master Trust Indenture, the Master Trustee may, and upon the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Obligations Outstanding, as provided in Section 4.03(a) of the Master Trust Indenture, together with indemnification of the Master Trustee to its satisfaction therefor, shall, proceed forthwith to protect and enforce its rights and the rights of the Holders under the Master Trust Indenture by such suits, actions, foreclosure proceedings or other proceedings as the Master Trustee, being advised by counsel, shall deem expedient regarding enforcement of rights under the any mortgages granted to secure an Obligation issued hereunder. Any proceeds received from the enforcement of the rights of the Master Trustee as beneficiary under any particular mortgage shall be distributed by the Master Trustee, after the payment of any compensation, expenses, disbursements and advances then owing to the Master Trustee pursuant to Section 5.05 hereof, to satisfy any amounts then due and owing under any Obligations in accordance with the Master Trust Indenture.

Section 4.04. Application of Moneys after Default. During the continuance of an Event of Default, subject to the expenditure of moneys to make any payments required to permit any Member of the Obligated Group to comply with any requirement or covenant in any Related Indenture to cause Related Bonds the interest on which, immediately prior to such Event of Default, is excludable from the gross income of the recipients thereof for federal income tax purposes under the Code to retain such status under the Code, all moneys received by the Master Trustee pursuant to any right given or action taken under the provisions of this Article shall be applied, after the payment of any compensation, expenses, disbursements and advances then owing to the Master Trustee pursuant to Section 5.05 hereof, in accordance with the provisions of Section 4.03(c) hereof and, with respect to the payment of Obligations thereunder, as follows:

(a) Unless the principal of all Outstanding Obligations shall have become or have been declared due and payable:

First: To the payment to the Persons entitled thereto of all installments of interest then due on Obligations in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon to the Persons entitled thereto, without any discrimination or preference; 25

Second: To the payment to the Persons entitled thereto of the unpaid principal installments of any Obligations which shall have become due, whether at maturity or by call for redemption, in the order of their due dates, and if the amounts available shall not be sufficient to pay in full all Obligations due on any date, then to the payment thereof ratably, according to the amounts of principal installments due on such date, to the Persons entitled thereto, without any discrimination or preference; and

Third: To the extent there exists a Credit Facility Issuer with respect to any series of Obligations or Related Bonds, amounts owed to such Credit Facility Issuer by the Obligated Group and not otherwise paid under clauses First and Second above.

(b) If the principal of all Outstanding Obligations shall have become or have been declared due and payable, to the payment of the principal and interest then due and unpaid upon Obligations without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Obligation over any other Obligation, ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or preference.

(c) If the principal of all Outstanding Obligations shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of this Article, then, subject to the provisions of paragraph (b) of this Section in the event that the principal of all Outstanding Obligations shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of paragraph (a) of this Section.

Whenever moneys are to be applied by the Master Trustee pursuant to the provisions of this Section, such moneys shall be applied by it at such times, and from time to time, as the Master Trustee shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Master Trustee shall apply such moneys, it shall fix the date upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue. The Master Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the Holder of any unpaid Obligation until such Obligation shall be presented to the Master Trustee for appropriate endorsement of any partial payment or for cancellation if fully paid.

Whenever all Obligations and interest thereon have been paid under the provisions of this Section and all expenses and charges of the Master Trustee have been paid, any balance remaining shall be paid to the Person entitled to receive the same; if no other Person shall be entitled thereto, then the balance shall be paid to the Members of the Obligated Group, their respective successors, or as a court of competent jurisdiction may direct.

Section 4.05. Remedies Not Exclusive. No remedy by the terms hereof conferred upon or reserved to the Master Trustee or the Holders is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or existing at law or in equity or by statute on or after the date hereof.

Section 4.06. Remedies Vested in the Master Trustee. All rights of action (including the right to file proof of claims) hereunder 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 trial or other proceedings relating thereto. Any such suit or proceeding instituted by the Master Trustee may be brought in its name as the Master Trustee without the necessity of joining as plaintiffs or defendants any Holders. Subject to the provisions of Section 4.04 hereof, any recovery or judgment shall be for the equal benefit of the Holders.

Section 4.07. Holders’ Control of Proceedings. If an Event of Default shall have occurred and be continuing, the Holders of not less than a majority in aggregate principal amount of Obligations then Outstanding shall have the right, at any time, by an instrument in writing executed and delivered to the Master Trustee and accompanied by indemnity satisfactory to the Master Trustee, to direct the method and place of conducting any proceeding to be taken in connection with the enforcement of the terms and conditions hereof or for the appointment of a receiver or any other proceedings hereunder, provided that such direction is not in conflict with any applicable 26

law or the provisions hereof, and is not unduly prejudicial to the interest of any Holders not joining in such direction, and provided further, that the Master Trustee shall have the right to decline to follow any such direction if the Master Trustee in good faith shall determine that the proceeding so directed would involve the Master Trustee in personal liability, in the sole judgment of the Master Trustee, and provided further that nothing in this Section shall impair the right of the Master Trustee in its discretion to take any other action hereunder which it may deem proper and which is not inconsistent with such direction by the Holders; provided, further, however, that the Credit Facility Issuer, if any, with regard to any series of Obligations or any series of Related Bonds secured by Obligations, and not the Holders, shall have the right to control proceedings with respect thereto in the manner described in this Section.

Section 4.08. Termination of Proceedings. In case any proceeding taken by the Master Trustee on account of an Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Master Trustee or to the Holders, then the Members of the Obligated Group, the Master Trustee and the Holders shall be restored to their former positions and rights hereunder, and all rights, remedies and powers of the Master Trustee and the Holders shall continue as if no such proceeding had been taken.

Section 4.09. Waiver of Event of Default. (a) No delay or omission of the Master Trustee or of any Holder to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein. Every power and remedy given by this Article to the Master Trustee and the Holders, respectively, may be exercised from time to time and as often as may be deemed expedient by them.

(b) The Master Trustee, with the consent of the holder(s) of any Accelerable Instrument and the Credit Facility Issuer, if any, of any affected Obligations or Related Bonds may waive any Event of Default which in its opinion shall have been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under the provisions hereof, or before the completion of the enforcement of any other remedy hereunder.

(c) Notwithstanding anything contained herein to the contrary, the Master Trustee, upon the written request of the Holders of not less than a majority of the aggregate principal amount of Obligations then Outstanding, with the consent of the Credit Facility Issuer, if any, of any affected Obligations or Related Bonds, shall waive any Event of Default hereunder and its consequences; provided, however, that, except under the circumstances set forth in subsection (b) of Section 4.02 hereof, a default in the payment of the principal of, premium, if any, or interest on any Obligation, when the same shall become due and payable by the terms thereof or upon call for redemption, may not be waived without the written consent of the Holders of all the Obligations (with respect to which such payment default exists) at the time Outstanding.

(d) In case of any waiver by the Master Trustee of an Event of Default hereunder, the Members of the Obligated Group, the Master Trustee and the Holders shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereon.

Section 4.10. Appointment of Receiver. Upon the occurrence of any Event of Default unless the same shall have been waived as herein provided, the Master Trustee shall be entitled as a matter of right if it shall so elect, (i) forthwith and without declaring the Obligations to be due and payable, (ii) after declaring the same to be due and payable, or (iii) upon the commencement of an action to enforce the specific performance hereof or in aid thereof or upon the commencement of any other judicial proceeding to enforce any right of the Master Trustee or the Holders, to the appointment of a receiver or receivers of any or all of the Property of the Obligated Group with such powers as the court making such appointment shall confer. Each Member of the Obligated Group, respectively, hereby consents and agrees, and will if requested by the Master Trustee consent and agree at the time of application by the Trustee for appointment of a receiver of its Property, to the appointment of such receiver of its Property and that such receiver may be given the right, power and authority, to the extent the same may lawfully be given, to take possession of and operate and deal with such Property and the revenues, profits and proceeds therefrom, with like effect as the Member of the Obligated Group could do so, and to borrow money and issue evidences of indebtedness as such receiver. 27

Section 4.11. Remedies Subject to Provisions of Law. All rights, remedies and powers provided by this Article may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Article are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this instrument or the provisions hereof invalid or unenforceable under the provisions of any applicable law.

Section 4.12. Notice of Default. The Master Trustee shall, within ten (10) days after it has actual knowledge of the occurrence of an Event of Default, mail, by first class mail, to all Holders as the names and addresses of such Holders appear upon the books of the Master Trustee, notice of such Event of Default known to the Master Trustee, unless such Event of Default shall have been cured before the giving of such notice; provided that, except in the case of default in the payment of the principal of or premium, if any, or interest on any of the Obligations and the Events of Default specified in subsections (e) and (f) of Section 4.01, the Master Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or any responsible officer of the Master Trustee in good faith determines that the withholding of such notice is in the interests of the Holders.

ARTICLE V

THE MASTER TRUSTEE

Section 5.01. Certain Duties and Responsibilities.

(a) Except during the continuance of an Event of Default:

(i) The Master Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Master Trust Indenture, and no implied covenants or obligations shall be read into this Master Trust Indenture against the Master Trustee; and

(ii) In the absence of negligence and willful misconduct on its part, the Master Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Master Trustee and conforming to the requirements of this Master Trust Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Master Trustee, the Master Trustee shall be under a duty to examine the same to determine whether or not on their face they conform to the requirements of this Master Trust Indenture.

(b) In case an Event of Default has occurred and is continuing, the Master Trustee shall exercise such of the rights and powers vested in it by this Master Trust Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

(c) No provision of this Master Trust Indenture shall be construed to relieve the Master Trustee from liability for its own negligence or willful misconduct, except that:

(i) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section;

(ii) the Master Trustee shall not be liable for any error of judgment made in good faith by a chairman or vice-chairman of the board of directors, the chairman or vice-chairman of the executive committee of the board of directors, the president, any vice president (however designated), the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller and any assistant controller or any other officer or employee of the Master Trustee customarily performing functions similar to those performed by any of the above designated officers or with respect to a particular matter, any other

officer or employee to whom such matter is referred because of his knowledge of and familiarity with the particular subject, unless it shall be proved that the Master Trustee was grossly negligent;

(iii) the Master Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Obligations relating to the time, method and place of conducting any proceeding for any remedy available to the Master Trustee, or exercising any trust or power conferred upon the Master Trustee, under this Master Trust Indenture, except under the circumstances set forth in Subsection (c) of Section 4.09 hereof requiring the consent of the Holders of all the Obligations at the time Outstanding; and

(iv) no provision of this Master Trust Indenture shall require the Master Trustee to expend or risk its own funds or otherwise incur any financial or other, liability, directly or indirectly, in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(d) Whether or not therein expressly so provided, every provision of this Master Trust Indenture relating to the conduct or affecting the liability of or affording protection to the Master Trustee shall be subject to the provisions of this Section.

Section 5.02. Certain Rights of Master Trustee. Except as otherwise provided in Section 5.01:

(a) The Master Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.

(b) Any request, direction or statement of any Member of the Obligated Group mentioned herein shall be sufficiently evidenced by an Officer’s Certificate and any action of the Governing Body may be sufficiently evidenced by a copy of a resolution certified by the secretary or an assistant secretary of the Member of the Obligated Group to have been duly adopted by the Governing Body and to be in full force and effect on the date of such certification and delivered to the Master Trustee.

(c) Whenever in the administration of this Master Trust Indenture the Master Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of negligence or willful misconduct on its part, rely upon an Officer’s Certificate.

(d) The Master Trustee may consult with counsel or an independent auditor and the written advice of such counsel or independent auditor or any Opinion of Counsel or Opinion of Bond Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(e) The Master Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Master Trust Indenture whether on its own motion or at the request or direction of any of the Holders pursuant to this Master Trust Indenture which shall likely involve expense or liability not otherwise provided for herein, unless there shall have been offered and furnished to the Master Trustee reasonable security or indemnity satisfactory to the Master Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction or otherwise in connection herewith.

(f) The Master Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document, but the Master Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Master Trustee shall determine to make such 29

further inquiry or investigation, it shall be entitled to examine the books, records and premises of any Member of the Obligated Group, personally or by agent or attorney.

(g) The Master Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Master Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

Section 5.03. Right to Deal in Obligations and Related Bonds and With Members of the Obligated Group. The Master Trustee may in good faith buy, sell or hold and deal in any Obligations and Related Bonds with like effect as if it were not such Master Trustee and may commence or join in any action which a Holder or holder of a Related Bond is entitled to take and may otherwise deal with Members of the Combined Group with like effect as if the Master Trustee were not the Master Trustee; provided, however, that if the Master Trustee has or shall acquire any conflicting interest, it shall, within ninety (90) days after ascertaining that it has such conflicting interest, either eliminate such conflicting interest or resign as Master Trustee.

Section 5.04. Removal and Resignation of the Master Trustee. The Master Trustee may resign on its motion or may be removed at any time by an instrument or instruments in writing signed by the Holders of not less than a majority of the principal amount of Obligations then Outstanding or, if no Event of Default shall have occurred and be continuing, by an instrument in writing signed by the Obligated Group Representative. No such resignation or removal shall become effective unless and until a successor Master Trustee (or temporary successor trustee as provided below) has been appointed and has assumed the trusts created hereby. Written notice of such resignation or removal shall be given to the Members of the Obligated Group and to each Holder by first class mail at the address then reflected on the books of the Master Trustee and such resignation or removal shall take effect upon the appointment and qualification of a successor Master Trustee. A successor Master Trustee may be appointed by the Obligated Group Representative or, if no such appointment is made by the Obligated Group Representative within thirty (30) days of the date notice of resignation or removal is given, the Holders of not less than a majority in aggregate principal amount of Obligations Outstanding. In the event a successor Master Trustee has not been appointed and qualified within sixty (60) days of the date notice of resignation is given, the Master Trustee, any Member of the Obligated Group or any Holder may apply to any court of competent jurisdiction for the appointment of a temporary successor Master Trustee to act until such time as a successor is appointed as above provided.

Unless otherwise ordered by a court or regulatory body having competent jurisdiction, or unless required by law, any successor Master Trustee shall be a trust company or bank having the powers of a trust company as to trusts, qualified to do and doing trust business in one or more states of the United States of America and having an officially reported combined capital, surplus, undivided profits and reserves aggregating at least fifty million dollars ($50,000,000), if there is such an institution willing, qualified and able to accept the trust upon reasonable or customary terms.

Every successor Master Trustee howsoever appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to each Member of the Obligated Group an instrument in writing, accepting such appointment hereunder, and thereupon such successor Master Trustee, without further action, shall become fully vested with all the rights, immunities, powers, trusts, duties and obligations of its predecessor, and such predecessor shall execute and deliver an instrument transferring to such successor Master Trustee all the rights, powers and trusts of such predecessor. The predecessor Master Trustee shall execute any and all documents necessary or appropriate to convey all interest it may have to the successor Master Trustee. The predecessor Master Trustee shall promptly deliver all material records relating to the trust or copies thereof and, on request, communicate all material information it may have obtained concerning the trust to the successor Master Trustee.

Each successor Master Trustee, not later than ten (10) days after its assumption of the duties hereunder, shall mail a notice of such assumption to each registered Holder.

Section 5.05. Compensation and Reimbursement. The Members of the Obligated Group agree:

(a) To pay the Master Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall be agreed to in writing between the Obligated Group Representative and the Master Trustee, but shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust).

(b) Except as otherwise expressly provided herein, to reimburse the Master Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Master Trustee, including fees on collection and enforcement, in accordance with any provision of this Master Trust Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and its agents), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct.

(c) To indemnify the Master Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust or its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.

As security for the performance of the Members of the Obligated Group under this Section, the Master Trustee shall have a lien prior to any Obligations upon all property and funds held or collected by the Master Trustee as such, except funds held in trust for the payment of principal of or interest or premiums on Obligations.

Section 5.06. Recitals and Representations. The recitals, statements and representations contained herein, or in any Obligation (excluding the Master Trustee’s authentication on the Obligations) shall be taken and construed as made by and on the part of the Members of the Obligated Group, respectively, and not by the Master Trustee, and the Master Trustee neither assumes nor shall be under any responsibility for the correctness of the same.

The Master Trustee makes no representation as to, and is not responsible for, the validity or sufficiency hereof, of the Obligations, or the validity or sufficiency of insurance to be provided. The Master Trustee shall be deemed not to have made representations as to the security afforded hereby or hereunder or as to the validity or sufficiency of such document. The Master Trustee shall not be concerned with or accountable to anyone for the use or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof. The Master Trustee shall have no duty of inquiry with respect to any default or Events of Default described herein without actual knowledge of or receipt by the Master Trustee of written notice of a default or an Event of Default from a Member of the Obligated Group or any Holder.

Section 5.07. Separate or Co-Master Trustee. At any time or times, for the purpose of meeting any legal requirements of any jurisdiction, the Master Trustee shall have power to appoint, and, upon the request of the Holders of at least twenty-five percent (25%) in aggregate principal amount of Obligations Outstanding, shall appoint, one or more Persons approved by the Master Trustee either to act as co-trustee or co-trustees, jointly with the Master Trustee, or to act as separate trustee or separate trustees, and to vest in such person or persons, in such capacity, such rights, powers, duties, trusts or obligations as the Master Trustee may consider necessary or desirable, subject to the remaining provisions of this Section.

Every co-trustee or separate trustee shall, to the extent permitted by law but to such extent only, be appointed subject to the following terms, namely:

(a) The Obligations shall be authenticated and delivered solely by the Master Trustee.

(b) All rights, powers, trusts, duties and obligations conferred or imposed upon the trustees shall be conferred or imposed upon and exercised or performed by the Master Trustee, or separate trustee or separate trustees jointly, as shall be provided in the instrument appointing such co-trustee or co-trustees or separate trustee or separate trustees, except to the extent that, under the law of any jurisdiction in which any particular act or acts are to be performed, the Master Trustee shall be incompetent or unqualified to perform such act or acts, in which event such act or acts shall be performed by such co-trustee or co-trustees or separate trustee or separate trustees. 31

(c) Any request in writing by the Master Trustee to any co- trustee or separate trustee to take or to refrain from taking any action hereunder shall be sufficient warrant for the taking, or the refraining from taking, of such action by such co-trustee or separate trustee.

(d) Any co-trustee or separate trustee may, to the extent permitted by law, delegate to the Master Trustee the exercise of any right, power, trust, duty or obligation, discretionary or otherwise.

(e) The Master Trustee at any time, by any instrument in writing, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section. Upon the request of the Master Trustee, the Members of the Obligated Group shall join with the Master Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal.

(f) No trustee or any paying agent hereunder shall be personally liable by reason of any act or omission of any other trustee or paying agent hereunder, nor will the act or omission of any trustee or paying agent hereunder be imputed to any other trustee or paying agent.

(g) Any demand, request, direction, appointment, removal, notice, consent, waiver or other action in writing delivered to the Master Trustee shall be deemed to have been delivered to each such co-trustee or separate trustee.

(h) Any moneys, papers, securities or other items of personal property received by any such co-trustee or separate trustee hereunder shall forthwith, so far as may be permitted by law, be turned over to the Master Trustee.

Upon the acceptance in writing of such appointment by any such co-trustee or separate trustee, it or he shall be vested with such rights, powers, duties or obligations, as shall be specified in the instrument of appointment jointly with the Master Trustee (except insofar as local law makes it necessary for any such co-trustee or separate trustee to act alone) subject to all the terms hereof. Every such acceptance shall be filed with the Master Trustee. To the extent permitted by law, any co-trustee or separate trustee may, at any time by an instrument in writing, constitute the Master Trustee its or his attorney-in-fact and agent, with full power and authority to perform all acts and things and to exercise all discretion on its or his behalf and in its or his name.

In case any co-trustee or separate trustee shall become incapable of acting, resign or be removed, all rights, powers, trusts, duties and obligations of said co-trustee or separate trustee shall, so far as permitted by law, vest in and be exercised by the Master Trustee unless and until a successor co-trustee or separate trustee shall be appointed in the manner herein provided.

Section 5.08. Disclosure. The Master Trustee is authorized to disclose to a central repository of information and data regarding municipal bond issues such material as shall be required to be disclosed in accordance with applicable regulations and guidelines regarding such disclosure, including without limitation the American Bankers Association Corporate Trust Disclosure Guidelines for Master Trustees, and the Members of the Obligated Group shall in connection with any such disclosure pay the reasonable compensation and expenses of the Master Trustee, including the fees and expense of its counsel, incurred in connection with such disclosure and shall provide the Master Trustee with such indemnification as shall be reasonably satisfactory to the Master Trustee.

ARTICLE VI

SUPPLEMENTS AND AMENDMENTS; REPLACEMENT MASTER TRUST INDENTURE

Section 6.01. Supplements Not Requiring Consent of Holders. Each Member of the Obligated Group, when authorized by resolution or other action of equal formality by its Governing Body, and the Master Trustee may, without the consent of or notice to any of the Holders enter into one or more Supplements for one or more of the following purposes:

(a) To cure any ambiguity or formal defect or omission herein.

(b) To correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising hereunder and which shall not materially and adversely affect the interests of the Holders.

(c) To grant or confer ratably upon all of the Holders any additional rights, remedies, powers, authority or security that may lawfully be granted or conferred upon them, subject to the provisions of the proviso of Section 6.02(a).

(d) To qualify this Master Trust Indenture under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect.

(e) To create and provide for the issuance of Indebtedness or the entry into a Derivative Agreement (including, in either case, the issuance of an Obligation in respect thereof) as permitted under the Master Trust Indenture, so long as no Event of Default has occurred and is continuing under this Master Trust Indenture.

(f) To obligate a successor to any Member of the Obligated Group as provided in Section 3.09.

(g) To comply with the provisions of any federal or state securities law.

(h) So long as no Event of Default has occurred and is continuing under this Master Trust Indenture and so long as no event which with notice or the passage of time or both would become an Event of Default under this Master Trust Indenture has occurred and is continuing, to make any change to the provisions of this Master Trust Indenture (except as set forth below) if the following conditions are met:

(i) the Obligated Group Representative delivers to the Master Trustee prior to the date such amendment is to take effect either (A)(1) an Independent Consultant’s report to the effect that the proposed amendment is consistent with then current industry standards for comparable institutions and (2) an Officer’s Certificate of the Obligated Group Representative demonstrating that the Long-Term Debt Service Coverage Ratio for the most recent period of twelve (12) consecutive calendar months preceding the date of delivery of the report for which there are Combined Group Financial Statements available was at least 1.75; or (B) evidence satisfactory to the Master Trustee to the effect that (i) there exists for each Related Bond or Obligation, which is not pledged to secure Related Bonds, credit enhancement consisting of a surety bond, insurance policy, letter of credit or other form of credit enhancement from a financial institution generally regarded as responsible (in each case which is irrevocable and will remain in full force and effect for the entire period of time each such Related Bond or Obligation, as the case may be, remains outstanding and provides for payment in full of principal and interest on such Related Bond or Obligation when due) or the Obligated Group has delivered, respectively, to each Related Bond Trustee for each outstanding Related Bond, each trustee for any outstanding Obligation which is not pledged to secure Related Bonds and each holder of an outstanding Obligation which is not pledged to secure Related Bonds and with respect to which there is no trustee, credit enhancement of the types described above in this subpart, and (ii) evidence satisfactory to the Master Trustee from each rating agency then rating each such Related Bond and Obligation that, on the date the proposed change is to take effect, each such Related Bond and Obligation rated by such rating agency will be rated based on such credit enhancement not lower than the rating applicable to such Related Bond or Obligation on the day prior to the effective date of such change;

(ii) if any series of Obligations or Related Bonds are rated based on credit enhancement of such Obligations or Related Bonds (whether in the form of a financial guaranty insurance policy, letter of credit, surety bond or otherwise) and not on the underlying credit of the Obligated Group, the issuer of such credit enhancement shall consent in writing to such amendment or modification; and 33

(iii) with respect to each outstanding Related Bond, an Opinion of Bond Counsel (which counsel and opinion, including without limitation the scope, form, substance and other aspects thereof, are not unacceptable to the Master Trustee) to the effect that the proposed change will not adversely affect the validity of any Related Bond or any exclusion from gross income for federal income taxation purposes of interest payable thereon to which such Bond would otherwise be entitled.

(i) To make any changes to this Master Trust Indenture in the event the Obligated Group Representative determines that a change in GAAP will create a lasting impediment upon the Members of the Obligated Group’s ability to comply with the provisions of any quantitative financial provisions or requirements of this Master Trust Indenture, which changes to this Master Trust Indenture relate to any such quantitative provisions or requirements and the related definitions upon which the calculations included in such provisions or requirements are based, to provide for similar financial and economic measures of the performance of the Members of the Obligated Group.

Section 6.02. Supplements Requiring Consent of Holders. (a) Other than Supplements referred to in Section 6.01 hereof and subject to the terms and provisions and limitations contained in this Article and not otherwise, the Holders of not less than fifty-one percent (51%) in aggregate principal amount of Obligations then Outstanding shall have the right, with consent of each Credit Facility Issuer insuring Obligations or Related Bonds, from time to time, anything contained herein to the contrary notwithstanding, to consent to and approve the execution by each Member of the Obligated Group, when authorized by resolution or other action of equal formality by its Governing Body, and the Trustee of such Supplements as shall be deemed necessary and desirable for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained herein; provided, however, nothing in this Section shall permit or be construed as permitting a Supplement which would:

(i) Effect a change in the times, amounts or currency of payment of the principal of, premium, if any, and interest on any Obligation or a reduction in the principal amount or redemption price of any Obligation or the rate of interest thereon, without the consent of the Holder of such Obligation;

(ii) Except as otherwise permitted in this Master Trust Indenture or an existing Supplement, permit the preference or priority of any Obligation over any other Obligation, without the consent of the Holders of all Obligations then Outstanding; or

(iii) Reduce the aggregate principal amount of Obligations then Outstanding the consent of the Holders of which is required to authorize such Supplement without the consent of the Holders of all Obligations then Outstanding.

(b) If at any time each Member of the Obligated Group shall request the Master Trustee to enter into a Supplement pursuant to this Section, which request is accompanied by a copy of the resolution or other action of its Governing Body certified by its secretary or assistant secretary or if it has no secretary or assistant secretary, its comparable officer, and the proposed Supplement and if the Master Trustee shall receive an instrument or instruments purporting to be executed by the Holders of not less than the aggregate principal amount or number of Obligations specified in subsection (a) of this Section 6.02 for the Supplement in question which instrument or instruments shall refer to the proposed 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, thereupon, but not otherwise, the Master Trustee may execute such Supplement in substantially such form, without liability or responsibility to any Holder, whether or not such Holder shall have consented thereto.

(c) Any such consent shall be binding upon the Holder giving such consent and upon any subsequent Holder of such Obligation and of any Obligation issued in exchange therefor (whether or not 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 Supplement, such revocation and, if such Obligation is transferable by delivery, proof that such Obligation is held by the signer of such revocation in the manner permitted by Section 8.01 34

of this Master Trust Indenture. At any time after the Holders of the required principal amount or number of Obligations shall have filed their consents to the Supplement, the Master Trustee shall make and file with each Member of the Obligated Group a written statement to that effect. Such written statement shall be conclusive that such consents have been so filed.

(d) If the Holders of the required principal amount of the Obligations Outstanding shall have consented to and approved the execution of such Supplement as herein provided, no Holder shall have any right to object to the execution thereof, or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Master Trustee or any Member of the Obligated Group from executing the same or from taking any action pursuant to the provisions thereof

Section 6.03. Execution and Effect of Supplements. (a)In executing any Supplement permitted by this Article, the Master Trustee shall be entitled to receive and to rely upon an Opinion of Counsel stating that the execution of such Supplement is authorized or permitted hereby. The Master Trustee may but shall not be obligated to enter into any such Supplement which affects the Master Trustee’s own rights, duties or immunities.

(b) Except as otherwise set forth in such Supplement, upon the execution and delivery of any Supplement in accordance with this Article, the provisions hereof shall be modified in accordance therewith and such Supplement shall form a part hereof for all purposes and every Holder of an Obligation theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

(c) Any Obligation authenticated and delivered after the execution and delivery of any Supplement in accordance with this Article may, and if required by the issuer of such Obligation or the Master Trustee shall, bear a notation in form approved by the Master Trustee as to any matter provided for in such Supplement. If the issuer of any series of Obligations then Outstanding or the Master Trustee shall so determine, new Obligations so modified as to conform in the opinion of the Master Trustee and the Governing Body of such issuer to any such Supplement may be prepared and executed by the issuer and authenticated and delivered by the Master Trustee in exchange for and upon surrender of Obligations then Outstanding.

Section 6.04. Replacement Master Indenture. Each Holder of an Obligation shall surrender such Obligation to the Master Trustee upon presentation to the Holder of all of the following:

(a) An original replacement note or similar obligation (the “Substitute Obligation”) duly authenticated and issued under and pursuant to an existing or new indenture, bond resolution, bond order or other instrument pursuant to which indebtedness is incurred or issued (the “Replacement Master Indenture”) by which the party or parties purported to be obligated thereby (collectively, the “New Obligor”) have agreed to be bound; provided, however, that the trustee serving as master trustee under such Replacement Master Indenture (the “New Trustee”) shall be an independent corporate trustee (which may be the Master Trustee or a Related Bond Trustee) meeting the eligibility requirements for the Master Trustee set forth in this Indenture;

(b) An original executed counterpart or certified copy of the Replacement Master Indenture pursuant to which each party purported to be bound thereby has agreed (1) to become subject to compliance with all provisions of the Replacement Master Indenture and (2) unconditionally and irrevocably (subject to the right of such party to cease its status as a New Obligor pursuant to the terms and conditions of the Replacement Master Indenture) to jointly and severally make payments upon each note and obligation, including the Substitute Obligation, issued under the Replacement Master Indenture at the times and in the amounts provided in each such note or obligation;

(c) An Opinion of Counsel addressed to the Holder and the Obligated Group Members to the effect that: (1) the Replacement Master Indenture has been duly authorized, executed and delivered or has been duly adopted by each party (other than the Master Trustee) purported to be bound thereby, the Substitute Obligation has been duly authorized, executed and delivered by the New Obligor, and the Replacement Master Indenture and the Substitute Obligation are each a legal, valid and binding obligation of the New Obligor, enforceable in accordance with their terms, subject in each case to customary exceptions for bankruptcy, insolvency, fraudulent conveyance and other laws affecting enforcement of creditors' rights generally and application of general principles of equity; (2) 35

all requirements and conditions to the issuance of the Substitute Obligation set forth in the Replacement Master Indenture have been complied with and satisfied; and (3) neither registration of the Substitute Obligation under the Securities Act nor qualification of the Replacement Master Indenture under the Trust Indenture Act is required, or, in either case, if such registration or qualification is required, all applicable registration and qualification provisions of said Acts have been complied with;

(d) An Opinion of Bond Counsel to the effect that the surrender of the Obligation and the acceptance by the Holder of the Substitute Obligation will not adversely affect the validity of any' Related Bonds or any exemption for the purposes of federal or state income taxation to which interest on such Related Bonds would otherwise be entitled; and

(e) Evidence (1) that written notice of such substitution, together with a copy of the Replacement Master Indenture, has been given by the New Obligor to each Rating Service then rating the Obligations, if any, or Related Bonds, (2) that the then current rating on such Obligations or Related Bonds will not be withdrawn or reduced below the then current rating category (without regard to any gradations by numerical qualifier or otherwise within such rating category) by any such Rating Service solely as a result of such substitution and (3) that the then current rating on such Obligation or Related Bonds is at least, and upon such substitution will not be reduced below, Investment Grade.

Notwithstanding any other provisions of this Section 6.04, no Substitute Obligation may effect any change with respect to any Obligation surrendered to the Master Trustee that would require the consent of the Holder of such Obligation if such change were to be made pursuant to Section 6.02 (a)(i) through (iii) hereof, without the consent of such Holder.

ARTICLE VII

SATISFACTION AND DISCHARGE OF INDENTURE

Section 7.01. Satisfaction and Discharge of Indenture. If (i) the Obligated Group Representative shall deliver to the Master Trustee for cancellation all Obligations theretofore authenticated (other than any Obligations which shall have been mutilated, destroyed, lost or stolen and which shall have been replaced or paid as provided in the Supplement) and not theretofore cancelled, or (ii) all Obligations not theretofore cancelled or delivered to the Master Trustee for cancellation shall have become due and payable and money sufficient to pay the same shall have been deposited with the Master Trustee, or (iii) all Obligations that have not become due and payable and have not been cancelled or delivered to the Master Trustee for cancellation shall be Defeased Obligations, and if in all cases the Members of the Obligated Group shall also pay or cause to be paid all other sums payable hereunder by the Members of the Obligated Group or any thereof, then this Master Trust Indenture shall cease to be of further effect, and the Master Trustee, on demand of the Members of the Obligated Group and at the cost and expense of the Members of the Obligated Group, shall execute proper instruments acknowledging satisfaction of and discharging this Master Trust Indenture. Each Member of the Obligated Group, respectively, hereby agrees to reimburse the Master Trustee for any costs or expenses theretofore and thereafter reasonably and properly incurred by the Master Trustee in connection with this Master Trust Indenture or such Obligations.

Section 7.02. Payment of Obligations after Discharge of Lien. Notwithstanding the discharge of the lien hereof as in this Article provided, the Master Trustee shall nevertheless retain such rights, powers and duties hereunder as may be necessary and convenient for the payment of amounts due or to become due on the Obligations and the registration, transfer, exchange and replacement of Obligations as provided herein.

Nevertheless, any moneys held by the Master Trustee or any paying agent for the payment of the principal of, premium, if any, or interest on any Obligation remaining unclaimed for five (5) years after the principal of all Obligations has become due and payable, whether at maturity or upon proceedings for redemption or by declaration as provided herein, shall then be paid to the Members of the Obligated Group, as their interests may appear, and the Holders of any Obligations not theretofore presented for payment shall thereafter be entitled to look 36

only to the Members of the Obligated Group for payment thereof as unsecured creditors and all liability of the Master Trustee with respect to such moneys shall thereupon cease.

ARTICLE VIII

CONCERNING THE HOLDERS

Section 8.01. Evidence of Acts of Holders. (a) Except as otherwise provided in a Related Bond Indenture, in the event that any request, direction or consent is requested or permitted hereunder of the Holders of any Obligation securing an issue of Related Bonds, (i) each Related Bond Issuer shall be deemed to be such Holder for the purpose of any such request, direction or consent, or (ii) in the event such series of Related Bonds or Obligation is secured by a Credit Facility, so long as the issuer of such Credit Facility is not then in default on its obligations under such Credit Facility, the Credit Facility Issuer shall be deemed to be the Holder of such Obligation or Obligations pledged as security for such Related Bonds.

(b) As to any request, direction, consent or other instrument provided hereby to be signed and executed by the Holders, such action may be in any number of concurrent writings, shall be of similar tenor, and may be signed or executed by such Holders in person or by agent appointed in writing.

(c) Proof of the execution of any such request, direction, consent or other instrument or of the writing appointing any such agent and of the ownership of Obligations, if made in the following manner, shall be sufficient for any of the purposes hereof and shall be conclusive in favor of the Master Trustee and the Members of the Obligated Group, with regard to any action taken by them, or either of them, under such request, direction or consent or other instrument, namely:

(i) The fact and date of the execution by any person of any such writing may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgments in such jurisdiction, that the person signing such writing acknowledged before him the execution thereof, or by the affidavit of a witness of such execution; and

(ii) The ownership of Related Bonds may be proved by the registration books for such Related Bonds maintained pursuant to the Related Bond Indenture.

(d) Nothing in this Section shall be construed as limiting the Master Trustee to the proof herein specified, it being intended that the Master Trustee may accept any other evidence of the matters herein stated which it may deem sufficient.

(e) Any action taken or suffered by the Master Trustee pursuant to any provision hereof upon the request or with the assent of any person who at the time is the Holder of any Obligation, shall be conclusive and binding upon all future Holders of the same Obligation.

(f) In the event that any request, direction or consent is requested or permitted hereunder of the Holders of an Obligation that constitutes a Guaranty, for purposes of any such request, direction or consent, the principal amount of such Obligation shall be deemed to be the stated principal amount of such Obligation.

Section 8.02. Obligations or Related Bonds Owned by Members of Obligated Group. In determining whether the Holders of the requisite aggregate principal amount of Obligations have concurred in any demand direction, request, notice, consent, waiver or other action under this Master Trust Indenture, Obligations or Related Bonds that are owned by any Member of the Obligated Group or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with such Member shall be disregarded and deemed not to be Outstanding or outstanding under the Related Bond Indenture, as the case may be, for the purpose of any such determination, provided that for the purposes of determining whether the Master Trustee shall be protected in relying on any such direction, consent or waiver, only such Obligations or Related Bonds which the Master Trustee has actual notice or knowledge are so owned shall be so disregarded and deemed not to be outstanding. Obligations or Related Bonds so owned that have been pledged in good faith may be regarded as Outstanding or outstanding 37

under the Related Bond Indenture, as the case may be, for purposes of this Section, if the pledgee shall establish to the satisfaction of the Master Trustee the pledgee’s right to vote such Obligations or Related Bonds and that the pledgee is not a person directly or indirectly controlling or controlled by or under direct or indirect common control with any Member of the Obligated Group. In case of a dispute as to such right, any decision by the Master Trustee taken upon the advice of counsel shall be full protection to the Master Trustee.

Section 8.03. Instruments Executed by Holders Bind Future Holders. At any time prior to (but not after) the Master Trustee takes action in reliance upon evidence, as provided in Section 8.01 hereof, of the taking of any action by the Holders of the percentage in aggregate principal amount of Obligations specified herein in connection with such action, any Holder of such an Obligation or Related Bond that is shown by such evidence to be included in Obligations the Holders of which have consented to such action may, by filing written notice with the Master Trustee and upon proof of holding as provided in Section 8.01, revoke such action so far as concerns such Obligation or Related Bond. Except upon such revocation any such action taken by the Holder of an Obligation or Related Bond in any direction, demand, request, waiver, consent, vote or other action of the Holder of such Obligation or Related Bond which by any provision hereof is required or permitted to be given shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Obligation or Related Bond, and of any Obligation or Related Bond issued in lieu thereof, whether or not any notation in regard thereto is made upon such Obligation or Related Bond. Any action taken by the Holders of the percentage in aggregate principal amount of Obligations specified herein in connection with such action shall be conclusively binding upon each Member of the Obligated Group, the Master Trustee and the Holders of all of such Obligations or Related Bonds.

ARTICLE IX

MISCELLANEOUS PROVISIONS

Section 9.01. Limitation of Rights. (a) With the exception of rights herein expressly conferred, nothing expressed or mentioned in or to be implied from this Master Trust Indenture or the Obligations issued hereunder is intended or shall be construed to give to any Person other than each Member of the Obligated Group, the Master Trustee, any Credit Facility Issuer and the Holders hereunder any legal or equitable right, remedy or claim under or in respect to this Master Trust Indenture or any covenants, conditions and provisions herein contained; this Master Trust Indenture and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties mentioned in this Section.

(b) To the extent any provision of this Master Trust Indenture requires or provides for the consent or direction of the issuer of Related Bonds or the trustee for Related Bonds, such consent or direction shall only be required to the extent there exists Related Bonds outstanding (as such term ‘outstanding’ is defined in the instrument authorizing such Related Bonds).

Section 9.02. Severability. If any one or more sections, clauses, sentences or parts hereof shall for any reason be questioned in any court of competent jurisdiction and shall be adjudged invalid or unenforceable, such judgment shall not affect, impair or invalidate the remaining provisions hereof, or the Obligations issued pursuant hereto, but shall be confined to the specific sections, clauses, sentences and parts so adjudged.

Section 9.03. Holidays. Except to the extent a Supplement or an Obligation provides otherwise:

(a) Subject to subsection (b) of this Section 9.03, when any action is provided herein to be done on a day or within a time period named, and the day or the last day of the period falls on a day on which banking institutions in the jurisdiction where the Corporate Trust Office is located are authorized by law to remain closed, the action may be done on the next ensuing day not a day on which banking institutions in such jurisdiction are authorized by law to remain closed with effect as though done on the day or within the time period named.

(b) When the date on which principal of or interest or premium on any Obligation is due and payable is a day on which banking institutions at the place of payment are authorized by law to remain closed, payment may be made on the next ensuing day on which banking institutions at such place are not authorized by law

to remain closed with the same effect as though payment were made on the due date, and, if such payment is made, no interest shall accrue from and after such due date.

Section 9.04. Governing Law. This Master Indenture and any Obligations issued hereunder are contracts made under the laws of the State of New York and shall be governed by and construed in accordance with such laws.

Section 9.05. Counterparts. This Master Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute one instrument.

Section 9.06. Immunity of Individuals. No recourse shall be had for the payment of the principal of, premium, if any, or interest on any Obligations issued hereunder or for any claim based thereon or upon any obligation, covenant or agreement herein against any past, present or future officer, member, employee or agent of any Member of the Obligated Group, and all such liability of any such individual as such is hereby expressly waived and released as a condition of and in consideration for the execution hereof and the issuance of Obligations issued hereunder.

Section 9.07. Binding Effect. This instrument shall inure to the benefit of and shall be binding upon each Member of the Obligated Group, the Master Trustee and their respective successors and assigns subject to the limitations contained herein.

Section 9.08. Notices. (a)Unless otherwise expressly specified or permitted by the terms hereof, all notices, consents or other communications required or permitted hereunder shall be deemed sufficiently given or served if given in writing, mailed by first class mail, postage prepaid and addressed as follows:

(i) If to any Member of the Obligated Group, addressed to the Obligated Group Representative at its principal place of business, which on the date hereof is:

The New York and Presbyterian Hospital 333 East 38th Street, 8th Floor New York, NY 10016 Attention: Chief Financial Officer;

(ii) If to the Master Trustee, addressed to it at:

TD Bank, N.A. 1006 Astoria Boulevard Cherry Hill, NJ 08034

(iii) If to any registered Holder, addressed to such Holder at the address shown on the books of the Master Trustee kept pursuant hereto.

(b) Any Member of the Obligated Group, or the Master Trustee may from time to time by notice in writing to the other and to the registered Holders designate a different address or addresses for notice hereunder.

IN WITNESS WHEREOF, the Hospital has caused these presents to be signed in its name and on its behalf by its duly authorized officer and to evidence its acceptance of the trusts hereby created, the Master Trustee has caused these presents to be signed in its name and on its behalf by its duly authorized officer, all of as of the day and year first above written.

TD BANK, N.A., as Master Trustee

By: ______David C. Leondi Vice President

THE NEW YORK AND PRESBYTERIAN HOSPITAL

By:______Phyllis R. F. Lantos Executive Vice President, Chief Financial Officer & Treasurer

Appendix A

Schedule of Liens

THE NEW YORK AND PRESBYTERIAN HOSPITAL OBLIGATED GROUP

SUPPLEMENTAL MASTER INDENTURE

FOR OBLIGATION NO. 2

pursuant to that certain

MASTER TRUST INDENTURE

dated as of January 1, 2015

by and between

THE NEW YORK AND PRESBYTERIAN HOSPITAL

and

T.D. BANK, N.A., as Master Trustee

Dated as of June 1, 2016

THIS SUPPLEMENTAL MASTER INDENTURE FOR OBLIGATION NO. 2 made and entered into as of the 1st day of June, 2016 (this “Supplemental Indenture”), by and between The New York and Presbyterian Hospital, a New York not-for-profit corporation (the “Hospital”), and T.D. Bank, N.A., a national banking association, as master trustee (the “Master Trustee”) under the Master Trust Indenture, dated as of January 1, 2015 (as it may be amended and supplemented, the “Master Indenture”), by and among the Master Trustee and the Hospital. WITNESSETH: WHEREAS, the Hospital has entered into the Master Indenture which provides for the establishment of the Obligated Group, of which the Hospital is currently the sole Member, and for the issuance, by any Member of the Obligated Group, of Obligations thereunder, upon the Obligated Group and the Master Trustee entering into an indenture supplemental to the Master Indenture to create Indebtedness; and WHEREAS, the Hospital will issue its Taxable Bonds, Series 2016 (the “Series 2016 Bonds”), dated the date of issuance thereof, pursuant to an Indenture of Trust dated as of June 1, 2016 (the “Bond Indenture”) between the Hospital and T.D. Bank, N.A., as bond trustee (the “Bond Trustee”); and WHEREAS, the Hospital desires to issue Obligation No. 2 hereunder to evidence and secure its obligations arising under the Master Indenture with respect to the Series 2016 Bonds and the Indenture; and WHEREAS, all acts and things necessary to constitute this Supplemental Indenture a valid indenture and agreement according to its terms have been done and performed, and the Hospital has duly authorized the execution and delivery hereof and of Obligation No. 2; and WHEREAS, there have been previously authorized the Supplemental Indentures set forth on Schedule I hereto. NOW, THEREFORE, in consideration of the premises, of the acceptance by the Master Trustee of the trusts hereby created, and of the giving of consideration for and acceptance of Obligation No. 2 by the holder thereof, the Obligated Group covenants and agrees with the Master Trustee, for the benefit of the holder from time to time of Obligation No. 2, as follows:

Section 1. Definitions. For the purposes hereof unless the context otherwise indicates the following words and phrases shall have the following meanings. (a) All terms used herein which are defined in the Master Indenture shall have the meanings assigned to them therein. (b) “Amendment to Intercreditor Agreement” means the Amendment to Intercreditor Agreement, dated as of June 1, 2016, by and among Prudential, DASNY, the Master Trustee, the Series 2015 Bond Trustee, the Series 2016 Bond Trustee, HUD and the Hospital. (c) “Bond Indenture” means the Indenture of Trust, dated as of June 1, 2016, between the Hospital and the Bond Trustee, relating to the Series 2016 Bonds. (d) “DASNY” means the Dormitory Authority of the State of New York.

(e) “Holder” means, with respect to Obligation No. 2, the Bond Trustee. (f) “Hospital” means The New York and Presbyterian Hospital. (g) “HUD” means the U.S. Department of Housing and Urban Development. (h) “Intercreditor Agreement” means the Intercreditor Agreement, made as of January 16, 2015, by and among Prudential, DASNY, the Master Trustee, the Series 2015 Bond Trustee, HUD and the Hospital, as amended from time to time, including as amended by the Amendment to Intercreditor Agreement. (i) “Obligation No. 2” means the Obligation issued pursuant hereto with respect to the Series 2016 Bonds. (j) “Prudential” means Prudential Huntoon Paige Associates, LLC. (k) “Series 2015 Bond Trustee” means T.D. Bank, N.A., as trustee with respect to the Series 2015 Bonds, and its successors and/or assigns as such trustee. (l) “Series 2016 Bond Trustee” means T.D. Bank, N.A., as trustee with respect to the Series 2016 Bonds, and its successors and/or assigns as such trustee. (m) “Series 2015 Bonds” means The New York and Presbyterian Hospital Taxable Bonds, Series 2015. (n) “Series 2016 Bonds” means The New York and Presbyterian Hospital Taxable Bonds, Series 2016. (o) “Supplemental Indenture” means this Supplemental Master Indenture for Obligation No. 2 executed and delivered by the Obligated Group and the Master Trustee pursuant to the Master Indenture. Section 2. Issuance of Obligation No. 2. There is hereby created and authorized to be issued Obligation No. 2 in the aggregate principal amount of ______Dollars ($______), designated as “The New York and Presbyterian Hospital Obligation No. 2”. Obligation No. 2 shall be dated as of June __, 2016, and shall be payable in such amounts, at such times and in such manner and shall have such other terms and provisions as are set forth in the form of Obligation No. 2 attached hereto as Appendix A. The aggregate principal amount of Obligation No. 2 is limited to the amount stated in this Section except for any Obligation authenticated and delivered in lieu of another Obligation as provided in Section 7 hereof with respect to any Obligation destroyed, lost, or, subject to the provisions of Section 6 of this Supplemental Indenture, upon transfer of registration of Obligation No. 2. Section 3. Payments on Obligation No. 2: Credits. (a) Payments on Obligation No. 2 are payable in any coin or currency of the United States of America which on the payment date is legal tender for the payment of public and private debts. Except as provided in subsections (b) and (c) of this Section with respect to credits, payments on Obligation No. 2 shall be made at the times and in the amounts specified in Obligation No. 2, respectively, in immediately available funds by the Members depositing the same with or to the account of the applicable Holder at or prior to the day such payments shall become due or payable (or the next preceding Business Day (as defined in the Bond Indenture) if such date is not a Business Day) and giving notice to the Master Trustee of each payment on

Obligation No. 2, specifying the amount paid and identifying such payment as a payment on Obligation No. 2. (b) The Obligated Group shall receive credit for payment on Obligation No. 2, in addition to any credits resulting from payment or prepayment from other sources, for payments made directly to the Holder of Obligation No. 2 by any Member of the Obligated Group. (c) The Obligated Group shall also receive credit for payment on Obligation No. 2, in addition to any credits resulting from payment or prepayment from other sources, as follows: (i) on installments of interest on Obligation No. 2 in an amount equal to moneys deposited in the Bond Fund created under the Bond Indenture, which amounts are available to pay interest on the Series 2016 Bonds and to the extent such amounts have not previously been credited against payments on Obligation No. 2; (ii) on installments of principal on Obligation No. 2 in an amount equal to moneys deposited in the Bond Fund created under the Bond Indenture, which amounts are available to pay principal of the Series 2016 Bonds and to the extent such amounts have not previously been credited on Obligation No. 2; (iii) on installments of principal of and interest on Obligation No. 2 in an amount equal to the principal of and interest on Series 2016 Bonds which have been called by the Bond Trustee for redemption prior to maturity to the extent that there are sufficient amounts for the redemption of such Series 2016 Bonds in cash on deposit in the Redemption Fund created under the Bond Indenture and to the extent that such amounts have not previously been credited on Obligation No. 2; provided that such credits shall be made against the installments of principal of and interest on Obligation No. 2 which would be due, but for such call for redemption, to pay principal of and interest on such Series 2016 Bonds when due at maturity; and (iv) on installments of principal of and interest on Obligation No. 2 in an amount equal to the principal amount of and interest on Series 2016 Bonds acquired by any Member of the Obligated Group and delivered to the Bond Trustee for cancellation or purchased by the Bond Trustee and cancelled; provided that such credits shall be made against the installments of principal of and interest on Obligation No. 2 which would be due, but for the cancellation of such Series 2016 Bond, to pay principal of and interest on such Series 2016 Bonds when due at maturity. (d) Upon payment of a sum, in cash or Defeasance Obligations (as defined in the Bond Indenture), or both, sufficient, together with any other cash and obligations held by the Bond Trustee and available for such purpose, to cause all Outstanding Series 2016 Bonds to be deemed to have been paid within the meaning of Article X of the Bond Indenture and to pay all other amounts referred to in Article X of the Bond Indenture, accrued and to be accrued to the date of discharge of the Bond Indenture, Obligation No. 2 shall be deemed to have been paid and to be no longer Outstanding under the Master Trust Indenture. Section 4. Prepayment of Obligation No. 2. (a) So long as all amounts which have become due under Obligation No. 2 have been paid, the Members may, in accordance with the terms of the Bond Indenture, at any time and from time to time pay in advance and in any order of due dates all or part of the amounts to become due under Obligation No. 2. (b) All such prepayments of Obligation No. 2 (and the additional payment of any amount necessary to pay the applicable premium, if any, payable upon the redemption of Series 2016 Bonds) shall be used for the redemption or purchase of Outstanding Series 2016 Bonds in the manner and subject to the terms and conditions set forth in the Bond Indenture. Notwithstanding any such prepayment or surrender of Series 2016 Bonds, as long as any Series

2016 Bonds remain Outstanding or any additional payments required to be made hereunder remain unpaid, the Members shall not be relieved of their obligations hereunder. Section 5. Registration. Numbers. Negotiability and Transfer of Obligation No. 2. (a) Obligation No. 2 shall be registered on the register to be maintained by the Master Trustee for that purpose at the Corporate Trust Office of the Master Trustee. Except as provided in subsection (c) of this Section, so long as any Series 2016 Bond remains Outstanding (within the meaning of that term as used in the Bond Indenture), Obligation No. 2 shall consist of a single Obligation registered in the name of the Bondholder of Obligation No. 2 and no transfer of Obligation No. 2 shall be registered under this Supplemental Indenture except for transfers to successors designated in writing to the Master Trustee. (b) Upon the principal of all Obligations Outstanding being declared immediately due and payable upon and during the continuance on an Event of Default, Obligation No. 2 may be transferred and such transfer registered, if and to the extent the Master Trustee requests that the restrictions of subsection (a) of this Section on transfers be terminated. (c) Obligation No. 2 shall be transferable only upon presentation of the respective Obligation at the Corporate Trust Office of the Master Trustee by the registered owner or by its duly authorized attorney. Such transfer shall be without charge to the owner thereof, but any taxes or other governmental charges required to be paid with respect to the same shall be paid by the owner requesting such transfer as a condition precedent to the exercise of such privilege. Upon any such transfer, the Obligated Group Representative shall execute and the Master Trustee shall authenticate and deliver in exchange for such transferred Obligation a new Obligation registered in the name of the transferee. (d) Prior to due presentment by the owner for registration of transfer, the Members and the Master Trustee may deem and treat the persons in whose name Obligation No. 2 is registered as the absolute owner for all purposes; and neither the Members nor the Master Trustee shall be affected by any notice to the contrary. All payments made to the registered owner shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable on Obligation No. 2. Section 6. Mutilation. Destruction and Loss of Obligation No. 2. If (i) Obligation No. 2 is surrendered to the Master Trustee in a mutilated condition, or the Obligated Group Representative and the Master Trustee receive evidence to its satisfaction of the destruction or loss of Obligation No. 2, and (ii) there is delivered to the Obligated Group Representative and the Master Trustee such security or indemnity as may be required by them to hold them and the Members harmless, then, in the absence of proof satisfactory to the Obligated Group Representative and the Master Trustee that Obligation No. 2 has been acquired by a bona fide purchaser and upon the Holder paying the reasonable expenses of the Members, the Obligated Group Representative and the Master Trustee, the Obligated Group Representative shall execute and the Master Trustee shall authenticate and deliver, in exchange for such mutilated, lost or destroyed Obligation No. 2, a new Obligation No. 2 of like principal amount, date and tenor. Every mutilated Obligation No. 2 so surrendered to the Master Trustee shall be cancelled by it and delivered to, or upon the order of, the Members. If any such mutilated, destroyed or lost Obligation No. 2 has become or is about to become due and payable. Obligation No. 2 may be paid when due instead of delivering a new Obligation No. 2.

Section 7. Execution and Authentication of Obligation No. 2. Obligation No. 2 shall be manually executed for and on behalf of the Members by their respective Authorized Representatives or the Obligated Group Representative. If any such signatory whose signature appears on Obligation No. 2 ceases to be such Authorized Representative of the Obligated Group Representative before delivery thereof, such signature shall remain valid and sufficient for all purposes as if such signatory had remained in such capacity until such delivery. Obligation No. 2 shall be manually authenticated by an authorized officer of the Master Trustee, without which authentication Obligation No. 2 shall not be entitled to the benefits hereof. Section 8. Right to Redeem. Obligation No. 2 shall be subject to redemption, in whole or in part, prior to the maturity, in an amount equal to the principal amount of any Series 2016 Bond called for redemption pursuant to the Bond Indenture. Obligation No. 2 shall be subject to redemption on the date any Series 2016 Bond shall be so redeemed or purchased, and in the manner provided in the Bond Indenture. Section 9. Partial Redemption of Obligation No. 2. Upon the call for redemption and the surrender of Obligation No. 2 for redemption in part only, the Members shall cause to be executed and the Master Trustee shall authenticate and deliver to or upon the written order of the holder thereof, at the expense of the Members, a new Obligation No. 2 in principal amount equal to the unredeemed portion of Obligation No. 2, which old Obligation No. 2 so surrendered to the Master Trustee pursuant to this Section 10 shall be cancelled by it and delivered to, or upon the order of, the Members. The Obligated Group Representative may agree with the Holder of Obligation No. 2 that such Holder may, in lieu of surrendering Obligation No. 2 for a new fully registered Obligation No. 2, endorse on Obligation No. 2 a notice of such partial redemption, which notice shall set forth, over the signature of such Holder, the payment date, the principal amount redeemed and the principal amount remaining unpaid. Such partial redemption shall be valid upon payment of the amount thereof to the registered owner of Obligation No. 2 and the Obligated Group and the Master Trustee shall be fully released and discharged from all liability to the extent of such payment irrespective of whether such endorsement shall or shall not have been made upon the reverse of Obligation No. 2 by the owner thereof and irrespective of any error or omission in such endorsement. Section 10. Effect of Call for Redemption. On the date designated for redemption of the Series 2016 Bonds, Obligation No. 2 shall become and be due and payable in an amount equal to the redemption or purchase price to be paid on the Series 2016 Bonds on such date. If, on the date fixed for redemption of Obligation No. 2, moneys for payment of the redemption or purchase price and accrued interest on the Series 2016 Bonds are properly set aside in accordance with the Bond Indenture, interest on Obligation No. 2 shall cease to accrue and said Obligation No. 2 shall cease to be entitled to any benefit or security under the Master Indenture to the extent of said redemption and the amount of Obligation No. 2 so called for redemption shall be deemed paid and no longer Outstanding in accordance with the Bond Indenture. Section 11. Discharge of Supplement. (a) Upon payment by the Obligated Group of a sum, in cash or Defeasance Obligations (as defined in the Bond Indenture), or both, sufficient, together with any other cash and Defeasance Obligations properly set aside in the Bond Indenture and available for such purpose, to cause all Outstanding Series 2016 Bonds to be deemed to have been paid within the meaning of the Bond Indenture and to pay all other amounts referred to in the Bond Indenture

accrued and to be accrued to the date of discharge of the Bond Indenture, Obligation No. 2 shall be deemed to have been paid and to be no longer Outstanding under the Master Indenture. (b) When Obligation No. 2 is no longer Outstanding, as provided in this Section 14, this Supplemental Indenture shall be discharged. Section 12. Ratification of Master Indenture. As supplemented hereby, the Master Indenture is in all respects ratified and confirmed and the Master Indenture as so supplemented hereby shall be read, taken and construed as one and the same instrument. Section 13. Additional Covenants. So long as Obligation No. 2 remains Outstanding, the Hospital agrees that (i) it shall not exercise its right to withdraw from the Obligated Group pursuant to Section 3.10 of the Master Indenture, and (ii) it will not incur any additional indebtedness under an FHA-Insured Loan other than for purposes of refinancing an existing FHA-Insured Loan. Section 14. Severability. If any provision of this Supplemental Indenture shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case and any jurisdiction or jurisdictions or in all jurisdictions, or in all cases, because it conflicts with any other provision or provisions hereof or any constitution, statute, rule or public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses, sections or subsections contained in this Supplemental Indenture shall not affect the remaining portions of this Supplemental Indenture or any part thereto. Section 15. Counterparts. This Supplemental Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute one instrument. Section 16. Governing Law. This Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York. Section 16. Intercreditor Agreement. The Hospital hereby authorizes and directs the Master Trustee to enter into the Amendment to Intercreditor Agreement, and agrees that the provisions of Article V of the Master Trust Indenture shall apply to the execution, delivery and performance of the Amendment to Intercreditor Agreement by the Master Trustee.

Supplemental Indenture IN WITNESS WHEREOF, the Hospital, currently the sole Member of the Obligated Group, has caused these presents to be signed in its name and on its behalf by its duly authorized officer or the Obligated Group Representative and to evidence its acceptance of the trusts hereby created the Master Trustee has caused these presents to be signed in its name and on its behalf by its duly authorized officer, all as of the day and year first above written.

T.D. BANK, N.A., THE NEW YORK AND PRESBYTERIAN as Master Trustee HOSPITAL

By: ______By: ______David C. Leondi Phyllis R. Lantos Vice President Executive Vice President, Chief Financial Officer & Treasurer

APPENDIX A

[FORM OF OBLIGATION NO. 2]

THE NEW YORK AND PRESBYTERIAN HOSPITAL

Obligation No. 2

KNOW ALL MEN BY THESE PRESENTS that The New York and Presbyterian Hospital (the “Hospital”), a New York not-for-profit corporation (the “Obligated Group” and individually, being a “Member” thereof) hereby acknowledges itself obligated to, and promise to pay to T.D. Bank, N.A. (the “Bond Trustee”), or registered assigns, the principal sum of ______Dollars ($______) and to pay interest thereon from the date hereof at the rate on the Series 2016 Bonds (as defined below). Principal and interest on this Obligation shall be paid as provided in the Indenture.

This Obligation No. 2 is a single Obligation of the Obligated Group (as defined in the Master Trust Indenture hereinafter identified) limited to $______in principal amount, designated as “The New York and Presbyterian Hospital Obligation No. 2” (“Obligation No. 2” and together with all other Obligations issued under the Master Trust Indenture, the “Obligations”) issued under and pursuant to the Supplemental Master Indenture for Obligation No. 2, dated as of June 1, 2016 (“Supplemental Indenture”), supplementing the Master Trust Indenture, dated as of January 1, 2015 (the “Master Trust Indenture”), by and among the Members of the Obligated Group and T.D. Bank, N.A., as master trustee (the “Master Trustee”). The Master Trust Indenture, as so supplemented and amended, is hereinafter called the “Master Indenture”. This Obligation No. 2, together with all other Obligations Outstanding under the Master Indenture, is equally and ratably secured by the provisions of the Master Indenture. As provided by Section 2.01 of the Master Indenture, each Member of the Obligated Group (as defined in the Master Indenture) is jointly and severally liable for this Obligation No. 2. Currently, the Hospital is the sole Member of the Obligated Group.

Principal hereof, interest hereon and any applicable redemption premium, are payable in any coin or currency of the United States of America which on the payment date is legal tender for the payment of public and private debts. The principal hereof, premium, if any, and interest hereon shall be payable in clearing house funds by the Obligated Group depositing the same with or to the account of the Holder of Obligation No. 2 at or prior to the opening of business on the day such payments shall become due and payable and the Obligated Group shall give notice of payment to the Master Trustee as provided in the Supplemental Indenture.

This Obligation No. 2 is issued for the purpose of evidencing and securing the indebtedness of the Obligated Group resulting from the issuance and sale of taxable bonds of the Hospital, aggregating $______in principal amount, designated “The New York and Presbyterian Hospital Taxable Bonds, Series 2016 (the “Series 2016 Bonds”). The Series 2016 Bonds are being issued under and pursuant to the Indenture of Trust dated as of June 1, 2016

between the Hospital and the Bond Trustee (the “Bond Indenture,” which is a Related Bond Indenture under the Master Trust Indenture).

The Obligated Group shall receive credit for payment on Obligation No. 2, in addition to any credits resulting from payment or prepayment from other sources, as follows: (i) on installments of interest on Obligation No. 2 in an amount equal to moneys deposited in the Bond Fund created under the Bond Indenture, which amounts are available to pay interest on the Series 2016 Bonds and to the extent such amounts have not previously been credited against payments on Obligation No. 2; (ii) on installments of principal on Obligation No. 2 in an amount equal to moneys deposited in the Bond Fund created under the Bond Indenture, which amounts are available to pay principal of the Series 2016 Bonds and to the extent such amounts have not previously been credited on Obligation No. 2; (iii) on installments of principal of and interest on Obligation No. 2 in an amount equal to the principal of and interest on Series 2016 Bonds which have been called by the Bond Trustee for redemption prior to maturity to the extent that there are sufficient amounts for the redemption of such Series 2016 Bonds in cash on deposit in the Redemption Fund created under the Bond Indenture and to the extent that such amounts have not previously been credited on Obligation No. 2; provided that such credits shall be made against the installments of principal of and interest on Obligation No. 2 which would be due, but for such call for redemption, to pay principal of and interest on such Series 2016 Bonds when due at maturity; and (iv) on installments of principal of and interest on Obligation No. 2 in an amount equal to the principal amount of and interest on Series 2016 Bonds acquired by any Member of the Obligated Group and delivered to the Bond Trustee for cancellation or purchased by the Bond Trustee and cancelled; provided that such credits shall be made against the installments of principal of and interest on Obligation No. 2 which would be due, but for the cancellation of such Series 2016 Bond, to pay principal of and interest on such Series 2016 Bonds when due at maturity.

Upon payment of a sum, in cash or Defeasance Obligations (as defined in the Bond Indenture), or both, sufficient, together with any other cash and obligations held by the Bond Trustee and available for such purpose, to cause all Outstanding Series 2016 Bonds to be deemed to have been paid within the meaning of Article X of the Bond Indenture and to pay all other amounts referred to in Article X of the Bond Indenture, accrued and to be accrued to the date of discharge of the Bond Indenture, Obligation No. 2 shall be deemed to have been paid and to be no longer Outstanding under the Master Trust Indenture.

In the manner and with the effect provided in the Supplemental Indenture, Obligation No. 2 will be subject to redemption in whole or in part prior to maturity, in an amount equal to the principal amount of any Series 2016 Bond called for redemption pursuant to the Bond Indenture. Obligation No. 2 shall be subject to redemption on the date any Series 2016 Bond shall be so redeemed or purchased, and in the manner provided herein. Upon payment of a sum, in cash or Defeasance Obligations, or both, sufficient, together with any other cash and obligations held by or on behalf of the Holder of Obligation No. 2 and available for such purpose, to cause all Outstanding Series 2016 Bonds to be deemed to have been paid within the meaning of the Bond Indenture and to pay all other amounts referred to in the Bond Indenture, accrued and to be accrued to the date of discharge of the Bond Indenture, Obligation No. 2 shall be deemed to have been paid and to be no longer Outstanding under the Master Indenture.

Copies of the Master Indenture are on file at the Corporate Trust Office of the Master Trustee and reference is hereby made to the Master Indenture for the provisions, among, others, with respect to the nature and extent of the rights of the owners of Obligations issued under the Master Indenture, the terms and conditions on which, and the purpose for which, Obligations are to be issued and the rights, duties and obligations of the Obligated Group and the Master Trustee under the Master Indenture, to all of which the registered owner hereof, by acceptance of this Obligation No. 2, assents.

The Master Indenture permits the issuance of additional Obligations under the Master Indenture to be secured by the covenants made therein, all of which, regardless of the times of issue or maturity, are to be of equal rank without preference, priority or distinction of any Obligation issued under the Master Indenture over any other such Obligation except as expressly provided or permitted in the Master Indenture and any applicable Supplemental Indenture.

To the extent permitted by and as provided in the Master Indenture, modifications or changes of the Master Indenture, of any indenture supplemental thereto, and of the rights and obligations of the Members and of the owners of Obligations in any particular may be made by the execution and delivery of an indenture or indentures supplemental to the Master Indenture or any supplemental indenture. Certain modifications or changes which would affect the rights of the Holders of this Obligation No. 2 may be made only with the consent of the Holders of not less than 51% in aggregate principal amount of the Obligations then Outstanding under the Master Indenture. No such modification or change shall be made which will (i) effect a change in the times, amounts or currency of payment of the principal of, and premium, if any, or interest on any Obligation without the consent of the Holders of such Obligation; (ii) permit the preference or priority of any Obligation over any other Obligation without the consent of the Holders of all Obligations then Outstanding, except as otherwise permitted in the Master Indenture or an existing Supplement; or (iii) reduce the aggregate principal amount of Obligations then Outstanding the consent of the Holders of which is required to authorize such supplement without the consent of the Holders of all Obligations then Outstanding. Any such consent by the Holders of this Obligation No. 2 shall be conclusive and binding upon such Holders and all future Holders hereof irrespective of whether or not any notation of such consent is made upon this Obligation No. 2.

Any redemption, either in whole or in part, shall be made upon notice thereof in the manner and upon the terms and conditions provided in the Bond Indenture. If this Obligation No. 2 shall have been duly called for redemption and payment of the redemption price, together with interest accrued thereon to the date fixed for redemption, shall have been made or provided for, as more fully set forth in the Supplemental Indenture and the Bond Indenture, interest on this Obligation No. 2 shall cease to accrue from the date fixed for redemption, and from and after such date this Obligation No. 2 shall be deemed not to be Outstanding, as defined in the Master Indenture, and shall no longer be entitled to the benefits of the Master Indenture, and the registered owner hereof shall have no rights in respect of this Obligation No. 2 other than payment of the redemption price, together with accrued interest to the date fixed for redemption.

Upon the occurrence of certain “Events of Default” (as defined in the Master Indenture), the principal of all Obligations then Outstanding may be declared, and the same shall become, due and payable as provided in the Master Indenture.

The registered owner of this Obligation No. 2 shall have no right to enforce the provisions of the Master Indenture, or to institute any action to enforce the covenants therein, or to take any action with respect to any default under the Master Indenture, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Master Indenture.

Obligation No. 2 is issuable only as a fully registered Obligation. This Obligation No. 2 shall be registered on the registration books to be maintained by the Obligated Group Representative for that purpose at the Corporate Trust Office of the Master Trustee and the transfer of this Obligation No. 2 shall be registerable only upon presentation of this Obligation No. 2 at said office by the registered owner or by his duly authorized attorney and subject to the limitations, if any, set forth in the Supplemental Indenture. Such registration of transfer shall be without charge to the registered owner hereof, but any taxes or other governmental charges required to be paid with respect to the same shall be paid by the registered owner requesting such registration of transfer as a condition precedent to the exercise of such privilege. Upon any such registration of transfer, the Obligated Group shall cause to be executed and the Master Trustee shall authenticate and deliver in exchange for this Obligation No. 2 a new Obligation, registered in the name of the transferee.

Prior to due presentment hereof for registration of transfer, the Obligated Group and the Master Trustee may deem and treat the person in whose name this Obligation No. 2 is registered as the absolute owner hereof for all purposes; and neither the Obligated Group nor the Master Trustee shall be affected by any notice to the contrary. All payments made to the registered owner hereof shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable on this Obligation No. 2.

No covenant or agreement contained in this Obligation No. 2 or the Master Indenture shall be deemed to be a covenant or agreement of any officer, agent or employee of the Obligated Group Members, or of the Master Trustee in his individual capacity, and no incorporator, member, officer or member of the Governing Boards of the Members shall be liable personally on this Obligation No. 2 or be subject to any personal liability or accountability by reason of the issuance of this Obligation No. 2.

This Obligation No. 2 shall not be entitled to any benefit under the Master Indenture, or be valid or become obligatory for any purpose, until this Obligation No. 2 shall have been authenticated by execution by the Master Trustee, or its successor as Master Trustee, of the Certificate of Authentication inscribed hereon.

IN WITNESS WHEREOF, the Hospital, as the sole Member of the Obligated Group, has caused this Obligation No. 2 to be executed in its name and on its behalf by its duly authorized officer, as of the __ day of June, 2016.

THE NEW YORK AND PRESBYTERIAN HOSPITAL

By: ______Name: Title:

MASTER TRUSTEE’S AUTHENTICATION CERTIFICATE

The undersigned Master Trustee hereby certifies that this Obligation No. 2 is one of the Obligations described in the within-mentioned Master Indenture.

Date of Authentication: June __, 2016

T.D. Bank, N.A., as Master Trustee

By: ______Name: Title:

Schedule I

THE NEW YORK AND PRESBYTERIAN HOSPITAL OBLIGATED GROUP MASTER TRUST INDENTURE AND OUSTANDING SUPPLEMENTAL INDENTURES

A. Master Trust Indenture, dated as of January 1, 2015 (the “Master Indenture”), by and among the Members of the Obligated Group and T.D. Bank, N.A., as Master Trustee.

B. Supplemental Master Indenture for Obligation No. 1, dated as of January 1, 2015.

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The New York and Presbyterian Hospital • Taxable Bonds, Series 2016