Northwell Health Inc., New York; System

Home , Northwell Health

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

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

Table Of Contents

Rationale

Outlook

Enterprise Profile: Very Strong

Financial Profile: Adequate

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 9, 2019 1 Northwell Health Inc., New York; System

Credit Profile

US$449.36 mil taxable bnds (Northwell Hlth, Inc.) ser 2019A due 11/01/2049 Long Term Rating A-/Stable New US$56.315 mil rev bnds (Northwell Hlth, Inc.) ser 2019B-1 due 05/01/2048 Long Term Rating A-/Stable New US$52.99 mil rev bnds (Northwell Hlth, Inc.) ser 2019B-2 due 05/01/2048 Long Term Rating A-/Stable New US$50.42 mil rev bnds (Northwell Hlth, Inc.) ser 2019B-3 due 05/01/2048 Long Term Rating A-/Stable New US$40.915 mil rev bnds (Northwell Hlth, Inc.) ser 2019A due 05/01/2033 Long Term Rating A-/Stable New Northwell Hlth, Inc. Long Term Rating A-/Stable Affirmed Dorm Auth of the St of New York, New York Northwell Hlth, Inc., New York

New York St Dorm Auth (North Shore Long Island Jewish Hlth Sys) (Series 2009A, 2011A & 2012A)

Long Term Rating A-/Stable Affirmed

Rationale

S&P Global Ratings assigned its 'A-' long-term rating to Northwell Health Inc. (Northwell), N.Y.'s series 2019A tax exempt; series 2019A taxable; and series 2019B-1, B-2, and B-3 health care revenue bonds. In addition, S&P Global Ratings affirmed its 'A-' long-term ratings on various series of health care revenue bonds, also issued for Northwell. The outlook on all the bonds is stable.

The rating on Northwell reflects its favorable enterprise profile, highlighted by an expansive footprint with broad geographic coverage in New York State, including 19 controlled hospitals (six tertiary) and a comprehensive and full continuum of care through its ambulatory, post-acute, and large physician network. Northwell is also anchored by its leading market position in a sizable and diverse service area spanning six counties with a population base of roughly 8.2 million. In addition, it maintains a good financial profile, highlighted by modest operational performance over the past several years that fluctuates from relatively break-even in 2017 (mainly due to increased losses from its insurance subsidiary CareConnect which began to wind down operations in 2017) to a slight operating profit, with increasing investments in population health and other long-term strategies.

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

• Continued success and growth as a system through various acquisitions over the past decade, expanding to a 19-hospital system with favorable geographic diversity and $11.5 billion in operating revenues in fiscal 2018;

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• Dominant market presence in core markets of Manhattan, Staten Island, Queens, Westchester, Nassau, and Suffolk (with a population totaling more than 8 million), and with a growing 29.9% market share, more than double that of the system's nearest competitors, New York Presbyterian (not rated by S&P Global Ratings) and Mount Sinai Health System;

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

• Experienced management team that has demonstrated leadership through a difficult integration process in the system's early years and continues to expand and reposition itself while maintaining a focus on quality, stable performance, and long-term growth.

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

• Operating performance and margins that averaged just 0.6% (as calculated by S&P Global Ratings) over the past three years, although we recognize that Northwell made significant investments to support the system's long-term strategies, including, but not limited to, the creation of a large ambulatory and physician network, IT initiatives, expansion of services, and funding for its now-closed insurance business CareConnect;

• Capital spending of up to $850 million for fiscal 2019, not including approximately $55 million for joint-venture and other strategic investments, which, at an estimated 161% of depreciation on average, is somewhat high and contingent on generating cash flow at or above existing levels to support approximately 36% of the total, while the remaining funds will come from debt and philanthropic support and grants; and

• Balance-sheet metrics such as days' cash on hand and leverage, which, although adequate for the rating given Northwell's favorable enterprise profile, are relatively light compared with S&P Global Ratings' health system median ratios and similarly rated health systems.

Other rating factors include Northwell's recent strategy to manage the funding of the cash balance pension plan and the self-insurance malpractice and workers compensation liability as a combined pool. The funded status on the cash balance plan was 69.3% in fiscal 2018. Northwell will transfer $364 million of management designated self-insurance assets (total assets were $1.04 billion as of June 30, 2019) to the cash balance plan to shore up funding levels to at or near 90%. As a result, Northwell will generate financial benefits and cash flow savings, in part by eliminating variable rate Pension Benefit Guaranty Corporation (PBGC ) premiums of $15 million in fiscal 2019 and future premiums estimated at $72 million. Under this plan Northwell intends to replenish the $364 million in self-insurance assets over a projected eight year period using the lower required cash balance plan contributions, as well as continuing to fund the expected growth in the self-insurance liabilities. While we recognize the malpractice and workers compensation funded status will decline to roughly 45%, managements indicates that claims have historically been covered as pay as you go and have not used the self-insurance asset pool to cover claims. Furthermore, we believe the inherent risk associated with malpractice claims typically span many years, since a considerable amount of time may elapse between when an incident may have occurred and when a claim is made. Because of this, we consider the strategy a neutral rating factor at this time given management is committed to replenishing the self-insurance assets to historical levels, of roughly 70% funded status or higher.

The series 2019 bonds will provide funding for future capital projects and refund the series 2009E bonds ($49.9 million). The total par amount of the series 2019 bonds is $650 million, which when combined with the expected

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 9, 2019 3 Northwell Health Inc., New York; System premium, brings the total debt issuance to $677.3 million. Total pro forma debt is approximately $4.07 billion.

Outlook

The stable outlook reflects our view of Northwell's dominant market position and expansive footprint in the New York metropolitan and Long Island service areas, coupled with historically positive core operations and adequate cash flow. While margins have compressed over the past several years, management continues with its planned and targeted revenue enhancement and cost-saving initiatives that, when combined with strategic operating investments, should allow for incremental revenue growth and modest operating income over the outlook period.

Downside scenario We could revise the outlook to negative or lower the rating if Northwell fails to capitalize on its strategic plan and achieve its projected financial performance. Specifically, we could lower the rating if it does not maintain break-even to slightly positive operations, as measured by S&P Global Ratings; if maximum annual debt service (MADS) coverage is not near or at current levels; or if key balance-sheet metrics weaken over time. Any significant debt issuance without a commensurate increase in unrestricted resources or improved cash flow to support the carrying charges could be viewed negatively. We would also view negatively any significant changes in Northwell's favorable enterprise profile, including shifts in market position, or any large acquisition that is dilutive to the system as negative factors that could affect the outlook or rating.

Upside scenario Although we would view an improvement in the financial profile as a positive rating factor, we believe the need to successfully implement the system's strategic plan and navigate the challenges posed under health reform could constrain cash growth and limit upgrades over the next one-to-two years. Furthermore, the increase in debt with the series 2019 financing, while absorbed at the current rating, likely limits any upgrades over the outlook period. We would consider a positive outlook or higher rating if Northwell maintains its very strong enterprise profile, generates improving operating margin and cash flow over a sustained period with coverage near or above 3.5x, and reports days' cash on hand trending favorably to 115 days while balancing future capital needs and additional debt.

Enterprise Profile: Very Strong

Market position Northwell's core service area consists of Nassau and Suffolk counties on Long Island and New York, Queens, and Richmond counties in New York City, as well as Westchester County. Within the core service area, Northwell has a dominant and improving market position at 29.9% in 2018 (including John T. Mather Memorial Hospital acquired Jan. 1, 2018), up from 28.3% in 2016, and still more than double that of the next-largest regional competitors, New York Presbyterian and Mount Sinai Health System. If including Mather in the 2016 market share data, the comparable figure would be 29.5% market share in 2016. Competition also comes from Long Island-based providers, including Catholic Health Services of Long Island, NYU Winthrop Hospital, South Nassau Communities Hospital, Stony Brook University Hospital, Nassau University Medical Center.

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Northwell's major competitors include several health care systems in Manhattan and the New York metropolitan area such as New York Presbyterian Health System, which has the next-leading market share at 13%; Mount Sinai Health System; the New York City Health & Hospitals Corp. (HHC); and NYU Hospitals Center.

When expanding the service area to include all of New York City, Westchester, and Long Island, Northwell still competes very effectively. Given the size of the service area and overlapping markets, Northwell's leading market share indicates it is more than a Long Island-based health system, with a strong presence throughout the region. The acquisitions of Phelps Memorial Hospital and Northern Westchester Hospital in January 2015 further enhanced Northwell's regional presence by giving it greater access to the Westchester market, while further strengthening its core service area. In 2010, Northwell followed a similar strategy when it acquired Lenox Hill Hospital and in July 2014 opened a comprehensive 24-hour freestanding emergency care and outpatient center in Manhattan's West Village, allowing Northwell additional access to the Manhattan market and successfully integrating those facilities into the larger health system.

System growth Northwell continues to expand through acquisition when it is strategically beneficial to the long-term growth of the system. Effective Jan. 1, 2018, Northwell completed its acquisition of John T. Mather Memorial Hospital (Mather) in Port Jefferson, N.Y. Mather is an accredited 248-bed, non-profit community hospital dedicated to providing a wide spectrum of health care services to Suffolk County residents. Also effective Jan. 1, 2018, Northwell acquired the assets of Orlin & Cohen, a medical group consisting of 80 providers in four specialties (orthopedics, physical medicine and rehabilitation, neurology, and pain management) operating across eight locations in Nassau and Suffolk Counties.

On Jan. 15, 2016, Northwell acquired Peconic Bay Medical Center, a not-for-profit corporation that operates an acute-care hospital and a skilled nursing/rehabilitation center in eastern Suffolk County (Riverhead), N.Y. The acquisition of Peconic and Mather, while strategic in that it further expands Northwell's footprint in its stronghold of Long Island, is immaterial from a financial perspective as it represents approximately 5% of total revenues combined and is not dilutive to the overall system.

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

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

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

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 9, 2019 5 Northwell Health Inc., New York; System strengthen Maimonides and expand its leadership role in the region.

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

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

Utilization Business volume was generally favorable in fiscal 2018, with a nice growth trend in many outpatient ambulatory care services. Therefore, equivalent inpatient admissions were up 6.3% in fiscal 2018. Acute-care admissions (excluding births, behavioral health, rehabilitation, and long-term care) also exhibited growth, up 5.1% compared with prior year, while observation days increased 7.7%. While Mather Hospital's utilization is included in fiscal 2018 results, and not in prior years, we believe the underlying growth rate is still positive and the increases in certain key utilization measures are due to several factors, including the continued expansion of services and physicians throughout the service area, coupled with the growth in its ambulatory network. Furthermore, we expect further shifts in volume over the next several years as Northwell continues to expand its ambulatory presence across the service area.

Management Northwell benefits from having a stable and experienced management team. In our view, management has a strong planning culture and remains committed to maintaining and strengthening Northwell's position as a leading health system in the New York metropolitan region.

A main factor in Northwell's long-term vision is to focus on its core strategies. These include elements of clinical integration across the system, providing superior quality and patient safety, maintaining positive alignment with its physician partners, and maintaining good financial performance to allow for adequate levels of capital investment as it positions the system to respond to the opportunities and challenges of health care reform. Furthermore, while expansion and acquisitions can present near-term challenges, management has been successful in identifying and pursuing growth opportunities while maintaining financial stability. We expect that trend will continue as management pursues new opportunities and continues its strategic partnership with Maimonides.

Table 1 Northwell Health, New York Enterprise Statistics --Six months ended June 30-- --Fiscal year ended Dec. 31--

2019 2018 2017 2016 PSA population 8,200,000 8,200,000 8,300,000 8,300,000 PSA market share (%) 29.9 29.9 29.5 28.3

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Table 1 Northwell Health, New York Enterprise Statistics (cont.) --Six months ended June 30-- --Fiscal year ended Dec. 31--

2019 2018 2017 2016 Inpatient admissions 138,042 273,308 259,923 260,196 Equivalent inpatient admissions 290,362 571,527 537,752 517,409 Emergency visits 324,607 658,006 621,695 621,054 Inpatient surgeries 35,311 71,923 65,082 63,825 Outpatient surgeries 110,577 220,095 195,100 184,323 Medicare case mix index 1.7300 1.7000 1.6700 1.6600 FTE employees 59,925 57,290 53,524 50,357 Active physicians 12,623 12,442 12,336 12,088 Based on net/gross revenues Net Net Net Net Medicare (%) 30.1 30.1 30.4 30.9 Medicaid (%) 15.1 15.1 15.0 14.8 Commercial/Blues (%) 49.9 50.1 50.1 50.2

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

Financial Profile: Adequate

Interim results Northwell generated an adjusted operating surplus of $60.9 million for the six months ended June 30, 2019 (as calculated by S&P Global Ratings), compared with a $40 million gain the previous year. When including non-operating income for the interim period, excess income (excluding unrealized investment gains) increases to $104 million, providing good coverage of pro forma MADS at 3.1x. Total revenue growth increased 8.8% through June 30, partly reflecting increases in volume and payment rates, revenue cycle initiatives, and continued growth in physician and ambulatory services. Expenses increased a relatively similar 8.6%. Northwell is still experiencing operating expense growth in its continued journey towards a more efficient care delivery system, including quality initiatives, physician practice acquisitions, ambulatory care expansion and investments in clinical initiatives to better manage the health care needs of a population. In our view, Northwell's modest operating performance, with a 1.5% operating margin projected for fiscal 2019, is both a reflection of the journey of transitioning the system to the changing business environment and more recently, incremental pressure associated with challenging reimbursement trends. Because of the challenging environment, Northwell launched a revenue focus initiative in early 2018 called Project North Star, which if successful (and coupled with continued expense management), will help close the projected budget gap identified by the revenue compression and expense pressures. With these initiatives, management is projecting a 2.0% operating margin in fiscal years 2020 and 2021.

Financial operations Northwell has had a relatively break-even-to-slightly positive operating trend for the past five fiscal years, capitalizing on its competitive advantages, including a solid and growing business position and historically favorable volume, particularly outpatient expansion. Furthermore, its operating results partially reflect a successful growth strategy and

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 9, 2019 7 Northwell Health Inc., New York; System greater system integration, with a greater focus on growth in outpatient services, physician integration, and cost-containment efforts, all led by a strong management team.

The system generated a positive $118.1 million operating gain (as calculated by S&P Global Ratings) on a $11.5 billion revenue base in fiscal 2018, compared with a slight $32.5 million operating deficit on a $10.8 billion revenue base in fiscal 2017. Historically, management had a stated goal of generating a 2% operating margin or greater, but over the past five years results have moderated with an operating margin averaging less than 1%. Management has cited the losses associated with CareConnect (prior to discontinuing operations), the continued investment for strategic initiatives, and preparation for health reform as some of the main reasons for the variance compared with previous years.

When combining the operating results with non-operating income, Northwell generated an excess surplus of $276.6 million or 2.36% excess surplus in fiscal 2018 (as calculated by S&P Global ratings). Despite an increase in debt from acquisitions and the series 2019 issuance, pro-forma MADS coverage was good and in line with the rating at 3.2. When accounting for operating leases, the pro forma lease-adjusted coverage decreases to 2.44x, which is also in line with the median level for the rating.

While management has indicated it is still committed to a 2% operating income goal, the next several years will require continued investments in infrastructure and ambulatory service expansion, clinical initiatives and program growth, and costs associated with transitioning to value- and risk-based payment models from the traditional fee-for-service model, all of which have the potential to keep operating margins in the low-1% range. While 1%-2% margins are generally modest, we believe Northwell's investments will better prepare it to succeed over the long term and should allow for incremental revenue and margin growth over time.

Liquidity and financial flexibility In keeping with our criteria, we are no longer adjusting a portion of unrestricted liquidity held in marketable securities and other investments due to Northwell's total self-insured malpractice liability. We will continue to monitor the level of annual funding, as well as the funded status of the self-insured asset pool, and will incorporate any additional perceived credit risk into our analysis. As a result, unrestricted liquidity as reported by S&P Global Ratings may not be comparable with prior year reports, representing approximately 10 days' additional cash on hand.

As of fiscal 2018, unrestricted reserves totaled $3.05 billion, equal to 102 days' cash on hand and a light 75% of total pro forma long-term debt. This compares with $2.98 billion, or 105 days' cash, in fiscal 2017. While the aggregate level of unrestricted reserves improved slightly to $3.2 billion, as of the June 30, 2019 period, days' cash on hand was flat at 102 due to the growth in the expense base. However, unrestricted reserves to pro forma debt ticked up to 78.6%. Although S&P Global Ratings recognizes the stability in unrestricted reserve levels over the past several years, some balance-sheet metrics remain relatively light when compared with similarly rated health systems. Pro forma leverage as measured by debt-to-capitalization was high at 52% on June 30, 2019, while the debt burden remains manageable at 2.3%.

Northwell is projecting up to $1.7 billion in capital spending over two years (through 2020), including approximately $850 million targeted for fiscal 2019. In our opinion, that amount, while somewhat aggressive, should be manageable if the system can sustain positive operating margins at or above 1%, as projected. A portion of the capital spend is

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 9, 2019 8 Northwell Health Inc., New York; System coming from the series 2019 debt issuance, and management has stated that the capital plan is contingent on operational improvement as well as achieving targeted philanthropy goals.

Debt and contingent liabilities Northwell's total pro forma debt (including short-term debt and capital leases), is roughly $4.07 billion.

As of June 30, 2019, Northwell had approximately $505 million of contingent liabilities (as defined by S&P Global Ratings), including:

• Series 2014 private-placement notes totaling $245 million, with a final maturity in May 2030;

• Short-term revolving credit draws of $96.75 million under committed bank revolving credits with either several years' availability or a term-loan period for repayment if a bank does not renew the revolving credit;

• A Staten Island University Hospital term loan totaling $16 million, with a final maturity in 2023;

• A Lenox Hill mortgage totaling $19 million, with a final maturity in 2029;

• Peconic Bay Medical Center series A-D variable-rate direct-purchase bonds totaling $25.5 million (synthetically fixed with fixed-rate swaps);

• Northern Westchester Hospital series 2004 and 2008 letter of credit-backed variable-rate demand bonds (series 2004 is synthetically fixed with a fixed-rate swap) and series 2014 fixed-rate direct-purchase bonds totaling $46.5 million;

• Phelps fixed-rate direct-purchase bonds series 2005 A and B and series 2013 totaling $27 million; and

• John T. Mather Memorial Hospital series 2012A and 2013B variable-rate demand bonds (synthetically fixed with fixed-rate swaps) totaling $28.6 million.

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

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

S&P Global Ratings has factored in the risk associated with the contingent liability debt into its rating analysis and determined that there is no credit impact at the current rating level, due, in part, to Northwell's sound management practices and conservative investment allocation, with a very strong 628% unrestricted reserves to contingent liability debt as of June 30, 2019.

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Table 2 Northwell Health, New York Financial Statistics Medians for --Six months 'BBB+' rated Medians for 'A-' Medians for 'A' ended June --Fiscal year ended Dec. health care rated health rated health 30-- 31-- system care system care system

2019 2018 2017 2017 2017 2017

Financial performance Net patient revenue ($000s) 5,617,965 10,616,983 9,255,313 1,602,943 1,967,303 2,302,771 Total operating revenue ($000s) 6,048,970 11,551,225 10,785,664 MNR MNR MNR Total operating expenses ($000s) 5,988,016 11,433,103 10,818,201 MNR MNR MNR Operating income ($000s) 60,954 118,122 (32,537) MNR MNR MNR Operating margin (%) 1.01 1.02 (0.30) (1.80) 2.00 1.70 Net nonoperating income ($000s) 43,091 158,535 89,567 MNR MNR MNR Excess income ($000s) 104,045 276,657 57,030 MNR MNR MNR Excess margin (%) 1.71 2.36 0.52 0.30 4.10 4.10 Operating EBIDA margin (%) 6.42 6.40 4.90 4.00 8.80 8.10 EBIDA margin (%) 7.08 7.67 5.68 5.50 11.00 10.10 Net available for debt service ($000s) 431,212 897,826 618,036 111,119 174,352 239,291 Maximum annual debt service ($000s) 281,022 281,022 281,022 MNR MNR MNR Maximum annual debt service 3.07 3.19 2.20 2.80 3.20 4.00 coverage (x) Operating lease-adjusted coverage (x) 2.27 2.44 1.84 2.30 2.50 3.00

Liquidity and financial flexibility Unrestricted reserves ($000s) 3,199,713 3,051,073 2,983,486 638,819 883,401 1,245,545 Unrestricted days' cash on hand 101.9 101.6 104.8 156.20 149.30 184.40 Unrestricted reserves/total long-term 93.1 87.7 85.2 141.90 88.20 142.90 debt (%) Unrestricted reserves/contingent 627.6 584.0 584.0 535.40 643.90 416.90 liabilities (%) Average age of plant (years) 5.0 4.9 4.9 10.50 13.30 11.60 Capital expenditures/depreciation and 136.3 173.9 180.1 87.70 173.30 119.70 amortization (%)

Debt and liabilities Total long-term debt ($000s) 3,436,379 3,479,988 3,502,764 MNR MNR MNR Long-term debt/capitalization (%) 47.9 51.0 51.4 35.30 46.20 37.30 Contingent liabilities ($000s) 509,832 522,428 510,905 MNR MNR MNR Contingent liabilities/total long-term 14.8 15.0 14.6 31.20 18.60 37.50 debt (%) Debt burden (%) 2.31 2.40 2.58 2.20 2.70 2.50 Defined-benefit plan funded status (%) N.A. 69.31 70.86 77.40 80.00 78.30

Pro forma ratios Unrestricted reserves ($000s) 3,199,713 3,051,073 N/A MNR MNR MNR Sinking funds for taxable debt with 222,809 170,975 MNR MNR MNR bullet maturities Total long-term debt ($000s) 4,068,553 4,068,553 N/A MNR MNR MNR

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Table 2 Northwell Health, New York Financial Statistics (cont.) Medians for --Six months 'BBB+' rated Medians for 'A-' Medians for 'A' ended June --Fiscal year ended Dec. health care rated health rated health 30-- 31-- system care system care system

2019 2018 2017 2017 2017 2017 Unrestricted days' cash on hand 101.9 101.6 N/A MNR MNR MNR Unrestricted reserves/total long-term 78.6 75.0 N/A MNR MNR MNR debt (%) Unrestricted reserves including sinking 84.1 79.2 N/A MNR MNR MNR fund payments/total long term-debt (%) Long-term debt/capitalization (%) 52.1 54.88 N/A MNR MNR MNR

N/A--Not applicable. N.A.--Not available. MNR--Median not reported.

Credit Snapshot

• Northwell is an integrated delivery system, with 19 controlled hospitals, more than 6,000 hospital and long-term care beds, and roughly 273,000 inpatient admissions (as per S&P Global Ratings' definition, which excludes newborns, psychiatric, and rehabilitation admissions). Six of the hospitals are tertiary facilities--North Shore University in Manhasset; Long Island Jewish Hospital and the Cohen Children's Medical Center, on the Queens-Nassau border; Staten Island University Hospital; Southside Hospital in Bay Shore; and Lenox Hill Hospital in Manhattan (acquired in 2010). The remaining hospitals are smaller community-based facilities and specialty hospitals. Northwell expanded its footprint again with the January 2016 acquisition of Peconic in Riverhead and the January 2018 acquisition of Mather in Port Jefferson. In addition to the hospitals, Northwell operates three long-term-care facilities, a hospice program, and a research institute that ranks in the nation's top 10% of all research institutions receiving National Institutes of Health funding, as well as a residency program with more than 1,800 residents in more than 125 programs and affiliations with a number of medical schools. • The rated bonds and the secured notes are all parity debt obligations, which are a joint and several general obligation of each member of the obligated group, and a pledge of the gross receipts of the members and mortgages on principal health care facilities of the obligated group secure the debt. • The Northwell obligated group accounts for 84% of total system assets and 83% of total revenue in 2018. The obligated group consists of Long Island Jewish Medical Center (which, due to a January 2016 merger, also includes Forest Hills Hospital and Franklin Hospital, now known as Long Island Jewish Forest Hills and Long Island Jewish Valley Stream), North Shore University Hospital, Glen Cove Hospital, Plainview Hospital, Northwell Health Stern Family Center for Rehabilitation, Huntington Hospital, Lenox Hill Hospital, Southside Hospital, Staten Island University Hospital, and Northwell Health Care Inc. The recently acquired hospitals—Mather, Peconic, Phelps, and Northern Westchester--are not part of the obligated group. This analysis reflects the entirety of Northwell, and the 'A-' rating is based on our view of Northwell's group credit profile and the obligated group's core status. Total pro forma system debt is approximately $4.07 billion. Unless otherwise noted, all financial data and ratios in this analysis refer to the fiscal 2018 audited period. The June 30, 2019 interim financial results are not audited.

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