HEALTHCARE FINANCIAL MANAGEMENT … Introductions Community Foundation of Northwest Indiana, Inc....

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HEALTHCARE FINANCIAL

MANAGEMENT

ASSOCIATION

CAPITAL CONFERENCE

April 10, 2014

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Introductions

Community Foundation of Northwest Indiana, Inc. (“CFNI”)

John Gorski – Chief Operating Officer

Mary Ann Shacklett – Senior Vice President of Finance & Chief

Financial Officer

3

Community Foundation of Northwest Indiana Overview

Regional healthcare system provider serving Lake and Porter counties in northwest Indiana

Community Healthcare System (“CHS”):

3 acute care hospitals Community Hospital (“MMRF” or

“CH”) Munster, Indiana – 427 beds

St. Catherine Hospital (“SCH”) East Chicago, Indiana - 189

beds

St. Mary Medical Center (“SMMC”) Hobart, Indiana – 195 beds

1 CCRC facility

Community Village Inc. (Hartsfield Village) (“CV”) Munster Indiana 106 independent living units,

71 assisted living, 24 memory support and 112 beds in nursing care facility

St. Catherine

Hospital

East Chicago, Indiana

St. Mary Medical

Center

Hobart, Indiana

The Community

Hospital

Munster, Indiana

4

Corporate Structure

For FYE 2013, the Obligated Group members (assuming CV as part of Obligated Group)

accounted for over 99% of total operating revenues and total assets

Members of the Obligated Group, Nonprofit

501(c)(3) Corporations

Other Related Entities

CVPA

Holding

Corporation

Community

Resources,

Inc.

Community

Foundation of

Northwest Indiana,

Inc.

Munster Medical

Research

Foundation, Inc.

d/b/a The

Community

Hospital

St. Catherine

Hospital, Inc.

St. Mary

Medical

Center, Inc.

Theatre at

The Center,

Inc.

Community

Cancer Research

Foundation, Inc.

Community

Care

Network,

Inc. (“CCNI”)

Community

Village, Inc. d/b/a

Hartsfield Village

5

Facilities and Services offered CHS offers the following facilities:

3 acute care hospitals

1 CCRC

Extended care services

Rehabilitation services

Wellness/Fitness center

Outpatient surgery and diagnostic centers

Maintains high level of care with wide range of

inpatient and outpatient services

In FY 2013: 43,636 discharges, 10,293 observations,

483,999 outpatient visits, 128,757 ER visits, 9,352

inpatient surgeries, and 24,367 outpatient surgeries

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Strategic Growth - Valparaiso Health Center

Opened February 11, 2013

High growth affluent area

Approximately 70% commercial payors

Revenue and earnings above or consistent with projections

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Comprised of no more than 20 directors

Currently 20 active directors

Staggered 3 year terms

Appoints:

Directors to the Boards of all 3

Hospital Corporations and CVI

the President of the Board of each

Hospital Corporation and CVI

Hospital Administrator for each

Hospital Corporation

Specific experience:

Physicians

Health Care Executives

Bankers

Attorneys

Local Business Leaders

Responsible for establishing strategic

oversight for the System

Monthly Board meetings

Key committees include:

Real Estate

Audit

Development

Salary and Benefits

Corporate Compliance

Board of Directors approvals consist of:

Annual business plans and budgets

Capital expenditures, borrowing

and disposition of assets

Compliance activities

Governance Structure – CFNI Board Structure

Board Structure and Approvals Board Composition

Nominating

Executive

Strategic Plan

Bylaws

8

Each of the 3 Hospital Corporations

represented by a Board of Directors

Hospital Corporation Boards

Not less than 10, nor more than 20

Directors

Staggered 3 year terms

Directors appointed by CFNI board

2 members also CFNI board

Directors

Responsibilities:

Medical staff credentialing

Quality assurance

Monitoring patient care

CVI Board comprised of 7 Directors

Serve 1-year terms

CCNI Board comprised of no less than 7

and no more than 12 Directors

Comprised of CFNI Board Chairman,

President/CEO, COO, CFO of CFNI

and CEO of each Hospital

Corporation

Governance Structure – Hospital Corporation and CVI Board

Structure

CVI & CCNI Board Structure Hospital Corporation Board Structure

9

Geographic Dispersion

10

Medical Staff

June, 2013Community

Hospital

St. Catherine

Hospital

St. Mary

Medical Center

Total Active Members* 568 329 461

Average Age of Active Physicians 50 51 51

Privileges at Community Hospital 247 (75.0%) 176 (38.0%)

Privileges at St Catherine Hospital 247 (43.0%) 157 (34.0%)

Privileges at St Mary Medical Center 176 (31.0%) 157 (48.0%)

Number of Specialties 54 41 34

Report period is for June 2013

Medical Staff Profiles

Community Foundation of Northwest Indiana, Inc. – Munster, IN

*Record Status Active; excludes emeritus members

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Specialty FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Family Practice 20 21 22 23 27 33

Internal Medicine 9 11 14 14 18 17

OB/GYN 2 7 9 10 13 14

Hospitalists 4 6

Cardiology 2 2 3 4

Pediatrics 3 3 3 2 3 4

Neurosurgery 2 2 3 3 3 3

Psychiatry 2 2 2 3 3 3

Surgery 1 3 3 3 3

Infectious Disease 2 2

Neurology 1 2 2

Occ Health 1 1 2 2 2 2

Orthopedics 1 1 1 2 2

ENT 1 1 1 1 1

Podiatry 1 1

Urology 1 1 1 1 1

Sub Total 39 51 63 66 88 98

% of Primary Care 87.2% 82.4% 76.2% 74.2% 69.3% 69.4%

Anesthesiology 20 21 22 20 23 25

Grand Total 59 72 85 86 111 123

Employed Physicians

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• Low turnover

• FTE increase from growth

Xxand Medical Practices

• Controls on personnel

Xxcosts

• Steady revenue growth

Rates and Ratios FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

CHS - RN/LPN

Turnover Rate11.7% 10.5% 11.1% 10.0% 9.6% 10.1% 10.0% 11.2%

RN/LPN Vacancy Rate FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

CH 2.4% 2.3% 2.1% 2.3% 2.1% 2.7% 2.3% 2.4%

SC 4.0% 4.7% 3.1% 3.3% 3.0% 3.4% 3.1% 3.2%

SM 4.1% 2.4% 2.2% 2.2% 2.9% 3.5% 3.6% 3.9%

CHS - Salary &

Benefits/NPSR51.94% 52.50% 51.17% 51.01% 50.46% 52.26% 50.72% 51.58%

CHS - Total Operating

Revenue ($000s)$568,687 $590,605 $644,322 $685,722 $760,245 $806,586 $857,488 $887,300

Community Healthcare System

FTE Trends by Fiscal Year

5,2515,2125,115

4,8794,628

4,4774,3904,364

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

CCNI

CFNI

SM

SC

CH

CHS

IHA 2012 Q 4

Turnover 14.08%

Vacancy 4.71%

IHA 2013 Q 1

Turnover 13.24%

Vacancy 4.40%

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Discharges

30,000

32,000

34,000

36,000

38,000

40,000

42,000

44,000

46,000

48,000

50,000

52,000

54,000

56,000

CHS 38,109 40,504 41,252 41,500 43,613 42,477 51,602 52,221 52,608 52,529 54,437 53,929 52,838

% change 6% 2% 1% 5% -3% 21% 1% 1% 0% 4% -1% -2%

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

FYTD

2014

Annl

CAGR: 2.76%

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Total Emergency Department Visits

75,000

80,000

85,000

90,000

95,000

100,000

105,000

110,000

115,000

120,000

125,000

130,000

135,000

CHS 86,147 85,828 89,547 92,675 94,757 96,816 107,567 112,029 118,137 122,114 127,419 128,757 128,676

% change 0% 4% 3% 2% 2% 11% 4% 5% 3% 4% 1% 0%

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

FYTD

2014

Annl

CAGR: 3.40%

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Growth Statistics

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 *FYTD 2014

Average Daily Occupancy 575.7 574.2 574.8 601.1 610.0 600.1 545.7

Average Length of Stay 4.52 4.57 4.69 4.66 4.60 4.73 4.69

Medicare CMI_CH 1.5358 1.5378 1.5227 1.5511 1.5356 1.5703 1.6269

Medicare CMI_SC 1.4945 1.4300 1.5542 1.4953 1.4194 1.4839 1.5706

Medicare CMI_SM 1.4624 1.4665 1.5021 1.4513 1.4370 1.4822 1.5988

*ED visits 107,567 112,029 118,137 122,114 127,419 128,757 128,676

**Outpatient Visits 451,252 466,723 493,728 485,040 490,228 483,999 532,576

**Outpatient Surgeries 25,124 24,525 24,879 24,495 24,353 24,367 24,572

**Inpatient Surgeries 10,416 10,250 9,962 10,102 9,741 9,352 8,786

**Open Heart Procedures 435 445 411 422 333 367 394

**Births_CHS 3,810 3,847 3,847 3,596 3,377 3,002 2,816

*FYTD 2014 through December 2013

**FYTD 2014 Annualized

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Market Share Growth - Primary Service Areas

30.5% 31.9% 32.3% 32.2% 32.7% 32.3% 31.0% 30.1%34.2% 32.6%

14.4%14.3% 14.3% 14.1% 13.6% 14.6%

14.1% 14.8%

13.5% 14.6%

13.4%13.8%

16.1% 16.6% 15.9% 15.9%16.7% 18.0%

17.5% 18.5%

65.7%65.2%62.9%

61.8%62.8%

62.2%62.9%62.7%

60.0%58.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

St. Mary Medical Center 13.4% 13.8% 16.1% 16.6% 15.9% 15.9% 16.7% 18.0% 17.5% 18.5%

St. Catherine Hospital 14.4% 14.3% 14.3% 14.1% 13.6% 14.6% 14.1% 14.8% 13.5% 14.6%

Community Hospital 30.5% 31.9% 32.3% 32.2% 32.7% 32.3% 31.0% 30.1% 34.2% 32.6%

System Market Share 58.3% 60.0% 62.7% 62.9% 62.2% 62.8% 61.8% 62.9% 65.2% 65.7%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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• Continued market dominance

• Essential facilities for insurance products in region


Market Share Growth - All Service Areas

22.5% 23.9% 24.4% 23.9% 24.6% 24.0% 22.8% 23.4%25.6% 24.7%

9.7%9.8% 10.3% 9.9% 9.4% 10.2%

9.7% 10.2%9.7% 10.4%

8.8%9.0%

11.2% 11.6% 11.0% 11.1%12.0%

12.0%12.2% 13.0%

48.1%47.5%45.6%44.5%45.3%45.0%45.4%45.9%

42.7%41.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

St. Mary Medical Center 8.8% 9.0% 11.2% 11.6% 11.0% 11.1% 12.0% 12.0% 12.2% 13.0%

St. Catherine Hospital 9.7% 9.8% 10.3% 9.9% 9.4% 10.2% 9.7% 10.2% 9.7% 10.4%

Community Hospital 22.5% 23.9% 24.4% 23.9% 24.6% 24.0% 22.8% 23.4% 25.6% 24.7%

CHS 41.0% 42.7% 45.9% 45.4% 45.0% 45.3% 44.5% 45.6% 47.5% 48.1%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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Awards and Accreditations

American Association of Blood Banks – Systemwide Laboratory Accreditation 2012 – 2013

Building Indiana – Swanky Office Award for Best Technology. Profiled were the da Vinci Surgical System, Dual-Source CT,

CartOSound Imaging, Wearable Therapy, and CyberKnife®, 2009

Commission on Accreditation of Rehabilitation Facilities (CARF) – The Acute Rehabilitation Centers at Community Hospital, St.

Catherine Hospital, and St. Mary Medical Center participated in a successful CARF reaccreditation survey, 2010

Commission on Laboratory Accreditation of the College of American Pathologists (CAP) – Systemwide Laboratory

Accreditation, 2010 – 11

Donate Life America – Award of Merit for the Flags Across America Program for honoring all donors and recipients by the creative

and widespread use of donate life flags. One of six national recipients; we were the only healthcare organization, 2010

Gift of Hope Organ & Tissue Donor Network – “Lifesaving Partner” for outstanding achievement in addressing the region’s

critical need for organ, eye, and tissue donations, 2010 – 11

Society of Innovators of Northwest Indiana – Chanute Prize for Team Innovation for the breast Care: Same Day Results project ,

2008 – 09

Studer Group – Fire Starter Award, November, 2009

The Joint Commission – The Gold Seal of ApprovalTM for demonstrating compliance with national standards for healthcare quality

and safety, 2009

Thomson Reuters – Nation’s Top 50 Best Healthcare Systems, 2009 – 10

U.S. News & World Report – Best Hospitals metro area rankings for the Chicago area, 2011

19 Patient Satisfaction Percentile Ranking Cash Flow

Net Income Days Cash On Hand

Millio

ns

Pe

rce

ntile

Ra

nk

COMMUNITY HEALTHCARE SYSTEM

80%88%82%

64%

32%

18%

84%

75%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY07

Q1

FY07

Q2

FY07

Q3

FY07

Q4

FY08

Q1

FY08

Q2

FY08

Q3

FY08

Q4

FY09

Q1

FY09

Q2

FY09

Q3

FY09

Q4

FY10

Q1

FY10

Q2

FY10

Q3

FY10

Q4

FY11

Q1

FY11

Q2

FY11

Q3

FY11

Q4

FY12

Q1

FY12

Q2

FY12

Q3

FY12

Q4

FY

13

1Q

FY

13

2Q

FY

13

3Q

FY

13

4Q

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100



Millio

ns

Pe

rce

ntile

Ra

nk


75%

84%

18%

32%

64%

82%88% 80%

$41.5$45.0

$31.0

$50.3

$36.5$38.2

$10.7$13.7

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY07

Q1

FY07

Q2

FY07

Q3

FY07

Q4

FY08

Q1

FY08

Q2

FY08

Q3

FY08

Q4

FY09

Q1

FY09

Q2

FY09

Q3

FY09

Q4

FY10

Q1

FY10

Q2

FY10

Q3

FY10

Q4

FY11

Q1

FY11

Q2

FY11

Q3

FY11

Q4

FY12

Q1

FY12

Q2

FY12

Q3

FY12

Q4

FY

13

1Q

FY

13

2Q

FY

13

3Q

FY

13

4Q

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100



Millio

ns

Pe

rce

ntile

Ra

nk


75%

84%

18%

32%

64%

82%88% 80%

$41.5$45.0

$31.0

$50.3

$36.5$38.2

$10.7$13.7

$92.3

$96.4

$76.4

$92.1

$76.2

$78.1

$54.2

$50.4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY07

Q1

FY07

Q2

FY07

Q3

FY07

Q4

FY08

Q1

FY08

Q2

FY08

Q3

FY08

Q4

FY09

Q1

FY09

Q2

FY09

Q3

FY09

Q4

FY10

Q1

FY10

Q2

FY10

Q3

FY10

Q4

FY11

Q1

FY11

Q2

FY11

Q3

FY11

Q4

FY12

Q1

FY12

Q2

FY12

Q3

FY12

Q4

FY

13

1Q

FY

13

2Q

FY

13

3Q

FY

13

4Q

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100



Millio

ns

Pe

rce

ntile

Ra

nk


75%

84%

18%

32%

64%

82%88% 80%

$41.5$45.0

$31.0

$50.3

$36.5$38.2

$10.7$13.7

$92.3

$96.4

$76.4

$92.1

$76.2

$78.1

$54.2

$50.4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY07

Q1

FY07

Q2

FY07

Q3

FY07

Q4

FY08

Q1

FY08

Q2

FY08

Q3

FY08

Q4

FY09

Q1

FY09

Q2

FY09

Q3

FY09

Q4

FY10

Q1

FY10

Q2

FY10

Q3

FY10

Q4

FY11

Q1

FY11

Q2

FY11

Q3

FY11

Q4

FY12

Q1

FY12

Q2

FY12

Q3

FY12

Q4

FY

13

1Q

FY

13

2Q

FY

13

3Q

FY

13

4Q

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

58

93

132

147

148 159

166 200

23


75%

84%

18%

32%

64%

82%88% 80%

$41.5$45.0

$31.0

$50.3

$36.5$38.2

$10.7$13.7

$92.3

$96.4

$76.4

$92.1

$76.2

$78.1

$54.2

$50.4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY07

Q1

FY07

Q2

FY07

Q3

FY07

Q4

FY08

Q1

FY08

Q2

FY08

Q3

FY08

Q4

FY09

Q1

FY09

Q2

FY09

Q3

FY09

Q4

FY10

Q1

FY10

Q2

FY10

Q3

FY10

Q4

FY11

Q1

FY11

Q2

FY11

Q3

FY11

Q4

FY12

Q1

FY12

Q2

FY12

Q3

FY12

Q4

FY

13

1Q

FY

13

2Q

FY

13

3Q

FY

13

4Q

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Patient Satisfaction Percentile Ranking Cash Flow


Millio

ns 58

93

132

147

148 159

166

Pe

rce

ntile

Ra

nk

200

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Acute System Payor Mix

System Payor Mix

Payor FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Medicare 49.4% 47.8% 47.3% 47.7% 48.1% 46.6%

Managed Medicare 2.0% 1.9% 2.1% 2.3% 2.5% 4.4%

Medicaid 3.3% 3.4% 3.7% 4.8% 4.8% 5.3%

Managed Medicaid 8.0% 8.3% 9.1% 8.3% 7.2% 7.1%

Blue Cross 17.4% 17.5% 17.1% 16.7% 16.9% 16.6%

Commercial 1.7% 1.7% 1.5% 1.5% 1.7% 1.5%

Managed Care 15.7% 15.6% 15.0% 14.6% 14.1% 13.7%

Self pay 1.5% 2.2% 2.5% 2.6% 3.4% 3.4%

Other 1.0% 1.5% 1.7% 1.5% 1.4% 1.3%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

*Based on gross patient revenue

The system’s acute care payor mix trend is stable with stable Medicare, low self pay, moderate Medicaid, and a reasonably good and stable portion of patients reimbursed by insurance.

25

CFNI’s Balance Sheet Exhibits Strong Growth

Unlike most providers which experienced balance sheet erosion during the financial crisis, CFNI was able to grow its cash position from

$153 million at FYE 07 to $438 million at FYE 2013 driven primarily by strong operating cash flow and prudent investment management

Despite substantial capital investment and an increase in leverage, cash to debt grew from 43.4% in FY 2005 to 111.8% in FY 2013.

Unrestricted net assets grew by an impressive CAGR of 8.2% over the last three fiscal years.

Reclassifications were made for 2010 & 2011 combining notes payable, capital lease debt, & bonds payable to one line called Long Term

Debt. Prior to this the amounts in notes payable and capital lease debt were not material

Balance Sheet ($000s)

2006 2007 2008 2009 2010 2011 2012 2013

Assets

Unrestricted Cash & Invest $ 95,759 $ 153,275 $ 227,543 $ 260,548 $ 288,261 $ 310,707 $ 351,658 $437,878

Net Patient A/R $ 99,452 $ 88,838 $ 85,167 $ 85,448 $ 86,618 $ 96,933 $ 111,952 $101,931

PP&E (Net) $ 350,344 $ 342,975 $ 356,462 $ 392,290 $ 381,747 $ 402,414 $ 388,823 $399,265

Total Assets $ 612,264 $ 720,555 $ 757,982 $ 824,348 $ 854,283 $ 889,070 $ 947,443 $1,083,158

Liabilities & Net Assets

Long Term Debt $ 220,741 $ 318,484 $ 281,734 $ 339,114 $ 336,885 $ 323,238 $ 312,004 $391,746

Unrestricted Net Asset $ 258,071 $ 252,679 $ 287,581 $ 300,126 $ 310,560 $ 364,366 $ 380,614 $426,287

26

CFNI’s Income Statement Characterized by Accelerating

Profitability

As a result of strong top line growth and timely cost containment, CFNI was able to grow its operating profitability from

$13.2 million in FY 06 to $37.5 million in FY 2013. FY 2011 would have been $23.5 without EPIC expenses

Net Patient Revenue & Total Operating Revenue in 2011, 2012, and 2013 is net of bad debt. All earlier years bad

debt was in expenses.

Medicaid is paid at Medicare rate starting in fiscal 2012 offset by a Medicaid Assessment Fee this is a part of the DSH

program. Notes: Investment income included in net non-operating income. Net Patient Revenue excludes capitation revenue

Income Statement ($000s)

2006 2007 2008 2009 2010 2011 2012 2013

Net Patient Revenue $ 563,714 $ 586,478 $ 633,538 $ 676,258 $ 727,811 $ 721,762 $ 804,823 $ 824,041

Dis. Share Payments $ 9,858 $ 9,613 $ 24,911 $ 13,185 $ 12,000 $ 12,000 $ 48,861 $ 53,845

Total Operating Revenue $ 596,414 $ 625,386 $ 680,894 $ 730,030 $ 786,519 $ 773,164 $ 861,436 $ 890,912

Total Operating Expenses $ 583,167 $ 610,720 $ 647,325 $ 689,108 $ 753,311 $ 761,515 $ 823,963 $ 853,450

Salaries and Benefits $ 289,811 $ 302,901 $ 318,888 $ 338,012 $ 366,039 $ 395,218 $ 409,964 $ 427,184

Supplies $ 122,583 $ 124,774 $ 136,713 $ 142,932 $ 159,164 $ 157,504 $ 154,689 $ 164,418

Depreciation & Amortization $ 39,943 $ 41,470 $ 43,830 $ 43,852 $ 44,502 $ 45,829 $ 50,500 $ 51,082

Interest Expense $ 15,206 $ 14,457 $ 17,999 $ 14,037 $ 16,964 $ 15,936 $ 15,139 $ 18,213

Medicaid Assessment fee $ 36,751 $ 38,917

Other $ 115,624 $ 127,117 $ 129,895 $ 150,275 $ 166,642 $ 147,028 $ 157,540 $ 153,636

Operating Income $ 13,247 $ 14,666 $ 33,569 $ 40,922 $ 33,209 $ 11,649 $ 37,473 $ 37,462

Net Non-Operating Income $ 4,384 $ 6,431 $ 10,801 $ 8,392 $ 12,157 $ 12,197 $ 8,879 $ 12,924

Excess Rev Over Exp $ 11,195 $ 15,923 $ 37,205 $ 41,362 $ 43,332 $ 33,289 $ 44,845 $ 39,814

27

CFNI’s Operating and Balance Sheet Metrics Consistently

Stronger than A Medians

2009 2010 2011 2012 2013 S & P

A

Operating Margin 5.61% 4.22% 1.44% 4.31% 4.20% 2.50%

EBIDA Margin 13.59% 13.38% 11.78% 12.89% 13.24% 10.60%

Operating EBIDA

Margin 13.54% 12.04% 9.10% 11.93% 11.98% 8.90%

Debt-to-Capitalization 53.05% 51.78% 47.01% 45.00 % 47.89% 43.90%

Days Cash on Hand 147.0 days 148.0 days 158.5 days 165.8 days 200.0 days 157.1 days

MADS Coverage 4.21 x 4.38 x 3.50 x 4.55 x 4.33 x 4.10 x

Operating EBIDA

MADS coverage 3.88 x 3.72 x 3.04 x 4.22 x 3.87 x N/A

Average Age of Plant 8.6 years 9.0 years 9.6 years 9.4 years 10.2 years 10.8 years

NOTE: YELLOW = CFNI outperforming ratio, LIGHT BLUE = CFNI underperforming ratio

28

CFNI’s Six Months Ended December 31, 2013 Performance Highlights ($000s)

29

Investment Strategy

A formally adopted investment policy statement governs

CFNI’s general investment pool

A primary objective of the plan is to achieve an absolute

rate of return of 6% after fees, expenses and inflation.

Changes have been made to the strategy to mitigate

impact of rising interest rates

Reduce Core and Inflation Protected Fixed Income holdings and

increase exposure to Short-term and Total Return strategies

Addition of non-investment grade securities (with cap as to

percent of total pool)

Addition of alternative investments

Rebalance the total portfolio’s allocation towards Equity and

away from Fixed Income

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Effective Capital Structure

Notes:

1) Excludes capital leases

2) Includes capital leases

Capital Structure: all fixed rate, no swaps

Fixed$375.962mm

100%

Variable$0.000mm

0%

Daily$0.000mm

0%

Projected Debt Service (2)

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$ in

Mill

ion

s

Series 2007 Commercial Loan Commercial Loan Series 2012 Series 2013 Capital Leases

Series (1)

Par Out.

($000)

Underlying

Structure

Bond

Maturity

Cost of

Capital

Series 2007 124,670 Fixed 2037 5.499%

Taxable Commercial Loan 18,785 Fixed 2025 5.400%

Taxable Commercial Loan 35,965 Fixed 2025 3.000%

Series 2012 171,130 Fixed 2041 4.797%

Series 2013 Placement 25,412 Fixed 2037 3.800%

Total $375,962 Par WACC 4.821%

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Standard & Poor’s:

Upgraded to BBB from BBB- in July of 2008

Affirmed at BBB in August of 2009

Upgraded to BBB+ from BBB in November of 2010

Affirmed at BBB+ in December of 2011

Upgraded to A- in October of 2012

Revised outlook from stable to positive on A- in November of 2013

Fitch Ratings:

Assigned new rating of A- in January of 2012

Revised outlook from stable to positive on A- in October of 2012

Upgraded to A in October of 2013

Credit Ratings Overview

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Sound management strategies have led to financial success

Strong focus on quality paying dividends

Patient satisfaction scores show continued and steady improvement and correlate with outstanding operating performance and rating upgrade trend: 18% patient satisfaction in 1Q07 growing to 79% in 2Q14

Strong physician relationships, revenue diversity, risk dispersion and scale position CFNI to respond favorably to evolving healthcare landscape

FY 2013 results include EBIDA of 13.24%, operating margin of 4.2% and cash growth to 200 days; all of which exceed ‘A’ system medians

Driven by strong utilization and intelligent capital investment, CFNI has generated uncommon revenue growth over period of several years

Expansion to Valparaiso an early success

Promotes growth to an area where 70% of population is covered by commercial insurance

Helps offset business lines facing reimbursement pressures

Sound balance sheet management by deep and experienced senior management team

Prudent capital investment for revenue accretive projects

Maintain very little risk in capital structure and conservative investment strategy. Allowed CFNI to navigate financial crisis with minimal devaluation and no use of variable rate debt or swaps protect strong and growing balance sheet

Effective managed care contracting strategy

Appropriate and rationally aggressive use of leverage as market leader in NW Indiana

Organization represents value to insurance payers

Increases probability of strong future cash flow

HEALTHCARE FINANCIAL MANAGEMENT … Introductions Community Foundation of Northwest Indiana, Inc....

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