Cleveland Clinic Health System Obligated Group - FMSbonds.com

and properties owned or operated by hospitals. Among the types of regulatory requirements faced by hospitals are(a) air and water quality control requirements, (b) waste management requirements, (c) specific regulatoryrequirements applicable to asbestos, polychlorinated biphenyls and radioactive substances, (d) requirements forproviding notice to employees and members of the public about hazardous materials handled by or located at thehospital, and (e) requirements for training employees in the proper handling and management of hazardous materialsand wastes.In its role as an owner and operator of properties or facilities, each Obligated Issuer may be subject toliability for investigating and remedying any hazardous substances that may be present on or have migrated off of itsproperty or facilities. Typical hospital operations include, but are not limited to, in various combinations, thehandling, use, storage, transportation, disposal and discharge of hazardous, infectious, toxic, radioactive, flammableand other hazardous materials, wastes, pollutants or contaminants. As such, hospital operations are particularlysusceptible to the practical, financial and legal risks associated with compliance with such laws and regulations.Such risks may result from damage to individuals, property or the environment and include an interruption ofoperations, an increase in operating costs, legal liability, damages, injunctions or fines and investigations,administrative proceedings, penalties or other governmental agency actions. The Obligated Issuers expect tocontinue to encounter such risks in the future, and exposure to such risks could materially adversely affect the futurefinancial condition or results of operations of individual Obligated Issuers and of the Obligated Group, taken as awhole.Management of the Cleveland Clinic is not aware of any pending or threatened claim, investigation orenforcement action regarding such environmental issues involving any Obligated Issuer which, if determinedadversely, would have a material adverse effect on the future financial condition or results of operations of theObligated Issuers, taken as a whole.The Master Trustee or the Bond Trustee may decline to enforce the Master Trust Indenture or the BondIndenture, as the case may be, if the related trustee has not been indemnified to its satisfaction, in accordance withits Indenture, for all liabilities it may incur as a consequence thereof. Such liabilities may include, but are notlimited to, costs associated with complying with environmental laws and regulations.Increased Enforcement Affecting Clinical ResearchIn addition to increasing enforcement of laws governing payment and reimbursement, the federalgovernment has also stepped up enforcement of laws and regulations governing the conduct of clinical trials athospitals. DHHS elevated and strengthened its Office of Human Research Protection, one of the agencies withresponsibilities for monitoring federally funded research. In addition, the National Institutes of Health significantlyincreased the number of facility inspections that these agencies perform. The Food and Drug Administration(“FDA”) also has authority over the conduct of clinical trials performed in hospitals when these trials are conductedon behalf of sponsors seeking FDA approval to market the drug or device that is the subject of the research. TheFDA’s inspection of facilities increased significantly in recent years. These agencies’ enforcement powers rangefrom substantial fines and penalties to exclusions of researchers and suspension or termination of entire researchprograms. Management of the Cleveland Clinic believes that clinical research being conducted by any of theObligated Issuers is in substantial compliance with material applicable requirements, but no assurance can be madethat the FDA will not take a contrary position and that such position will not have a material adverse effect on thefuture operations or financial condition of the Obligated Issuers.Technological ChangesMedical research and resulting discoveries have grown exponentially in the last decade. These newdiscoveries may add greatly to the Obligated Issuers’ cost of providing services with no or little offsetting increasein federal reimbursement and may also render obsolete certain of the Obligated Issuers’ health services. New drugsand devices may increase hospitals’ expense because, for the most part, the costs of new drugs and devices are nottypically accounted for in the DRG payment received by hospitals for inpatient care. The PPS system imposed onoutpatient services does permit a direct pass-through of certain new technologies defined by the government.45