Cleveland Clinic Health System Obligated Group - FMSbonds.com

N. ACCREDITATION AND MEMBERSHIPSEach member of the Obligated Group, Affiliate, outpatient clinic and home health care program of theHealth System is accredited by The Joint Commission (formerly known as the Joint Commission on Accreditationof Healthcare Organizations). Each member of the Obligated Group has accreditations for certain specializedprograms and services consistent with its mission and operations. From time to time, accrediting bodies may reviewaccreditations of accredited organizations and recommend certain actions or impose conditions on an existingaccreditation. The Cleveland Clinic is accredited by The Joint Commission for hospital, long term care, andbehavioral health services and is also certified by The Joint Commission as a primary stroke center. The ClevelandClinic will undergo its next hospital, long term care, and behavioral health services surveys by The JointCommission in 2011. It will undergo its next survey for the primary stroke center in 2009. All laboratory programsoperated by the Cleveland Clinic and the other members of the Obligated Group are accredited by the College ofAmerican Pathologists, except for two smaller laboratory programs that are accredited by COLA. The laboratoryprograms undergo accreditation surveys every two years. The Cleveland Clinic is certified in credentialing and recredentialingby the National Committee for Quality Assurance (“NCQA”). It will undergo its next NCQA surveyin 2010. Management of the Obligated Group does not expect any such review to require actions or imposeconditions that could adversely affect the continuing accreditation of any member of the Obligated Group.The Cleveland Clinic is a member of the American Hospital Association and the Ohio Hospital Association;the Cleveland Clinic and certain other members of the Obligated Group are members of The Center for HealthAffairs (formerly known as the Greater Cleveland Hospital Association); and the Cleveland Clinic and CCHS-EastRegion are members of Premier, Inc., a group purchasing organization.PART III.SELECTED FINANCIAL INFORMATION FOR THE OBLIGATED GROUP AND HEALTH SYSTEMThe members of the Obligated Group together accounted for 91% of the total unrestricted revenues and78% of the excess of revenues over expenses of the Health System for the year ended December 31, 2007, andapproximately 88% of the total assets of the Health System as of December 31, 2007. See the financial informationdescribed below in this Appendix and in Appendix B for more information regarding the relative financial size ofthe Obligated Group and the Health System.The audited consolidated financial statements and other financial information of the Cleveland Clinic andits controlled Affiliates as of and for the years ended December 31, 2007 and 2006, and related notes appear inAppendix B. These financial statements reflect the results of operations and financial position of the members of theObligated Group and certain Affiliates described in this Appendix, as well as other Affiliates that are not describedin this Appendix.Certain financial information regarding the Obligated Group (which consists only of the Cleveland Clinic,Fairview, Lutheran, Marymount, CCHS-East Region and Florida Clinic) and Health System appears in thisAppendix for the years ended December 31, 2005, 2006 and 2007 and the six months ended June 30, 2007 and 2008.A. CONSOLIDATED BALANCE SHEETSThe following consolidated balance sheets as of December 31, 2005, 2006 and 2007 for the ObligatedGroup are derived from unaudited consolidating financial information underlying the audited consolidated financialstatements of the Cleveland Clinic and its controlled Affiliates. The consolidated balance sheet as of June 30, 2008has been derived from unaudited interim consolidated financial statements for the Obligated Group. In the opinionof Cleveland Clinic management, the unaudited interim consolidated financial statements include all adjustmentsnecessary for a fair presentation of such information on a basis consistent with the audited financial statements.The information shown includes data as of those dates for the Obligated Group and the Health System,respectively. The data should be read in conjunction with the information included under “PART IV –MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF HEALTH SYSTEM OPERATIONSAND FINANCIAL POSITION,” as well as the audited consolidated financial statements and other financialinformation of the Cleveland Clinic and its controlled Affiliates as of and for the years ended December 31, 2007and 2006, and related notes that appear in Appendix B and the June 30, 2008 unaudited consolidated financialA-26