Cleveland Clinic Health System Obligated Group - FMSbonds.com

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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
statements filed with Digital Assurance Certification LLC, a post-bond issuance, compliance and monitoring systemfor municipal bond issuers (“DAC”).[Balance of Page Left Blank Intentionally]A-27
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NEW ISSUEBOOK ENTRY ONLYSee “RATI
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TABLE OF CONTENTSINTRODUCTORY STATE
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OFFERING CIRCULARRelating to$452,34
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Security and Sources of Payment for
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Upon issuance of the Series 2008A B
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(ii) acquisition of magnetic resona
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$147,200,000 Term Bonds Due January
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that the redemption is conditional
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Use of Certain Terms in Other Secti
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County BondsThe Cleveland Clinic an
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The Cleveland Clinic regularly revi
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ESTIMATED SOURCES AND USES OF FUNDS
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DEBT SERVICE COVERAGEThe following
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MedicareGeneralApproximately 29% of
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there is no assurance that the Obli
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Medicare Conditions of Participatio
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fiscal year’s budget that are in
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Federal Regulatory and Contractual
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Stark-type statutes have fewer exce
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party or for any services rendered
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typically in a position to refer pa
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OhioOhio Certificate of Need Progra
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performance demonstration programs
Page 47 and 48: manifest injustice would otherwise
Page 49 and 50: and properties owned or operated by
Page 51 and 52: plan of reorganization, with one ex
Page 53 and 54: percentage may be composed wholly o
Page 55 and 56: The Internal Revenue Service Form 9
Page 57 and 58: Charity Care, Underinsured and Unin
Page 59 and 60: • Proposals to eliminate the tax-
Page 61 and 62: acting in the capacity of underwrit
Page 63 and 64: Frederick R. Nance, Regional Managi
Page 65 and 66: FINANCIAL POSITION — D. BALANCE S
Page 67 and 68: The CommissionBecause the Series 20
Page 69 and 70: APPENDIX ACLEVELAND CLINIC HEALTH S
Page 71 and 72: TABLE OF CONTENTSPageINTRODUCTION .
Page 73 and 74: This Appendix to the Offering Circu
Page 75 and 76: A. ORIGINS AND FUNDAMENTAL MISSIONT
Page 77 and 78: C. GOVERNANCE OF THE CLEVELAND CLIN
Page 79 and 80: Voting Members of theBoard of Trust
Page 81 and 82: Voting Members of theBoard of Trust
Page 83 and 84: Principal Operating Officers. The d
Page 85 and 86: In addition to the broad range of o
Page 87 and 88: The main campus also includes a com
Page 89 and 90: GovernanceThe Cleveland Clinic is t
Page 91 and 92: E. UTILIZATIONThe following tables
Page 93 and 94: Statistical Information. The follow
Page 95 and 96: I. COLLABORATIVE PROGRAMSIn additio
Page 97: Clinic’s charity care policy, see
Page 101 and 102: CLEVELAND CLINIC HEALTH SYSTEMConso
Page 103 and 104: OBLIGATED GROUPConsolidated Stateme
Page 105 and 106: PART IV.MANAGEMENT’S DISCUSSION A
Page 107 and 108: increase in minor equipment purchas
Page 109 and 110: The following table sets forth the
Page 111 and 112: pension plans’ funded status in t
Page 113 and 114: of funding to the pension plan offs
Page 115 and 116: portfolio. Offsetting the decrease
Page 117 and 118: • Clinic Care, Inc. (“Clinic Ca
Page 119 and 120: APPENDIX BCERTAIN FINANCIAL STATEME
Page 121 and 122: A UDITED C ONSOLIDATED F INANCIAL S
Page 123 and 124: • Ernst & Young LLPSuite 1300925
Page 125 and 126: Liabilities and net assetsCurrent l
Page 127 and 128: Changes in Net AssetsNet AssetsTemp
Page 129 and 130: Cleveland Clinic Health SystemNotes
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Cleveland Clinic Health SystemNotes
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Other Financial Information
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• Ernst & Young LLPSuite 1300925
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Liabilities and net assetsCurrent l
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Liabilities and net assetsCurrent l
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Cleveland Clinic Health SystemConso
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Cleveland Clinic Health SystemConso
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APPENDIX CSUMMARY OF BASIC DOCUMENT
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APPENDIX CSUMMARY OF BASIC DOCUMENT
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“Bond Indenture” means the Bond
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period of three months from the com
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PROPERTY”, and all improvements,
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direct, express or charitable trust
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Rate Hedge” for purposes of this
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Debt according to a fixed schedule
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“Officer’s Certificate” means
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provided, however, that Series 2008
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(t) liens on money or obligations d
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Project Administrator. In the event
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“Stated Maturity” means, when u
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(b) the Cleveland Clinic, or if the
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(d) the Master Trustee receives an
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(g) the loan of cash or other non-O
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under this caption shall be deemed
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Supplemental Indenture to which suc
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emedy thereunder, unless the Noteho
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purchase or other acquisition or re
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limitation, (A) the Special Funds a
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(b) Default in the payment of the p
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Fund Requirements, in the order of
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(g) to evidence the appointment of
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THE LEASEThe Lease contains various
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(a) Failure by the Cleveland Clinic
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APPENDIX DPROPOSED FORM OF OPINION
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PROPOSED TEXT OF LEGAL OPINION OFSQ
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October __, 2008Page 32008A Bonds c
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