2018 Audited Financial Statements December 31, 2018

2018 Audited Financial Statements December 31, 2018

Sutter Health and Affiliates

Consolidated Financial Statements

Years ended December 31, 2018 and 2017

Contents

Audited Consolidated Financial Statements

Report of Independent Auditors ........................................................................................... 1

Consolidated Balance Sheets ................................................................................................ 2

Consolidated Statements of Operations and Changes in Net Assets .................................... 3

Consolidated Statements of Cash Flows............................................................................... 5

Notes to Consolidated Financial Statements ........................................................................ 7

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The Board of Directors Sutter Health and Affiliates

Report of Independent Auditors

We have audited the accompanying consolidated financial statements of Sutter Health and Affiliates, which comprise the consolidated balance sheets as of December 31, 2018 and 2017, and the related consolidated statements of operations and changes in net assets, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sutter Health and Affiliates at December 31, 2018 and 2017, and the consolidated results of their operations and changes in net assets, and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

ey

March 6, 2019

1

A member firm of Ernst & Young Global Limited

Sutter Health and Affiliates

Consolidated Balance Sheets

(Dollars in millions)

Assets Current assets:

Cash and cash equivalents Short-term investments Patient accounts receivable Other receivables Inventories Other Total current assets

Non-current investments Property, plant and equipment, net Other non-current assets

Liabilities and net assets Current liabilities:

Accounts payable Accrued salaries and related benefits Other accrued expenses Current portion of long-term obligations Total current liabilities

Non-current liabilities: Long-term obligations, less current portion Other

Net assets: Without donor restrictions: Controlling Noncontrolling With donor restrictions

Total net assets

See accompanying notes.

December 31,

2018

2017

$

362 $

395

5,000

5,052

1,223

1,277

835

878

127

118

179

200

7,726

7,920

983 8,193

401

$ 17,303

773 7,954

434

$ 17,081

$

761 $

854

647

576

811

877

57

150

2,276

2,457

4,626 1,290

3,972 1,094

8,530 112 469

9,111

$ 17,303

8,965 108 485

9,558

$ 17,081

2

Sutter Health and Affiliates Consolidated Statements of Operations and Changes in Net Assets

(Dollars in millions)

Net assets without donor restrictions: Operating revenues: Patient service revenues Premium revenues Contributions Other

Total operating revenues

Year ended December 31,

2018

2017

$ 10,957 1,383 6 351

12,697

$ 10,828 1,220 9 387

12,444

Operating expenses: Salaries and employee benefits Purchased services Supplies Depreciation and amortization Rentals and leases Interest Insurance Other

Total operating expenses

5,852 3,372 1,492

681 176 115 15 793

12,496

5,627 3,246 1,391

655 176 105 15 903

12,118

Income from operations

201

326

Investment income

187

336

Change in net unrealized gains and losses on investments

classified as trading

(454)

315

Loss on extinguishment of debt

(54)

(19)

(Loss) income

(120)

958

Less income attributable to noncontrolling interests

(78)

(65)

(Loss) income attributable to Sutter Health

(198)

893

3

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