OVERLAKE HOSPITAL ASSOCIATION

OVERLAKE HOSPITAL ASSOCIATION

Consolidated Financial Statements and Consolidating Information

June 30, 2018 and 2017 (With Independent Auditors' Report Thereon)

KPMG LLP Suite 2900 1918 Eighth Avenue Seattle, WA 98101

Independent Auditors' Report

The Board of Directors Overlake Hospital Association:

We have audited the accompanying consolidated financial statements of Overlake Hospital Association and subsidiaries, which comprise the consolidated balance sheets as of June 30, 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 consolidated financial statements in accordance 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Overlake Hospital Association and subsidiaries as of June 30, 2018 and 2017, and the results of their operations and their cash flows for the years then ended, in accordance with U.S. generally accepted accounting principles.

KPMG LLP is a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

Other Matters Our audit was performed for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating information in Schedules 1 and 2 is presented for the purposes of additional analysis and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. October 15, 2018

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OVERLAKE HOSPITAL ASSOCIATION Consolidated Balance Sheets June 30, 2018 and 2017 (In thousands)

Assets

Current assets:

Cash and cash equivalents

$

Receivables, net of allowance for uncollectible accounts of $9,465

in 2018 and $9,009 in 2017

Current portion of pledges receivable

Current portion of assets whose use is limited

Supplies inventory

Prepaid expenses

Other current assets

Total current assets

Assets whose use is limited: Restricted by donors Management designated Funds held under bond indenture and collateral agreements Less current portion

Total assets whose use is limited, net of current portion

Investments Long-term portion of pledges receivable, net Other long-term receivables, net Land, buildings, and equipment, net

Other assets: Investments in joint ventures Prepaid pension Other assets

Total other assets

Total assets

$

2018

29,730

60,787 2,158 6,946 9,744

10,722 5,519

125,606

10,657 4,041

118,939 (6,946)

126,691

466,515 4,743 3,043

253,178

2,740 --

1,917

4,657 984,433

2017

18,404

54,983 706

8,488 9,029 8,154 5,798

105,562

16,023 3,536 8,488 (8,488)

19,559

408,061 3,252 3,398

240,068

3,091 1,946 2,175

7,212 787,112

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(Continued)

OVERLAKE HOSPITAL ASSOCIATION Consolidated Balance Sheets June 30, 2018 and 2017 (In thousands)

Liabilities and Net Assets

Current liabilities: Current portion of long-term debt Accounts payable Accrued liabilities Deferred revenues Accrued interest payable Payable to third-party agencies

Total current liabilities

Long-term debt, net of current portion Pension liability Other long-term liabilities

Total liabilities

Net assets: Unrestricted net assets Temporarily restricted net assets Permanently restricted net assets

Total net assets

Total liabilities and net assets

2018

$

5,245

21,576

56,168

--

5,699

7,229

95,917

307,653 5,438

11,454

420,462

546,792 11,334 5,845

563,971

$

984,433

See accompanying notes to consolidated financial statements.

2017

8,640 16,928 49,192 14,029

3,729 5,600

98,118

155,816 --

10,842

264,776

502,732 13,874 5,730

522,336 787,112

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