WASHINGTON COUNTY HEALTH SYSTEM, INC



BUSINESS INTEGRITY PROGRAM

Policy Manual

APPROVED: May 14, 1998

by BOARD OF DIRECTORS

WASHINGTON COUNTY HEALTH SYSTEM

formerly titled “Legal Compliance Program”

Revised 2/2001

10. Tax-Exempt Bonds

Washington County Hospital Association sometimes issues tax-exempt bonds to finance construction and improvement projects. Since these bonds can be publicly bought and sold, some activities of the Hospital are regulated by federal securities law. These laws decide how information about the Hospital and its related organizations can be used and publicly revealed. The laws also regulate how information about the Hospital can be offered to individuals who are considering purchasing or selling the bonds.

(a) Continuing Disclosure

The Securities and Exchange Commission (SEC) requires that the Hospital provide regular information about its operations to bondholders. The Hospital is committed to complying with these rules, and makes the information available accurately and on time. The Hospital does not allow employees to use confidential information about Hospital operations to purchase bonds themselves. Employees will be reminded each year of their duty to keep business information confidential and to not use this information to purchase bonds themselves (called “insider trading”).

(b) Insider Trading

It is usually against the law for anyone to buy or sell securities if they know important information not available to the general public. This applies even if the person is buying or selling securities for another person. It is also against the law to communicate confidential important information to others if they may use the information to buy or sell securities. It is still illegal even if the information is merely passed on to others who may trade in the securities. All employees, trustees, and professional staff members must comply with these "insider trading" restrictions.

If a person is convicted of violating the insider trading rules, they may have to repay up to three times the profit they earned. They may also face criminal fines of up to $1,000,000, and may be jailed for up to 10 years. They may also have to pay civil damages to anyone harmed by their trading. If an employee violates the insider trading rules, their employer may have to pay a fine up to $1,000,000 or three times the profit earned illegally.

Any information that an investor might consider important in deciding whether to buy, sell, or keep securities is considered "material". Examples of some types of material information are:

➢ financial and operating results for the month, quarter, or year

➢ financial forecasts, including postponed or approved budgets

➢ utilization statistics such as occupancy rates, payor mix, number of discharges and ambulatory visits, etc.

➢ awarding or loss of major research funding

➢ possible mergers, acquisitions, joint ventures and other purchases and sales of companies and investments in companies

➢ obtaining or losing important contracts

➢ major personnel or medical staff changes

➢ major developments in lawsuits

Information that is likely to affect the price of securities is almost always material.

Information is non-public unless it has been disclosed to the public, for example, by a press release. The information must not only be publicly disclosed, but there must also be adequate time for the public to analyze the information. All information about the Hospital or its business plans is potentially "insider" information until publicly disclosed or made available by the Hospital. Thus, Hospital employees may not disclose it to others, such as relatives, friends, or business or social acquaintances, without a need to know it for legitimate business reasons.

When an employee (or a member of the professional staff or trustee) knows important non-public information about the Hospital, he or she is not allowed to:

➢ trade in the Bonds for themselves or someone else (including any trusts they are involved with, or any other entity that buys or sells securities, such as a mutual find)

➢ have anyone else trade for them

➢ disclose information to anyone else who then trades or "tips" another person who trades.

These prohibitions are in place for as long as the information continues to be material and non-public. Anyone who is considering buying or selling the Bonds should obtain specific prior approval from the Director of Business Integrity if they are concerned the transaction might involve the improper use of material non-public information.

We encourage anyone interesting in buying or selling Hospital bonds to contact their own attorney.

We should all remember that others may be listening to us or watching us and may be able to pick up information they should not have. We should not, for example, discuss the Hospital's affairs in places where we can be overheard by others--such as corridors, elevators, the cafeteria, restaurants, and on cellular phones--and we should be careful about how we handle and dispose of sensitive papers. Any questions or concerns about disclosure of non-public information should be brought to the Director of Business Integrity.

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