SSM HEALTH (SSMH)

Disclosure Package

Management Discussion and Analysis (MD&A)

concerning the

Unaudited Consolidated Financial Information for the Year ended December 31, 2019

This document is dated April 29, 2020.

SPECIAL NOTE CONCERNING FORWARD LOOKING STATEMENTS. Certain of the discussions included in the following Management Discussion and Analysis (“Analysis”) may include forward-looking statements, which involve known and unknown risks and uncertainties inherent in the operation of an integrated health care delivery system. In particular, statements preceded by, followed by, or that include the words "anticipates," "believes," “budgets,” "estimates," "expects," “forecasts,” "intends," "plans," "possible," "potential," “predicts,” "projects," "guiding," and similar expressions, constitute forward-looking statements. Actual actions or results may differ materially from those discussed in the Analysis. Specific factors that might cause such differences include but are not limited to: competition from other health care providers, economic conditions in the communities SSM Health serves, state and federal regulation and the policies and practices of private insurers regarding payment for medical services. SSM Health undertakes no obligation to update or publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this report.

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Table of Contents

Report for the Year ended December 31, 2019

Sections: Page

I. Organization ............................................................................... 5 II. Mission ....................................................................................... 5 III. Vision 2025 ................................................................................. 5 IV. Overview .................................................................................... 6 V. Adoption of New Accounting Guidance ...................................... 7 VI. Operating Results ....................................................................... 8 VII. Financial Position ....................................................................... 12 VIII. Subsequent Events .................................................................... 18 IX. Financial Forecast and Guidance ............................................... 18 Tables: Page Table 1: Overview of Current Financial Performance Metrics .......... 6 Table 2: Net Patient Service Revenue Mix ...................................... 8 Table 3: Net Payor Mix .................................................................... 8 Table 4: Key Operational Statistics .................................................. 9 Table 5: Covered Lives per Business Line ...................................... 10 Table 6: Summary of Key Liquidity and Capital Structure Ratios .... 12 Table 7: Unrestricted Portfolio Asset Allocation ............................... 13 Table 8: Summary of Investment Income ........................................ 13 Table 9: Summary of Total Debt ...................................................... 14 Table 10: Summary of Fair Value of Derivatives ............................... 16 Table 11: Liquidation Period of Unrestricted Cash ............................ 16 Table 12: Self Liquidity Indebtedness ................................................ 17 Appendices: Page Appendix A: EBITDA Information ..................................................... 19 Appendix B: Forward Looking Statements ....................................... 20

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I. Organization SSM Health (SSMH or System) is a centrally managed, fully integrated health care delivery system with its headquarters based in St. Louis, Missouri. Through its affiliated corporations, SSMH owns and operates hospitals, long-term care facilities, an extensive network of physician practice operations, a health plan and pharmacy benefit management organization (PBM), as well as other health care businesses, located primarily in four states, and whose related businesses provide health related administrative services to clients in 39 states. SSMH is sponsored by SSM Health Ministries which is a seven-member body comprised of two Franciscan Sisters of Mary (FSM), one Sister of St. Agnes, and four lay people who collectively hold certain reserved powers over SSMH. The health care activities of FSM date back to 1872 when the founder and four other sisters arrived in St. Louis from Germany, committed to serve the sick and the poor. SSMH is contractually obligated to make payments with respect to notes and other obligations issued under a master trust indenture. The entities that comprise the credit group include certain designated affiliates, as well as SSM Health Care Corporation as the obligated group member. However, the credit group does not include Dean Health Plan, SSMH’s physician group practices, charitable foundations, and the interests of SSMH in various other minor subsidiaries and ancillary joint ventures.

II. Mission “Through our exceptional health care services, we reveal the healing presence of God.” This thirteen-word statement was developed in 1999 with involvement and input from over 3,000 employees. The mission statement is intended to guide SSMH’s decisions and actions, and the achievement of “exceptional health care services” is measured by the top decile results in the areas of quality, safety, patient satisfaction, and employee and physician commitment. For financial goals, “exceptional” is set based on goals established through the strategic and financial planning process.

III. Vision 2025 As a Catholic health ministry, SSM Health will be a leader in delivering compassionate, safe, affordable and accessible care designed around the needs of the individual. We will nurture the well-being of our communities and partner with others to seek out innovative solutions to improve health at every stage of life.

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IV. Overview This MD&A report is provided to give management’s view of key factors underlying SSMH’s financial performance and position as of and for the year ended December 31, 2019. The report also includes an update on capital and debt as of December 31, 2019. Unless otherwise stated, financial results relate to the years ended December 31, 2019 and 2018. For detailed financial results please refer to the financial information included in this compliance posting. Certain data and information reflected in this MD&A report may not comply with generally accepted accounting principles (GAAP) and/or statutory accounting reporting requirements; and certain amounts in prior fiscal periods have been reclassified to conform to current year presentation with no impact to the consolidated statement of operations. The data for the year ended December 31, 2018 includes the impact of the sponsorship transfer of Agnesian HealthCare and The Monroe Clinic (hereinafter collectively referred to as “CSA”) to SSMH, which had an effective date of January 1, 2018. However, certain financial ratios have been adjusted to exclude the inherent contribution (excess of fair value of net assets received over the cash consideration paid) associated with the CSA sponsorship transfer, which was approximately $598.8 million. Table 1 – Overview of Current Financial Performance Metrics ($ in millions)

2019 Total Operating Revenues $7,934.6 Operating EBITDA 533.3 Operating Income 150.2 Non-operating Gain, net* 265.8 Excess EBITDA $799.1 *Excludes loss from early extinguishment of debt of $0.4 million.

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V. Adoption of New Accounting Guidance Effective January 1, 2019, SSMH adopted FASB guidance on leases (Topic 842), which requires the rights and obligations arising from lease contracts, including existing and new arrangements, with durations greater than twelve months to be recognized on the balance sheet and enhanced disclosures on key quantitative and qualitative information about leasing. SSMH elected the optional transition method that permits the option to use the effective date as the date of initial application on transition, and as a result, SSMH did not adjust its comparative period financial information or make the new required lease disclosures for periods before the effective date. SSMH elected certain practical expedients, including the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs as well as an accounting policy to account for lease and non-lease components as a single component for certain classes of assets. SSMH also elected the accounting policy election for short-term leases. Consequently, short-term leases will be recorded as an expense on a straight-line basis over the lease term. SSMH did not elect the hindsight practical expedient. SSMH’s leases generally do not provide a readily available implicit rate. Therefore, SSMH estimates the incremental borrowing discount rate based on the remaining lease term upon adoption date and information available at lease commencement for new or modified leases after the adoption date. The discount rates used were based on collateralized basis for similar terms and economic environments. As of January 1, 2019, SSMH recognized an Operating Right-of-Use Asset of $263.3 million and an Operating Lease Obligation of $274.0 million, of which approximately $61.6 million was classified as current and approximately $212.4 million as long-term. Other asset and liability line items in SSMH’s consolidated balance sheet were also impacted by immaterial amounts. There was not a material impact on the consolidated statements of operations and changes in net assets or cash flows. In January 2016, the FASB issued Accounting Standards Update (ASU) 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which requires equity investments to be measured at fair value with changes in fair value recognized in net income. In addition, for private companies and not-for-profit organizations it eliminates the requirement to disclose fair value information about financial instruments measured at amortized cost. SSMH adopted ASU 2016-01 as of January 1, 2019 and it did not have a material impact on the consolidated financial statements. Effective January 1, 2019, SSMH adopted ASU 2016-18, Statement of Cash Flows—Restricted Cash, which requires restricted cash to be included with cash and cash equivalents when reconciling the beginning and ending amounts shown on the consolidated statements of cash flows, and it did not have a material impact on the consolidated financial statements.

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Effective January 1, 2019, SSMH adopted ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which relates to implementation costs incurred in a cloud computing arrangement that is a service contract. The update aligns the requirements for capitalizing implementation costs incurred under such arrangements with the requirements for capitalizing costs incurred to develop or obtain internal-use software. The adoption did not have a material impact on the consolidated financial statements.

VI. Operating Results A. Net Patient Service Revenue: Net patient service revenue (NPSR) increased 1.5%

to $5,223.0 million during the year ended December 31, 2019, compared to the same period in 2018. Net inpatient revenue decreased 1.0%, while net outpatient revenue (including physician operations, skilled nursing, and home health) increased 3.8%. Charity care and deductions for uncollectible accounts declined 3.3% during the period. Table 2 – Net Patient Service Revenue Mix

2019 2018 Chg.* Inpatient 35.8% 36.9% (110)bps Outpatient 64.2% 63.1% 110bps 100.0% 100.0%

*bps stands for basis points Table 3 – Net Payor Mix

2019 2018 Chg. Medicare 27% 28% (100)bps Medicare Managed Care 10% 9% 100bps Medicaid 12% 11% 100bps Medicaid Managed Care 6% 7% (100)bps Managed Care 34% 35% (100)bps Commercial, Self-Pay and Other 11% 10% 100bps

100% 100% Payor mix data is based on patient revenue after contractual adjustments, charity care, and deductions for uncollectible accounts. SSMH’s Adjusted Patient Days (APD) decreased 0.8% during the period reflecting a shift in the procedure mix toward outpatient services, as acute admissions declined while observation days, as well as outpatient visits, increased. This shift is in line with the market and SSMH’s goal to have 65% of patient revenue generated from outpatient services by 2023. Net Patient Revenue per Adjusted Patient Day increased 3.0% to $2,616, mainly due to an increase in acuity levels, with the acute care case mix index (CMI) increasing to 1.66 during the year ended December 31, 2019 from 1.61 during the year ended December 31, 2018.

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Table 4 – Key Operational Statistics

2019 2018 Chg. Acute Admissions 171,891 183,532 (6.3)% Occupancy Rate 65.4% 67.5% (210)bps Adjusted Patient Days (APD) 2,133,068 2,149,373 -0.8% Inpatient Surgeries 39,053 39,602 (1.4)% Outpatient Surgeries 87,056 84,539 3.0% Outpatient Visits 2,107,987 2,067,930 1.9% Emergency Visits 768,224 800,906 (4.1)% Net Patient Revenue per APD $2,616 $2,541 3.0% Observation Days 76,798 61,981 23.9%

B. Premium, PBM, and Other Operating Revenues: Premium, PBM and other

operating revenues, which includes those generated through DHP, Navitus, Lumicera and Dean Retail Services, is comprised of premiums earned, PBM revenue, investment income (operating), other revenues, and net assets released from restrictions. The total of these revenues increased $306.1 million, or 12.7% during the year ended December 31, 2019, compared to the year ended December 31, 2018. Premium revenue decreased by $13.7 million, or 0.9% during the period, despite a slight increase in membership. Rate increases in the group commercial segment were offset by a decline in individual premium rates. Rates for both the group commercial and the individual segments were negatively impacted by the removal of the Federal Health Insurance Tax; rates for both segments combined would have increased by approximately 3% from 2018 levels had the tax been included. In addition, rates in the individual segment were impacted by the enactment of the new Wisconsin reinsurance program, which is expected to lower costs to insurers for higher cost cases, allowing for a reduction in premium rates. Group commercial membership increased significantly during the period, with DHP picking up coverage for local government employees and other commercial groups, mainly as a result of pricing strategies intended to stabilize the segment. However, overall membership was up just slightly from the previous year as membership declines in the individual, Medicare supplement, and Medicaid lines, served to offset increases in the group and Medicare Advantage Prescription Drug (MAPD) lines.

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Table 5 – Covered Lives per Business Line

2019 2018 %

Chg. Group 156,316 151,118 3.4% Individual 32,832 35,138 (6.6)% Medicare Supplement 19,879 21,297 (6.7)% MAPD 5,664 4,637 22.1% Medicaid 35,349 36,367 (2.8)% Other 15,321 15,380 (0.4)% Administrative Services Only 143,533 141,418 1.5%

408,894 405,355 0.9% PBM revenue reflects pharmacy product revenue and other revenues recognized by Navitus, SSMH’s fully transparent, pass-through, PBM company, as well as those generated by Lumicera, SSMH’s specialty pharmacy business. The combined Navitus and Lumicera revenue increased by $108.5 million, or 22.0% during the period, mainly from growth in prescriptions at Lumicera, which have increased at a compound annual growth rate of 53% from 2015 through 2019. Other revenue reflects amounts generated by various other businesses, including Dean Retail Services (the Wisconsin region’s retail pharmacy business). This revenue increased $89.4 million, or 19.0% during the year ended December 31, 2019, compared to the year ended December 31, 2018. The remainder of the increase in Premium, PBM and other operating revenues was related to an increase in operating investment income within insurance operations and foundations, which was up $118.7 million during the year ended December 31, 2019, compared to the year ended December 31, 2018.

C. Total Operating Revenue: Total operating revenues for the year ended December 31, 2019 increased $382.9 million, or 5.1%, to $7,934.6 million compared to the same period in 2018.

D. Operating Expenses and Income: For the year ended December 31, 2019,

operating expenses increased $356.7 million, or 4.8%, compared to the same period in 2018. Compensation expense increased $134.7 million, or 4.2%, during the period mostly due to increases in employee health related medical claims and agency costs associated with nationwide nursing labor shortages. Medical claims expense, net of intercompany eliminations, decreased by $1.0 million, or 0.2%, during the year ended December 31, 2019 compared to the same period in 2018.

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Supplies expense increased by $151.2 million, or 9.2%, during the year ended December 31, 2019 compared to the same period in 2018, mainly from growth in supply expense at Navitus, Lumicera and Dean Retail Services, which was up $133.2 million over the prior period. It should be noted that increases in supply expense for Navitus, Lumicera and Dean Retail Services are more than offset through corresponding revenue growth, which is reflected in PBM revenue for Navitus and Lumicera and Other revenue for Dean Retail Services. The System’s operating income, excluding nonrecurring items, was $150.2 million, or 1.9% of total operating revenue, for the year ended December 31, 2019, compared to $124.0 million, or 1.6% for the same period in 2018. SSMH is committed to ongoing Continuous Improvement (CI) initiatives, including the implementation of a new operating model for the organization along with the creation of an Enterprise Project Management Office (EPMO), which is led by key stakeholders within the organization and has been instituted to create a culture of CI for SSMH. CI workstreams currently include (but are expected to continually evolve over time): supply chain optimization, revenue cycle management, value-based care initiatives, managed care and population health, workforce management, and other growth initiatives. In 2018, SSMH was able to achieve approximately $150 million of value from cost savings and revenue enhancements through CI initiatives. Through the year ended December 31, 2019, SSMH achieved approximately an additional $133 million of value from CI initiatives.

E. Non-Operating Gains and (Losses): Non-operating gains and losses, which include non-operating investment income, the change in fair value of interest rate swaps, non-operating pension costs, as well as other items, was a net gain of $265.4 million for the year ended December 31, 2019. This represents an increase of $361.9 million compared to the same period in 2018, when excluding the inherent contribution related to the CSA sponsorship transfer from the 2018 data, which was approximately $598.8 million. The main growth driver was the increase in non-operating investment income, which was up $419.2 million over the amount reported for the year ended December 31, 2018; this was offset by a decrease in the market value of swaps, which declined $83.8 million over the reported amount for the year ended December 31, 2018.

F. Excess of Revenues Over Expenses: For the year ended December 31, 2019, excess revenue over expenses was $415.6 million, or 5.2% of total operating revenue which represents an increase of $500.9 million compared to the same period in 2018, when excluding the inherent contribution related to the CSA sponsorship transfer from the 2018 results, which was approximately $598.8 million.

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VII. Financial Position A. Key Balance Sheet Ratios: SSMH’s cash and investments (Cash) increased by

$358.5 million during 2019, mainly from improving operations and strong investment market returns. Cash to debt, improved to 128.8% at December 31, 2019 from 114.2% at December 31, 2018. Debt to capitalization showed improvement as well during the period, going from 47.8% at December 31, 2018 to 45.0% at December 31, 2019. Debt service coverage, which excludes the impact of unrealized gains and losses, declined from 6.1 at December 31, 2018 to 5.0 at December 31, 2019, mainly due to the exclusion of significant unrealized gains in the 2019 calculation compared to the exclusion of significant unrealized losses from the 2018 figure. Debt to cash flow trended positively during the period mainly due to a substantial increase in EBIDA during 2019, but also from a slight decline in debt outstanding (from scheduled principal paydowns during the period).

Table 6 – Summary of Key Liquidity and Capital Structure Ratios

Dec 31,

2019 Dec 31,

2018 Chg. % Chg. Cash & Investments ($mm) [1] $3,338.8 $2,980.3 $358.5 12.0% Net Patient AR ($mm) $786.6 $781.7 $4.9 0.6% Net Assets Without Donor Restrictions ($mm) $3,168.2 $2,859.2 $309.0 10.8% Days Cash on Hand [1] 176.9 167.9 9.0 5.4% Accounts Receivable (days) [6] 53.5 53.8 (0.3) (0.6)% Debt Service Coverage [2] 5.0 6.1 (1.1) (18.0)% MADS Coverage [3] 3.4 3.6 (0.2) (5.6)% Debt to Capitalization 45.0% 47.8% (280)bps n/a Debt to Cash Flow [5] 3.0 6.5 (3.5) (53.8)% Cushion Ratio [1][4] 31.7 28.3 3.4 12.0% Current Ratio 0.8 0.9 (0.1) n/a Cash to Debt [1] 128.8% 114.2% 1,460bps n/a [1] Excludes DHP cash and investments of $204.9mm and $238.3mm, in 2019 and 2018 respectively, as well as DHP related daily cash operating expenses. Days Cash on Hand based on rolling 12 months ending on specified period. Cash & investments reflects the term unrestricted cash and investments as defined in bond documents subsequent to 2017. [2] Debt service coverage based on rolling 12-month period ending on the specified date. The calculation excludes a $322.6mm unrealized gain on investments from available income in the 2019 period, and a $233.3mm unrealized loss on investments in the 2018 period. [3] MADS coverage based on rolling 12-month period ending on the specified date. [4] The cushion ratio represents unrestricted cash and investments that are available to cover annual debt service. [5] 2018 cash flow figure adjusted to exclude the inherent contribution of $598.8 million related to the sponsorship transfer of CSA. [6] Excludes DHP related entities from the calculation.

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B. Investments: At December 31, 2019 and 2018, the actual asset class allocation of SSMH’s centralized investment program (CIP), was as follows:

Table 7 – CIP Asset Allocation

Dec 31,

2019 Dec 31,

2018 Chg. Enhanced Cash 4.0% 5.8% (180)bps Equities 43.9% 40.2% 370bps Fixed Income 30.9% 28.7% 220bps Hedge Funds 7.2% 12.7% (550)bps Real Assets 9.6% 9.8% (20)bps Private Equity 4.3% 2.7% 160bps Strategic Private Investments 0.1% 0.1% 0bps

100.0% 100.0% The composite value of all the centralized investment program portfolios was $4,667.2 million at December 31, 2019. This includes $1,673.1 million of pension plan assets that are netted against pension liabilities on SSMH’s consolidated balance sheet. Dean Health Plan and certain foundation assets are not currently included within the CIP but are reflected in the consolidated financial statements of SSMH. Investment performance was positive for the year ended December 31, 2019, with the consolidated investment portfolio (which excludes pension related investments) earning 14.6%, yielding investment income (operating and non-operating) of $433.5 million, which is $537.9 million higher than the amount reported for the same period in 2018. A comparison of the results for 2018 and 2019 is listed in the following table, which includes a breakout of 2019 investment gains by income recognition (realized and unrealized), income segment (operating and non-operating), and the amounts attributed to interest and dividend earnings. The table excludes investment income from donor restricted assets, which is recorded directly to net assets with donor restrictions, in the amounts of $7.7 million and $(1.7) million for 2019 and 2018, respectively.

Table 8 – Summary of Investment Income ($ in millions) a. 2019 - 2018 Comparisons 2019 2018 Interest, dividends and realized gain, net $110.9 $128.9 Change in unrealized gains 322.6 (233.3) Total $433.5 ($104.4)

b. 2019 Sources Investment Gain Classification

Interest & Dividends Realized Gain

Change in Unrealized

Gains Total

Operating $21.3 ($3.3) $78.1 $96.1 Non-operating 48.8 44.1 244.5 337.4 Total $70.1 $40.8 $322.6 $433.5

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C. Debt Structure: At December 31, 2019, SSMH’s total debt, including commercial

paper and lines of credit, decreased by $17.7 million from December 31, 2018, mainly due to principal paydowns.

Table 9 – Summary of Total Debt ($ in millions)

Secured Under the Master

Trust Indenture: Dec 31, 2019 Dec 31, 2018 Chg. Tax-exempt fixed rate debt $774.2 $583.7 $190.5 Taxable fixed rate bonds 1,024.6 1,024.6 0.0 Variable rate demand bonds 452.2 454.0 (1.8) Variable rate direct loans 39.9 243.4 (203.5) Auction rate bonds 3.6 10.0 (6.4) Revolving Line of Credit 60.0 60.0 0.0

Total under Master Indenture 2,354.5 2,375.7 (21.2)

Other: Various NP and other debt 52.9 51.6 1.3 Finance lease obligations 26.6 26.4 0.2 Deferred financing costs (10.8) (12.9) 2.1 Commercial Paper 175.0 175.0 0.0 Revolving Line of Credit 0.0 0.1 (0.1)

Not Secured Under Master Indenture 243.7 240.2 3.5 Total Debt* 2,598.2 2,615.9 (17.7)

Balance Sheet Classification:

Long-Term Debt (excl. current portion) 1,865.8 1,883.1 (17.3) Finance lease obligations (excluding

current portion 20.9 22.9 (2.0)

Current portion (long-term debt and finance lease obligations) 24.3 20.8 3.5

Total Short-Term Debt 687.2 689.1 (1.9) Total Debt* $2,598.2 $2,615.9 $(17.7)

Tax-Exempt Fixed

$774mm31%

Taxable Fixed

$1,025mm41%VRDB

$452mm18%ARS

$4mm0%

LOC $60mm 2%

CP $175mm

7%

Variable DP $40mm

2%

Product Mix

*Figures in the table above include unamortized premiums/discounts, but exclude Operating Lease Obligation; differences in graphs below due to rounding

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SSMH utilizes lines of credit for general corporate purposes. In April 2019, SSMH renewed a revolving line of credit agreement for $500.0 million, which is secured under SSMH’s existing Master Trust Indenture, for an additional 364-day term ending April 3, 2020. At December 31, 2019, SSMH had $60.0 million outstanding on the line, which was related to the redemption of the Series 2014I bonds. At December 31, 2019, SSMH maintains a taxable Commercial Paper program totaling $400.0 million, of which $175.0 million was issued and outstanding at December 31, 2019. SSMH’s commercial paper has historically traded at the London Inter-bank Offered Rate (LIBOR) or better and has broadened the investor base for SSMH beyond traditional tax-exempt investors. The following financing activity has occurred over the year ended December 31, 2019: • On July 17, 2019, SSMH closed on the issuance of the Series 2019 bonds. This

transaction included the issuance of $239.3 million in principal of debt placed in private transactions that was used to: o Refinance the direct placement Series 2012B with PNC Bank ($62.5 million in

principal outstanding as of the transaction date); o Refinance the direct placement Series 2014K with PNC Bank ($76.8 million in

principal outstanding as of the transaction date); and, o Refinance the direct placement Series 2014H with Union Bank ($100.0 million

in principal outstanding as of the transaction date). The entirety of Union Bank related debt was refinanced as part of the Series 2019 transaction.

• SSMH funded scheduled payments of $22.0 million during the period. D. Derivative Instruments: As of December 31, 2019, SSMH had six floating-to-fixed

interest rate swaps, four fixed spread basis swaps, three total return swaps, and two fixed-to-floating interest rate swaps. SSMH generally uses its derivatives portfolio to manage the System’s interest cost and debt duration.

Under the outstanding floating-to-fixed swaps, SSMH receives LIBOR or a percentage of LIBOR plus a spread of 0.12% and pays a fixed rate. Under the fixed spread basis swaps, SSMH pays a rate based on the Securities Industry and Financial Markets Association Municipal Swap Index (SIFMA) and receives a percentage of LIBOR plus a spread ranging from 0.40% and 0.62%. Under the total return swaps, SSMH pays both a fixed rate equal to the coupon interest rate on the underlying bond or direct placement loan, as well as a variable rate based on SIFMA plus a spread, then receives the same fixed rate equal to the coupon interest rate on the underlying bond or direct placement loan. Under the fixed-to-floating interest rate swaps, SSMH receives a fixed rate and pays three-month LIBOR or SIFMA. Counterparties to SSMH’s swaps are diversified and include Goldman Sachs, JP Morgan, Citibank, Wells Fargo, Union Bank, Deutsche Bank, Barclays and PNC Bank.

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The swaps had a total notional amount of $1,383.8 million with a total mark-to-market value of $(160.4) million as of December 31, 2019, which is a decline of $54.5 million compared to the mark-to-market value as of December 31, 2018. In the event that the mark-to-market valuation reaches a certain negative value, SSMH may be required to post collateral for the benefit of the swap counterparty. Based on the mark-to-market valuation as of December 31, 2019, SSMH had posted $2.0 million in collateral for the benefit of the counterparties. Table 10 – Summary of Fair Value of Derivatives

Dec 31, 2019 ($ in millions)

Derivatives not designated as hedges

Maturity Date of Derivatives

Fixed Rate

Notional Amount

Outstanding Fair Value

Interest rate swaps 2034 - 2044 2.068% - 5.216% $1,383.8 $(160.4) The estimated fair values of the interest rate and basis swap instruments have been determined using available market information and valuation methodologies, primarily discounted cash flows.

E. Liquidity: The following table describes the liquidation period of the unrestricted cash

and investments of SSMH as of December 31, 2019 (exclusive of certain DHP assets). Table 11 – Liquidation Period of Unrestricted Cash

Liquidation Period Amount ($ in millions) Cumulative %

T+0 $603.3 18% T+3 1,799.2 72%

Monthly or Less 409.2 84% Quarterly or Less 104.1 87%

Illiquid 423.0 100% Total $3,338.8

The following table describes the self-liquidity indebtedness of SSMH. For purposes of this table, "self-liquidity indebtedness" means indebtedness that is subject to mandatory tender or maturity within one year or less, excluding the current portion of long-term indebtedness and lines of credit.

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Table 12 –Self Liquidity Indebtedness Principal

Amount ($ in millions) CP Mode VRDB $200.0 Daily VRDB 53.4 Weekly VRDB 198.8 Taxable CP 175.0 Total Self-Liquidity Debt $627.2

F. Risk Based Capital: SSMH uses Risk Based Capital (RBC) to monitor the adequacy

of liquidity and capitalization of DHP. RBC is a method of measuring the minimum amount of capital appropriate for a reporting entity to support its overall business operations in consideration of its size and risk profile. For health insurance companies, regulatory action is activated when RBC falls below 200%. The RBC statistics for DHP stood at 518% as of December 31, 2019 (RBC is reported on an annual basis).

G. Capital Planning: SSMH’s capital plan reflects the strategic initiatives of SSMH. As

part of the ongoing strategic and community needs planning process, management regularly assesses near-term and long-term capital requirements for each of its markets including strategic and growth opportunities as well as replacement needs. Management assesses strategic opportunities beyond the existing facilities for growth and to improve access to care in the communities SSMH serves. The capital expenditure investment for SSMH, which is focused on physician alignment and outpatient expansion, but also includes routine equipment replacement, significant infrastructure replacement, and adoption of new technologies, was approved at $508 million for 2019. Through the year ended December 31, 2019, capital expenditures were approximately $486.3 million, which includes approximately $203.5 million for SSM Health Saint Louis University Hospital (SSMH-SLUH). SSMH-SLUH is anticipated to be completed by September 1, 2020. Based on the current environment, management has reduced its expectation for capital spending in 2020 from approximately $500 million to $430 million. Future capital plans are still being assessed and further changes in capital spend may be included in subsequent disclosures. Management expects that the sources of funding for capital projects for fiscal years 2019 and 2020 will be cash from operations, investment earnings, and bond financing under the Master Indenture. Management reviews proposed capital expenditures from time to time, and evaluates capital expenditures based on a variety of factors, including results from operations, debt capacity, status of the financial markets, strategic importance of an individual project, community needs, and identified marketplace opportunities.

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VIII. Subsequent Events Currently it is premature to comment on the likely impact SSMH will experience as a result of the coronavirus 2019 (COVID-19) pandemic. Beginning in mid-March, the ministries have experienced substantial declines in volumes as a result of the cancellation of all elective procedures and surgeries. SSMH has applied for all available assistance and relief, including funds available as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Management will continue to monitor and assess the situation and plan to provide more detailed comments in future quarterly filings. On March 3, 2020, SSMH announced that it had sold a minority interest in its PBM, Navitus Health Solutions (Navitus), including its subsidiary Lumicera Health Services (a specialty pharmacy business), to Costco. The financial terms of the transaction were not disclosed. The cash proceeds, accounted for as an equity transaction, were not material to the consolidated financial position of SSMH. The partnership with Costco is expected to enable SSMH to more rapidly expand the Navitus business model to benefit more people. Navitus operates as a 100% pass-through PBM, which means every dollar in rebates, fees and incentives from drug manufacturers is passed through to its clients, along with all network discounts. This approach fully aligns Navitus with its client’s goals, resulting in significantly lower overall pharmacy costs. As a part of the transaction, effective February 27, 2020, Navitus Health Solutions, LLC and Lumicera Health Services, LLC ceased to be designated as members of the Credit Group, while Navitus Holdings, LLC (parent of Navitus Health Solutions, LLC and Lumicera Health Services, LLC) will still be included in the Credit Group. On March 27, 2020, SSMH renewed a revolving line of credit agreement for $500.0 million, which is secured under SSMH’s existing Master Trust Indenture, for an additional 364-day term ending March 26, 2021. The line was renewed at the same terms as 2019. As of the publishing date of this document, SSMH had approximately $440.0 million of capacity on the line.

IX. Financial Forecast and Guidance

SSMH is committed to providing transparent, thoughtful, and routine disclosure of financial results to the capital markets. In the disclosure for the first quarter of 2018, SSMH began providing guidance related to annual total operating revenue, annual operating EBITDA, and annual operating income, which it committed to updating on a quarterly basis. In January 2020, SSMH posted operating guidance for 2020. However, due to the uncertainty of the impact on operations from COVID-19, SSMH is suspending its financial forecast and guidance until further notice.

As stated in prior disclosures, financial results may be affected by a number of factors and are dependent upon the occurrence of future events that cannot be assured. SSMH makes no warranty of assurance regarding achievability of any stated guidance.

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APPENDIX A EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION &

AMORTIZATION (EBITDA) INFORMATION ($ in millions)

2019 2018 Chg. % Chg. Total Operating Revenues $7,934.6 $7,551.7 $382.9 5.1% Operating EBITDA* $533.3 $514.0 $19.3 3.7% Excess EBITDA* $799.1 $430.6 $368.5 85.6% Operating EBITDA %* 6.7% 6.8% (10)bps n/a Excess EBITDA %* 10.1% 5.7% 440bps n/a * 2018 figures exclude nonrecurring expenses of 112.8 million. ** 2019 figures exclude a loss from early extinguishment of debt of $0.4 million. 2018 figures exclude the inherent contribution of $598.8 million related to the sponsorship transfer of CSA as well as a loss from early extinguishment of debt of $13.0 million.

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APPENDIX B Forward Looking Statements

Certain of the discussions included in this Analysis may include forward-looking statements, which involve known and unknown risks and uncertainties inherent in the operation of an integrated health care delivery system. In particular, statements preceded by, followed by, or that include the words "anticipates," "believes," “budgets,” "estimates," "expects," “forecasts,” "intends," "plans," "possible," "potential," “predicts,” "projects," "guiding," and similar expressions constitute forward-looking statements. These forward-looking statements are based on current plans and expectations that are subject to a number of known and unknown uncertainties and risks, many of which are beyond the control of management of SSM Health, which could significantly affect current plans and expectations and the future financial position and results of operations for the organization. Specific factors that might cause such differences include, but are not limited to:

• The impact of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”), including the effects of any repeal of, or changes to, the ACA or changes to its implementation

• The impact of current and prospective tax reform measures, including those that would result in a higher uninsured population in the U.S., and in particular, the areas were SSM Health provides services

• The impact of federal budget cuts on reimbursement for services provided by SSM Health

• The possible enactment of additional federal or state health care reforms and possible changes to other federal, state or local laws or regulations affecting the health care industry

• Adjustments resulting from reimbursement audits, including audits by the Medicare Recovery Audit Contractor program

• Increases in the frequency or severity of uncollectible amounts associated with uninsured accounts or for deductibles and copayment amounts for insured accounts

• The ability to execute strategic initiatives and achieve operating and financial goals, including the ability to generate expected levels of patient volumes and control the costs of providing services

• Increases in the amount and type of competition, both from market incumbents and new entrants, in SSM Health’s market service areas

• Changes in service mix and/or revenue mix, including potential declines in the population covered under third-party payer agreements, the ability to enter into and renew third-party payer provider agreements on acceptable terms and the impact of consumer-driven health plans and physician utilization trends and practices

• The impact from the actions of health insurers, health care providers, large employer groups and others to contain health care costs

• Increases in wages and the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical and technical support personnel

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• The availability and terms of capital to fund the expansion of our business and improvements to our existing facilities

• Changes in accounting practices • Changes in general economic conditions nationally and regionally in SSM Health’s

market service areas • The increasing number and severity of cyber threats and the costs of preventing

them and protecting patient and other data • Changes in business strategy or development plans • The impact of natural disasters, such as hurricanes and floods, or similar events

beyond our control • Other various risk factors.

SSM Health undertakes no obligation to update or publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this report.