2019 Financing Investor Presentation
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(2) Disclaimer. The Investor Presentation you are about to view is provided as of September 13, 2019, for a proposed offering of Dormitory Authority of the State of New York, Northwell Health Obligated Group, Series 2019A&B Tax-Exempt Bonds, and Northwell Health, Series 2019A Taxable Bonds (the “Bonds”). Market prices, financial data, and other information provided herein are not warranted as to completeness or accuracy and are subject to change without notice.. This Investor Presentation is provided for your information and convenience only. By receiving this presentation, you agree not to duplicate, copy, download, screen capture, electronically store or record this Investor Presentation, or to produce, publish or distribute this Investor Presentation in any form whatsoever. This Investor Presentation does not constitute an offer to sell or the solicitation of an offer to buy any security or other financial instrument, including the Bonds, or to adopt any investment strategy. Any offer or solicitation with respect to the Bonds will be made solely by means of the Preliminary Official Statement, Official Statement, Preliminary Offering Memorandum or Offering Memorandum, which describe the actual terms of such Bonds. The underwriters make no representations as to the legal, tax, credit or accounting treatment of any transactions mentioned herein, or any other effects such transactions may have on you and your affiliates or any other parties to such transactions and their respective affiliates. In no event shall the underwriters or the Issuer be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction mentioned herein. Nothing in these materials constitutes a commitment by the underwriters or any of their affiliates to enter into any transaction. No assurance can be given that any transaction mentioned herein could in fact be executed. Any investment decision regarding the Bonds should only be made after a careful review of the complete Preliminary Official Statement or Preliminary Offering Memorandum. You will be responsible for consulting with your own advisors and making your own independent investigation and appraisal of the risks, benefits, appropriateness and suitability of the proposed transaction and any other transactions contemplated by this presentation and neither the Issuer nor the underwriter is making any recommendation (personal or otherwise) or giving any investment advice and will have no liability with respect thereto. Transactions involving the Bonds may not be suitable for all investors. You should consult with your own advisors as to the suitability of the Bonds for your particular circumstances. Past performance is not indicative of future returns, which will vary. This Investor Presentation may contain “forward‐looking” statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results may differ materially from those expressed or implied by such forward‐looking statements. We caution you not to place undue reliance on these statements. All statements other than the statements of historical fact could be deemed forward‐looking. All opinions, estimates, projections, forecasts and valuations are preliminary, indicative and are subject to change without notice. Prospective investors should contact their salesperson at, and execute transactions through an underwriter for the Bonds qualified in their home jurisdiction unless governing law permits otherwise. 2.
(3) Investment Highlights • Large scale, covering broad geographic area – more than 8 million people • Stable financial profile • #1 in market, with continued market share gains • 29.9% inpatient market share, more than 2x that of any other provider in the greater metro NY area • Largest market share growth in last 6 years compared to top 5 systems in service area • Demonstrated track-record of successful integration of acquired hospitals, physician practices, and other assets • Experienced, stable management team • Centralized governance & strategic decision-making. 3.
(4) •. •. The Northwell Perspective. •. A proud history of achievement; innovation and growth. − Consistency of strategy and purpose − Stability of performance A recognition of how much has changed. − Role of the hospital − Creation of a distributed network − New programs; new business A progressive culture. − Collaborative and team-based − Optimistic, integrated and adaptive. •. An understanding of the responsibility and obligation of leadership. − An agent of continuous change and practical disruption − Responsibility to the community at large. •. A commitment to the promotion and advancement of overall health. − More than the delivery of excellent medical care − Long-term view; multi-year perspective 4.
(5) Key Facts. …The largest integrated. health system in New York State. 19. $11.6 billion. hospitals. 750+. operating revenue. ambulatory facilities. 5.5 million patient encounters. 29.9%. inpatient share of market. 1,800 1,800 residents. residents and and fellows fellows in in 120 120 programs programs. 4,000. researchers. 2,500. clinical research studies conducted. 4,300+. employed physicians. 12,600+. affiliated physicians. nearly. 70,000 employees. 5.
(6) Northwell Health Major Components. 6.
(7) We Have Been Busy This Past Year. 7.
(8) Key Focus Areas. Current Operations Growth Diversification 8.
(9) Current Operations – Enhanced Effectiveness Cumulative Beds Created Through Efficiency. 800 700 600. 571. 500 400. 402. 300. 227. 200 100 -. 280. 436. 469. 660. 612. 506. 339. 120 53 2007. 2008. 2009. 2010. 2011. 2012. 2013. 2014. 2015. 2016. 2017. 2018. 9.
(10) Current Operations – Enhancing Our P&L: Revenue & Expense Focus. 10.
(11) Growth – 19 Hospitals and 750+ Ambulatory Locations. 11.
(12) Growth – Ambulatory Network Referral Funnel Credentialed Voluntary Physicians………. Voluntary Premium IPA…………………………….. Employed Physicians………………………………………. Ambulatory Practices………………………………………….... 13,600 2,446 4,380 636. Urgent Care Centers…………………………………………………... 52. Ambulatory Surgery Centers…………………………………………. 15(1). 750+(2) Ambulatory Locations. Hospitals & Post Acute Services. The referral funnel has caused many of our Hospitals to be at or above full capacity (1) (2). Includes majority and minority-owned joint ventures as well as hospital-based ASCs. Total also includes non-physician practice ambulatory locations, such as imaging centers.. 12.
(13) Growth – Expanding Operating Revenue ($ in Billions) $12.0B. $11.6B. $10.0B. $10.0B. $9.3B $8.5B. $8.0B. $7.4B $7.0B $6.6B $6.2B. $6.0B. $5.5B $4.8B. $4.0B $2.5B $2.6B. $2.0B. $2.8B $2.9B. $3.1B. $3.4B. $3.6B. $3.8B $3.9B. $4.2B. $4.4B. $1.7B $1.7B $1.0B. -. 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018. Note: Excludes Health Insurance companies. 13.
(14) Growth – Expanding Market Share. Source: SPARCS data as of 2018 YTD September based on discharges and patient origin; excludes normal newborns (DRG 795). Market includes Staten Island, Queens, Manhattan, Nassau, Suffolk, and Westchester residents. * Includes all Northwell hospitals in both years, including Peconic Bay, which joined Northwell on January 1, 2018, and all competitor hospitals for both years.. 14.
(15) Diversification – Shifting to Ambulatory. Note: Excludes Health Insurance companies. 15.
(16) Growth – Telehealth Initiatives. Telehealth Services enable the highest quality of specialist care in both inpatient and outpatient settings. • An interdisciplinary team from across the enterprise. • Interconnecting our backend systems to provide a digitallypowered, patient-centric experience. 16.
(17) Diversification – Clinical Joint Ventures. Leveraging investments & partnership expertise to enter new markets and expand clinical capabilities 13 Joint Venture Surgery Centers. 52 Urgent Care Centers. 7 centers operational 7-10 more within the next 2 years(1) 150,000 treatments annually. Additional centers in Development(1). (1). Subject to receipt of regulatory approvals.. 17.
(18) Diversification – Expanding Opportunities Moving to For-Profit. 18.
(19) Results – 2018 & 2017 Performance ($ in Thousands). Year Ended December 31 Operating revenue: Net patient service revenue Other revenue Total operating revenue. 2017 9,255,313 714,457 9,969,770. Amt $ 1,361,670 175,563 1,537,233. % 14.7% 24.6% 15.4%. 5,851,950 1,347,618 3,530,160 474,509 146,660 11,350,897. 5,212,002 1,230,621 2,841,508 431,497 129,509 9,845,137. 639,948 116,997 688,652 43,012 17,151 1,505,760. 12.3% 9.5% 24.2% 10.0% 13.2% 15.3%. 156,106. 124,633. 31,473. 25.3%. Health Insurance Companies excess of operating expenses. (21,711). (143,370). 121,659. 84.9%. Total excess (deficiency) of operating revenue over operating expenses Non-operating gains and losses. 134,395 (111,501). (18,737) 312,982. 153,132 (424,483). 817.3% -135.6%. $ (271,351). -92.2%. $. Operating expenses: Salaries Employee benefits Supplies & expense Depreciation and amortization Interest Total operating expense Excess of operating revenue over operating expenses excluding Health insurance Companies. Excess of revenue and gains and losses over expenses. $. 2018 10,616,983 890,020 11,507,003. Change. 22,894. $. $. 294,245. 19.
(20) Results – 2018 Highlights • Operating income and operating margin of $134.4 million and 1.2%, respectively. • Three significant non-recurring transactions included in 2018 resulted in a decrease to total operating income of $12.8 million: $104 million of other operating revenue was recognized from the proceeds received from the Medical Liability Mutual Insurance Company (“MLMIC”) demutualization transaction $78 million in expense was recorded relating to the amended agreement with Optum360, LLC $39 million reserve was recorded within the Health Insurance Companies related to updated expectations of regulatory relief from NYS related to the ACA risk adjustment program. New York State Department of Financial Services (“DFS”) recently announced revised guidance related to the relief regulation and the remaining relief balance was fully reserved due to the uncertainty caused by a lawsuit filed by a large health insurance company contesting the regulatory relief 20.
(21) Results – June 2019 & 2018 Performance ($ in Thousands). Operating revenue: Net patient service revenue Other revenue Total operating revenue. $. Operating expenses: Salaries Employee benefits Supplies & expense Depreciation and amortization Interest Total operating expense Excess of operating revenue over operating expenses excluding Health insurance Companies Health Insurance Companies excess of operating expenses Total excess (deficiency) of operating revenue over operating expenses Non-operating gains and losses Excess of revenue and gains and losses over expenses. Unaudited Six Months Ended June 30 2019 2018 5,617,965 $ 5,165,555 438,303 398,800 6,056,268 5,564,355 3,111,744 729,847 1,817,638 256,150 71,017 5,986,396. 2,845,516 684,046 1,663,657 246,617 71,656 5,511,492. 69,872 69,872 323,142 $. 393,014. $. Change Amt $ 452,410 39,503 491,913. % 8.8% 9.9% 8.8%. 266,228 45,801 153,981 9,533 (639) 474,904. 9.4% 6.7% 9.3% 3.9% -0.9% 8.6%. 52,863. 17,009. 32.2%. -. -. 0.0%. 52,863 125,513. 17,009 197,629. 32.2% 157.5%. 178,376. $ 214,638. 120.3%. 21.
(22) Results – Stable Performance in Period of Growth and Investment Operating Cash Flow Margin. 4.0% 3.0% 2.0%. 3.2%. 1.0% -. 2016. 1.3%. 1.4%. 1.2%. 2017. 2018. 2019 June YTD. 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0%. Cash to Debt 95%. 48.0%. 90%. 46.0%. 80% 75%. 97.8%. 2016. 86.5% 2017. 3.0x 6.7%. 91.0%. 2018. 44.0%. 5.0% 2016. 2017. 2018. 46.9%. 48.7%. 40.0%. 2016. 2019 June YTD. 2018. 1.0x. 2016. 2.6x. 2017. 3.3x. 3.4x. 2018. 2019 June YTD. Unrestricted Cash & Investments and Days Cash on Hand3. 45.6%. 2017. 3.4x. 2.0x. 2. 48.5%. 42.0% 2019 June YTD. 6.6%. 6.5%. 2019 June YTD. $3.5 $3.0. 105. 105. 102. 103. $2.5. $1.0. $2.7. $3.0. $3.1. $3.2. 60 40 20. $0.5 -. 100 80. $2.0 $1.5. 120. 2016. 2017. 2018. 2019 June YTD. -. Please refer to the Preliminary Offering documents for detailed figures. Amounts above may be rounded. 1: Excludes Health Insurance Companies. 2: Capitalization is 22 defined as the sum of total outstanding debt and total net assets, excluding those related to permanent endowments.. 3: Refer to Note 4 to the Audited Consolidated Financial Statements in Appendix B-1 and Note G to the Unaudited Interim Consolidated Financial Statements in Appendix B-2 for more information.. Days Cash on Hand. 50.0%. 90.7%. 4.0x. Debt to Capitalization. 100%. 85%. Long-Term DebtService ServiceCoverage Coverage Debt. Total Unrestricted Cash and Investments ($ billions). Operating. Margin1.
(23) Proposed Plan of Finance Overview* Tax-Exempt Fixed Rate Bonds. Par ($mm):. Series 2019A. Series 2019B-1. Series 2019B-2. Series 2019B-3. Series 2019A. $40.860. $53.240. $53.240. $53.240. $449.360. Issuer:. Purpose: Mandatory Tender Date: Final Maturity:. Taxable (Corporate CUSIP) Fixed Rate Bonds. Tax-Exempt Put Bonds. Northwell Healthcare, Inc.. Dormitory Authority of the State of New York Current Refunding of Series 2009E Bonds N/A 5/1/2033. General Corporate Purposes. New Money 5/1/2022 (Hard Put). 5/1/2024 (Hard Put). 5/1/2026 (Hard Put). 5/1/2048. Security:. Gross Revenue Pledge Mortgages on Core Hospital Facilities1. Ratings:. Moody’s: A3 (Stable Outlook) S&P: A- (Stable Outlook) Fitch: A- (Stable Outlook). Pricing:. Tuesday, September 17. Closing:. Thursday, September 26. N/A 11/1/2049. *Preliminary and subject to change. 1) Certain springing provisions will be consented to in conjunction with the purchase of the bonds offered in the financing. Please refer to the offering documents for additional details.. 23.
(24) Contact Information Please contact the following individuals with any questions: Michael Irwin Citi, Managing Director 212-723-5624 [email protected]. Joan Marron Morgan Stanley, Managing Director 212-761-9049 [email protected]. Katherine Meyers Citi, Director 212-723-5285 [email protected]. Barbara Scudder Pritchard Morgan Stanley, Executive Director 212-761-9082 [email protected]. POS Link:. https://www.munios.com/munios-notice.aspx?i=Q76KHf4dvMS4. POM Link:. https://www.munios.com/munios-notice.aspx?e=JPCIE. 24.
(25) Thank You.
(26)
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