Covenant Health

“On December 5, 2016, Covenant Health, parent company of the organization, changed its corporate bylaws as follows: While the organization has in prior periods maintained a robust internal audit function, the organization amended its bylaws to create the position of "internal audit officer." The internal audit officer is appointed by the president and is to be invited to all meetings of the existing Audit Committee to provide information and answer questions posed by the Audit Committee. The internal audit officer shall also be responsible for preparing and reporting information necessary for the Audit Committee to carry out its functions and shall make an annual report to the Audit Committee on the status and effectiveness of the internal audit function. Direct access to the Audit Committee and the Board of Directors shall be afforded the internal audit officer when the officer deems necessary. Amendments were made to the bylaws to delegate to the Integrity Compliance Committee the authority to approve contracts or other arrangements involving or relating to transactions in which a director or officer has a conflict of interest, except where such authority is retained by the Board of Directors or delegated to another committee. The purpose of this amendment is to ensure that the committee of the board charged with leading the organization's compliance effort reviews all potential conflict of interest transactions consistent with the organization's previously adopted and expansive conflict of interest policies and procedures.”

“Part VI, Section B, Line 11: Covenant Health is a large integrated health system which files fourteen Forms 990. Annually, at the September Finance Committee meeting, one of the fourteen 990s is selected (a different entity each year) for distribution to each member of the Committee. Management then reviews in detail each of the Form 990 schedules and describes variances between entities, if any. The remaining thirteen Forms are made available for review by any committee member. The same presentation is made to the Covenant Health Board of Directors at the October meeting. All fourteen Forms 990 are then made available to all board members for their review throughout the month of October.”

“Board members, officers and employees are required to adhere to rules and policies regarding conflicts of interest. Covenant Health distributes a board-approved Code of Conduct to all employees. The Code covers among other subjects, conflicts of interest. Additionally, managers are required to complete and sign a bi-annual management certification that addresses conflicts of interest. Board members' conflicts of interests are dealt with in the corporate bylaws, and board members are required to complete and sign a conflict of interest questionnaire on an annual basis. The Integrity Compliance Office maintains records that contain conflict of interest information obtained from board members, officers and employees. These records are available to be queried prior to engaging in business transactions. The Integrity Compliance Officer initially reviews all conflict of interest data. Based on this information, the officer determines what conflicts of interest exist at that point in time. Between times when surveys are collected board members are expected to disclose any new conflicts that have arisen that affect pending board decisions. As well, managers and other employees are expected to report conflicts to the Integrity Compliance Officer as they arise. Depending on the nature of the conflict and the circumstances surrounding the conflict and transaction, the Integrity Compliance Officer, Senior Leadership, or the Board of Directors may review the conflict of interest. Where appropriate these bodies may also consult legal counsel. Restrictions imposed on persons with a conflict of interest are determined on a case by case basis. For Covenant Health employees, the Integrity Compliance Officer in conjunction with Executive Leadership determines how to appropriately handle the conflict. In any conflict involving a board member, such member is expected to excuse himself or herself from voting on matters that give rise to the conflict.”

“Form 990, Part VI, Section B, Line 15a: Annual compensation for Covenant Health's Presidents and Chief Executive Officers ("CEO"), James D. VanderSteeg and Anthony L. Spezia, are determined by the Compensation Committee of the Covenant Health Board of Directors, ("the Committee") which is composed of independent members of the board and chaired by the chairman of the board. The Committee is guided in its decision-making process by an independent, nationally recognized executive compensation consultant experienced in advising nonprofit hospital boards (the "Consultant") whose services include: (1) providing pay comparisons with market comparables; (2) recommending salary ranges and annual base salary adjustments; (3) designing incentive compensation and deferred compensation components of the CEO's total compensation package; (4) reviewing benefits and perquisites; and (5) certifying as to the reasonableness of total annual compensation. The Consultant analyzes and makes recommendations with respect to the CEO's total compensation package through analysis of CEO compensation data for comparable nonprofit health systems in the United States. The systems selected for comparison are similar to Covenant Health in revenue, total assets, number of hospitals, full time employees and services provided. Covenant Health's current compensation methodology includes setting base salary around the 50th percentile of the market. Base salaries for individual executives will vary based on market conditions, performance, tenure, experience, special skills or qualifications, recruitment and retention challenges, and other relevant factors. In addition, annual incentive compensation may be awarded upon achievement of goals established by the Committee at the beginning of each fiscal year which reflect quality of care, patient safety and service excellence in addition to financial performance and other measures. Incentive opportunity levels will be positioned at or slightly above median or average levels in the market. Annual incentive opportunity ranges from 0-50% of base salary depending upon the CEO's performance. Overall, total compensation levels (all forms of cash compensation and benefits) will be positioned up to or around the 75th percentile of the market, based on individual and organizational performance. As a part of its CEO performance evaluation process, the Committee asks each member of the board of directors to submit a written evaluation of the CEO's performance using an evaluation form prepared by an independent audit firm. This information is collected, collated, and reported to the Committee by the audit firm; results are "blinded" so that individual board members are not identified. The blinded results are shared with the CEO as part of the evaluation process. Any increase in base salary, award of annual incentive, or changes in overall compensation methodology are made by the Committee after discussion with and advice of the Consultant and conditioned upon the Consultant's determination that such decisions result in total annual compensation that is reasonable and within a fair market value range. Once the annual performance evaluation is completed, the chairman and at least one other member of the Committee meet with the CEO and share the Committee and board's evaluation of his prior year's performance, communicate his performance goals for the upcoming year, and inform him of the Committee's actions with respect to any annual incentive award for the prior year and any base salary adjustment for the upcoming year. Form 990, Part VI, Section B, Line 15b: Base salaries and annual bonus opportunities for Key Executives (*1) are set by the Covenant Health Chief Executive Officer (CEO) in consultation with Senior Vice President-Human Resources, subject to approval of the Compensation Committee of the Covenant Health Board of Directors ("the Committee"), after review by and discussion with the executive compensation consultant ("th”

“Per its tax exempt bond provisions, Covenant Health is required to file quarterly and annual consolidated and obligated group financial statements and other documentation with various bond insurers and other agencies, including the Electronic Municipal Market Access (EMMA) service of the Municipal Securities Rulemaking Board (MSRB). Any member of such a repository has access to these financial statements. The organization's governing documents and conflict of interest policy are not made publicly available.”

“2016 Report to the Community Covenant Health is a comprehensive, community-owned, not-for-profit health system serving 23 counties in East Tennessee. Nine acute care hospitals located in Knoxville and surrounding areas comprise the foundation of the health system. Additional outpatient and specialty care departments are located throughout the region providing diagnostic and surgery services, mental health and cancer treatments, and therapy and home health services. Over 10,000 employees and 1,500 affiliated physicians are dedicated to improving the quality of life for the more than one million patients and families served each year. Established in 1996, Covenant Health is celebrating 20 years of service and accomplishment. Recognized for excellence in many areas - quality of care, integrity of operations, financial strength, expertise and dedication of physicians, employees and volunteers, it continues a legacy of reinvestment in the counties where the facilities are located and dedication to improving the quality of life through better health for our patients and community. Covenant Health Board members and administrative leaders serve our communities through strategic planning and successful operation of these member organizations: Hospitals Claiborne Medical Center Cumberland Medical Center Fort Loudoun Medical Center Fort Sanders Regional Medical Center LeConte Medical Center Methodist Medical Center of Oak Ridge Morristown-Hamblen Healthcare System Parkwest Medical Center Peninsula Hospital, a division of Parkwest Medical Center Roane County Medical Center Outpatient and Specialty Care Covenant HomeCare and Hospice Covenant and Methodist Therapy Centers Fort Sanders West Diagnostic Center Fort Sanders West Outpatient Surgery Center Morristown Regional Diagnostic Center Patricia Neal Rehabilitation Center Peninsula Outpatient Centers Thompson Cancer Survival Centers Covenant Breast Centers Covenant Joint Centers Covenant Sleep Centers Claiborne Nursing Home Fort Sanders Sevier Nursing Home Physician Services Covenant Medical Group, Inc. Covenant Health is also a partner in joint ventures with physicians that provide surgical and other services. Other Programs and Services Fortress Corporation Fort Sanders Health and Fitness Center Nanny's Nursery Covenant Staffing Services Tennessee Wesleyan University - Fort Sanders Nursing Foundations Fort Sanders Foundation Methodist Medical Center Foundation Morristown-Hamblen Hospital Foundation Thompson Cancer Survival Center Foundation Introducing Covenant Health's Executive Leadership Team "Continuing the Legacy" is the theme of the 2016 annual report, recognizing both the 20th anniversary of Covenant Health and an executive leadership transition for the health system. In November 2015, Anthony L. (Tony) Spezia announced that he would transition from president and CEO of Covenant Health to CEO Emeritus. Jim VanderSteeg was named as his successor, effective April 1, 2016. Spezia served as president and CEO of Covenant Health for more than 15 years. During that time he oversaw the health system's geographic expansion; the addition of new member hospitals investment of more $1.2 billion in facilities, technology and services, and growth in the number of employees and affiliated physicians. Spezia now focuses his efforts on the healthcare industry, legislative issues and public policy initiatives. Jim VanderSteeg joined Covenant Health in 2007 after nearly 20 years in administrative and executive leadership roles at Baptist Memorial Healthcare Corp., a healthcare delivery system with 13 hospitals in Tennessee and Mississippi. He is "continuing the legacy," focusing on the health system's vision of putting the patient first, the highest standards of excellence, and assuring that Covenant Health is the first and best choice for healthcare services in our communities. With VanderSteeg as CEO, Covenant's new Executive Leadership Team includes: John Geppi, who continues to serve as the orga”

“New Nurse Residency Program Supports School-to-Work Transition for Recent Grads Program Receives $15,000 Grant in First Year of Operation Covenant Health implemented a nurse residency program to support newly graduated nurses as they transition into new responsibilities in a fast-paced hospital environment. Covenant adopted the Vizient/AACN Nurse Residency Program, used by more than 200 hospitals and health systems nationwide. The program emphasizes evidence-based practices and is designed to empower new nurses with increased competence, more confident decision making, stronger leadership and critical-thinking skills, and greater work satisfaction. Hospitals that have implemented the program have seen reductions in nursing turnover and a positive impact on patient safety and quality of care. It is important for new nursing graduates to have a group of peers and mentors who assist them in enhancing their skills and becoming comfortable with the challenges of practice. The positive clinical outcomes helps not only the participating nurses, but also patients. The new initiative recently received a $15,000 grant from The Promise of Nursing for Tennessee Nursing School Grant Program administered by the Foundation of the National Student Nurses' Association. Funds for the grant program were contributed by several hospitals and health care agencies in the Tennessee area, by Johnson & Johnson, and by national companies with an interest in supporting nursing education, and were raised at a gala event sponsored by Johnson & Johnson. Covenant Health Partners with LMU in New Medical Student Program Covenant Health has launched a medical student program in partnership with DeBusk College of Osteopathic Medicine at Lincoln Memorial University in Harrogate, Tennessee. The medical student program provides clinical experiences for aspiring physicians and mid-level providers. Students are assigned to one of several participating Covenant Health hospitals for their clinical training. They may also participate in elective experiences at other Covenant facilities in specialty areas such as primary care, neurology, perinatology, radiology, and orthopedics. Working under the direct supervision of physicians, students interview and examine patients, review clinical information, make hospital rounds, participate in interdisciplinary team meetings, practice appropriate documentation, and perform procedures. There is a shortage of medical professionals in the area, and the medical student program helps address the need. Convenient Care for Downtown Knoxville Knoxvillians who work or live downtown now have a convenient location to receive medical care when they need it. In early 2016 Covenant Health opened Convenient Care Downtown, a clinic designed to meet the immediate medical needs of downtown employees, residents and visitors. Located in the Phoenix Building at 418 South Gay Street, Convenient Care Downtown offers treatment for minor illnesses and injuries such as cold, allergies, and sprains. Sports and camp physicals are available, as well as flu shots and new-hire drug screenings. No appointment is needed and most insurance plans are accepted. With the new clinic Covenant Health is able to offer quality walk-in care for people who live, work, and visit downtown. Covenant Health Solutions Covenant Health works with local businesses and organizations to develop strategies and programs for improving their employees' health. 2016 Summary * 10 business clients, comprising approximately 750 employees * Worksite clinics at Jewelry Television and Sevier County Wellness Clinic * Services offered: biometric screenings, health risk assessments and personal health reports, aggregate health analysis, newsletters, educational and diabetes classes, weight loss programs, health coaching Clinical Accomplishments In addition to its nine acute care hospitals, Covenant Health provides services including Covenant HomeCare; inpatient and outpatient behavioral care thro”

“From Our Member Organizations In 2016 the S&P Global Ratings raised the long-term rating and underlying rating to "A" from "A-" on the health system's series 2006A-1, 2011C and 2012A bonds and assigned an "A" rating to the system's 2016A bonds. Ratings services assign bond ratings based on an organization's financial strength and performance outlook. The 'A' rating from S&P Global gives Covenant Health the highest bond rating among healthcare organizations in the East Tennessee area. A higher bond rating enables Covenant to fund facility expansions or major projects at continued lower interest rates and overall cost of capital, enhancing the health system's ability to provide excellent care. Covenant Health selected Cerner, a worldwide provider of health information technologies, to provide a comprehensive suite of integrated solutions to support Covenant's clinical, financial and population health management initiatives. The implementation will include initiatives such as an upgraded electronic health record, a revenue cycle platform, clinical support systems and an expanded patient portal. Cerner's IT solutions will support Covenant Health as it continues to improve patient outcomes and population health, and positively impact the quality of life in our communities. Covenant Homecare has earned four-star quality ratings based on outcome measures and patient satisfaction data collected by the Centers for Medicare and Medicaid Services (CMS). Covenant Hospice has received Level II designation in We Honor Veterans, a national awareness action campaign that encourages partnerships between community hospices, state hospice organizations and VA facilities for veterans' end-of-life care. Claiborne Medical Center has continued to upgrade facilities in 2016. A major project included the purchase of new nuclear medicine equipment to perform both general and cardiac nuclear medicine testing. The renovation also included the development of a "hot lab" (where radioactive diagnostic tracers are prepared) and reorganized other areas for improved patient flow. Other facility upgrades included purchase of new pulmonary function equipment for the respiratory department and installation of exterior signage using the hospital's new logo and Covenant Health branding. Cumberland Medical Center opened its new $6.3 million Emergency Department in early October. The hospital also welcomed its first full-time interventional cardiologist, enabling the hospital to offer expanded cardiology services. Fort Sanders Regional Medical Center's cardiology department received the 2016 American College of Cardiology Foundation's NCDR ACTION Registry - 2016 GWTG Gold Plus Performance Achievement Award with Honor Roll status for Elite Stroke Care. The award honors hospitals that have maintained a 90% or better performance of care guidelines for eight consecutive quarters. Fort Sanders has been recertified by The Joint Commission as a Comprehensive Stroke Center. The stroke program's capabilities and outreach efforts were expanded by the addition of neurohospitalists to the medical staff. Fort Sanders Regional was recognized in Becker's Hospital Review as one of "100 Hospitals and Health Systems with Great Oncology Programs." Hospital renovations included a new 5,000-square-foot cardiac and pulmonary rehab facility, a new hybrid operating room and in-hospital MRI. LeConte Medical Center was included on the 2016 list of "100 Great Community Hospitals" in the U.S. compiled by Becker's Hospital Review. The Becker's editorial team selected community hospitals around the country based on rankings and awards from a variety of healthcare organizations, including iVantage Health Analytics, Truven Health Analytics, Healthgrades, CareChex, the American Nurses Credentialing Center and the Leapfrog Group. Methodist Medical Center piloted the health system's new low-dose CT screening for those at high risk for lung cancer. Studies have shown that early detection through yearly”

“Philanthropy Builds a Legacy Throughout the years, fundraising efforts across Covenant Health have brought generous individuals and businesses together to make an impact on the health of our communities. In the last year, there have been many opportunities to celebrate and grow Covenant Health's legacy of excellence through fundraising: SUBWAY Race Against Cancer Thompson Cancer Survival Center was established with the help of many generous donors and has a long tradition of charitable support. The Smothers family and BUDDY's bar-b-q had great vision in establishing the Race Against Cancer to benefit the center 22 years ago. All funds raised by the race have stayed in East Tennessee to provide cancer screenings, education and outreach to our communities. In 2015 Covenant health announced the next step for this signature event with the lead corporate sponsorship of SUBWAY . The partnership with local franchises brings opportunities to expand the reach and success of the race. Hope Center The Hope Center's journey began in 1996 for people who are affected by HIV. Originally based at Fort Sanders Regional Medical Center, the program has adapted to the changing needs of the HIV community. Last year the program transitioned to be a part of Covenant HomeCare with a new medical director and program coordinator. The hope-focused care model created in 1996 continues to be the essence of care for the Center's services. The Hope Center provides, at no charge, caring support and assistance to individuals and families living with HIV. Inpatients, outpatients and newly diagnosed individuals have a safe, non-stigmatizing place to feel encouraged and valued. The Hope Center is completely funded through philanthropic donations and grants, and generous volunteers help provide many of its services. Hospitality Houses In 2016, 211 guests spent 1,787 nights at two Hospitality Houses for patients and families receiving care at Methodist Medical Center in Oak Ridge. Each house has private suites, a fully stocked kitchen, a shared family room and laundry facilities. The two houses are increasingly at 100% occupancy. An additional house is owned by Methodist but needs renovation in order to become the third Hospitality House, at an estimated cost of $400,000. Earlier this year, a fundraising campaign began under the leadership of MMC Foundation board member Steve Whitson to raise both financial and in-kind contributions of material and labor. Oak Ridge businesses UT-Battelle and Pro2Serve have committed the lead charitable gifts to the campaign. As a result of their generosity, the third house will be named the UT-Battelle/Pro2Serve House. Covenant Health's Office of Philanthropy also supports the Fellowship Center, which provides housing for patients and families receiving care at Covenant locations in downtown Knoxville. The Covenant Health Office of Philanthropy coordinates these fund raising efforts of the boards of directors and staff at four foundations: * Fort Sanders Foundation (serving Fort Sanders Regional, Fort Loudoun, Parkwest, Roane, and Cumberland Medical Centers; Peninsula; Covenant HomeCare/Hospice; Hope Center; and Patricia Neal Rehabilitation Center) * Methodist Medical Center * Morristown-Hamblen Hospital Foundation * Thompson Cancer Survival Center Foundation”

“Book/Tax Diff in Income(Loss) from Partnerships/Trusts -2,189,707. Return of capital from subsidiaries 257,881,624. Capital contributed to subsidiaries -116,415,443. Change in 457(b) unrealized gain/loss 273,384.”

“The Audit Committee of the Board of Directors annually selects the external auditors for Covenant Health. There is a joint meeting of the Finance Committee and Audit Committee of the Board of Directors where the audit of the consolidated financial statements are presented.”