NORTHWESTERN MEMORIAL HEALTHCARE AND

NORTHWESTERNMEMORIALHEALTHCAREANDSUBSIDIARIES

ConsolidatedFinancialStatementsandSupplementaryInformation

YearsEndedAugust31,2021and2020

Contents

ReportofIndependentAuditors 1

ConsolidatedFinancialStatements:

ConsolidatedBalanceSheets 3

ConsolidatedStatementsofOperationsandChangesinNetAssets 5

ConsolidatedStatementsofCashFlows 7

NotestoConsolidatedFinancialStatements 8

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Ernst & Young LLP Tel: +1312879 2000 155 North Wacker Drive Fax: +1312879 4000 Chicago, IL 60606-1787 ey.com

Report of Independent Auditors

The Board of Directors Northwestern Memorial HealthCare

We have audited the accompanying consolidated financial statements of Northwestern Memorial HealthCare and Subsidiaries, which comprise the consolidated balance sheets as of August 31, 2021 and 2020, 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 financial statements in conformity 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 financial statements that are free of material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these 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 financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor' s judgment, including the assessment of the risks of material misstatement of the 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 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 financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

A member f irm of Ernst & Yourx;i Global Limited

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Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Northwestern Memorial HealthCare and Subsidiaries at August 31, 2021 and 2020, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

December 7, 2021

A member f irm of Ernst & Your.:;i Global Limited

August312021 2020

AssetsCurrentassets:Cashandcashequivalents $ 1,229,066 $ 1,336,516Short-terminvestments 15,478 15,474Currentportionofinvestments,includingassetslimitedastouse 203,658 190,482Patientaccountsreceivable 830,724 607,407Currentportionofpledgesandgrantsreceivable,net 24,057 17,028Currentportionofinsurancerecoverable 21,481 28,971Inventories 152,889 121,999Othercurrentassets 208,349 172,598

Totalcurrentassets 2,685,702 2,490,475

Investments,includingassetslimitedastouse,lesscurrentportion 9,556,068 6,971,079

Propertyandequipment,atcost:Land 417,655 392,078Buildings 5,062,945 4,564,669Equipmentandfurniture 1,858,049 1,705,261Constructioninprogress 209,387 138,072

7,548,036 6,800,080Lessaccumulateddepreciation 3,159,143 2,825,937

4,388,893 3,974,143

Prepaidpensioncost 220,258 81,199Pledgesandgrantsreceivable,lesscurrentportion 90,844 44,000Insurancerecoverable,lesscurrentportion 169,460 133,573Right-of-useassets-leases,net 186,918 173,422Otherassets,net 302,934 236,737Totalassets $ 17,601,077 $ 14,104,628

NorthwesternMemorialHealthCareandSubsidiaries

ConsolidatedBalanceSheets

(Inthousands)

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August312021 2020

LiabilitiesandnetassetsCurrentliabilities:Accountspayable $ 279,731 $ 216,410Accruedsalariesandbenefits 479,971 392,710Grantsandacademicsupportpayable,currentportion 15,299 22,602Accruedexpensesandothercurrentliabilities 192,702 160,406Duetothird-partypayors 768,386 655,892CMSAcceleratedPayments 314,509 412,358Currentaccruedliabilitiesunderself-insuranceprograms 170,184 137,537Currentmaturitiesoflong-termdebt 18,815 25,471Long-termdebtsubjecttoshort-termremarketing 126,200 58,880Short-termdebt 77,697 77,697

Totalcurrentliabilities 2,443,494 2,159,963

Long-termdebt,lesscurrentmaturities 1,812,325 1,611,861Accruedliabilitiesunderself-insuranceprograms,lesscurrentportion 842,041 650,034

Grantsandacademicsupportpayable,lesscurrentportion 60,868 71,871Interestrateswaps 106,447 128,253Leaseobligations,lesscurrentportion 167,292 150,514Otherliabilities 304,300 241,814Totalliabilities 5,736,767 5,014,310

Netassets:Withoutdonorrestrictions:Controllinginterest 11,214,690 8,615,138Noncontrollinginterestinsubsidiaries 13 515

Totalnetassetswithoutdonorrestrictions 11,214,703 8,615,653Withdonorrestrictions 649,607 474,665Totalnetassets 11,864,310 9,090,318Totalliabilitiesandnetassets $ 17,601,077 $ 14,104,628

Seeaccompanyingnotestotheconsolidatedfinancialstatements.

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YearEndedAugust312021 2020

RevenuePatientservicerevenue $ 6,810,600 $ 5,570,737Rentalandotherrevenue 414,536 394,664

Netassetsreleasedfromdonorrestrictionsandfederalandstategrants 134,232 323,026Totalrevenue 7,359,368 6,288,427ExpensesSalaries 2,880,134 2,578,215Employeebenefits 394,386 346,970Supplies 1,585,877 1,303,575Purchasedservices 736,624 665,600Depreciationandamortization 407,715 370,991Insurance 208,016 132,781Rentandutilities 100,746 105,013Repairsandmaintenance 149,663 123,882Interest 55,480 53,346IllinoisHospitalAssessment 187,676 157,279Other 174,876 157,775Totalexpenses 6,881,193 5,995,427Operatingincome 478,175 293,000Nonoperatinggains(losses)Investmentreturn 1,921,339 576,905ContributionofPalosnetassets 61,466 —Changeinfairvalueofinterestrateswaps 21,805 (7,498)Lossonextinguishmentoflongtermdebt (22,548) —Grantsandacademicsupportprovided (50,822) (74,567)Other 29,277 26,576Totalnonoperatinggains,net 1,960,517 521,416Excessofrevenueoverexpenses 2,438,692 814,416Netgainattributabletononcontrollinginterestinsubsidiaries 475 455

ExcessofrevenueoverexpensesattributabletoNMHCandsubsidiaries $ 2,438,217 $ 813,961


ConsolidatedStatementsofOperationsandChangesinNetAssets(Inthousands)

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YearEndedAugust31,

2021 2020

Netassetswithoutdonorrestrictions,controllinginterestExcessofrevenueoverexpenses $2,438,217 $ 813,961Netassetsreleasedfromrestrictionsusedforpropertyandequipment

additions 17,063 5,514Postretirement-benefit-relatedchangesotherthannetperiodicpensioncost 143,645 (18,890)Other 627 (4,636)Increaseinnetassetswithoutdonorrestrictions,controllinginterest 2,599,552 795,949

Netassetswithoutdonorrestrictions,noncontrollinginterestExcessofrevenueoverexpenses 475 455Distributiontononcontrollinginterest (378) (903)Other (599) 328

Decreaseinnetassetswithoutdonorrestrictions,noncontrollinginterest (502) (120)NetassetswithdonorrestrictionsContributions 195,792 47,190Investmentreturn 26,053 21,732Netassetsreleasedfromrestrictionsusedfor:Operatingexpenses,charitycare,andresearchandeducation (33,866) (42,867)Propertyandequipmentadditions (17,063) (5,514)Changeinfairvalueofsplit-interestagreements 3,716 367ContributionofPalosrestrictednetassets 184 —

Other 126 (466)

Increaseinnetassetswithdonorrestrictions 174,942 20,442Changeinnetassets 2,773,992 816,271Netassets,beginningofperiod 9,090,318 8,274,047Netassets,endofperiod $11,864,310 $9,090,318



ConsolidatedStatementsofOperationsandChangesinNetAssets(continued)(Inthousands)

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ConsolidatedStatementsofCashFlows(Inthousands)

YearEndedAugust31,

2021 2020OperatingactivitiesChangeinnetassets $ 2,773,992 $ 816,271

Adjustmentstoreconcilechangeinnetassetstonetcashprovidedbyoperatingactivities:

Postretirementbenefit-relatedchangesotherthannetperiodicpensioncost (143,645) 18,890

Changeinfairvalueofinterestrateswaps (21,805) 7,498Lossonextinguishmentoflong-termdebt 22,548 —

Netunrestrictedrealizedinvestmentreturnandnetchangeinunrestrictedandrestrictedunrealizedinvestmentgains/losses (1,922,175) (577,626)

Restrictedcontributions,changeinfairvalueofsplitinterestagreementsandrealizedinvestmentreturn (224,909) (68,567)

ContributionofPalosnetassets (61,650) —Depreciationandamortization 407,715 370,991Changesinoperatingassetsandliabilities:Patientaccountsreceivable (188,618) 184,260Duetothird-partypayors 85,435 60,605Grantsandacademicsupportpayable (18,306) 484CMSacceleratedpayments (97,849) 412,358Otheroperatingassetsandliabilities 147,347 5,461

Netcashprovidedbyoperatingactivities 758,080 1,230,625InvestingactivitiesPurchaseofinvestments (5,824,944) (4,806,171)Saleofinvestments 4,819,651 4,818,980CashreceivedfromcontributionofPalos 46,251 —Netunrestrictedrealizedinvestmentreturn 362,409 107,615Capitalexpenditures,net (491,131) (387,002)Netcashusedininvestingactivities (1,087,764) (266,578)FinancingactivitiesProceedsfromissuanceoflong-termdebt 1,039,556 —Paymentsoflong-termdebt (1,042,231) (25,744)

Restrictedcontributions,changeinfairvalueofsplitinterestagreementsandrealizedinvestmentreturn 224,909 68,567

Netcashprovidedbyfinancingactivities 222,234 42,823Net(decrease)increaseincashandcashequivalents (107,450) 1,006,870Cashandcashequivalents,beginningofperiod 1,336,516 329,646Cashandcashequivalents,endoftheperiod $ 1,229,066 $ 1,336,516


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Northwestern Memorial HealthCare (NMHC) is the parent of an integrated nonprofit health careorganization, anchored by Northwestern Memorial Hospital (NMH) and Northwestern Medical Group(NMG), that provides health care services to communities in northern Illinois. NMHC partners withNorthwesternUniversity’sFeinbergSchoolofMedicine(FSM)toformanacademicmedicalcenter,brandedasNorthwesternMedicine,thatisshapingthefutureofmedicinethroughoutstandingpatientcare,researchandtrainingofresidentphysicians.

BasisofPresentation

The accompanying consolidated financial statements include the accounts of NMHC and its subsidiaries(collectively referred to herein as NorthwesternMemorial). All significant intercompany transactions andbalanceshavebeeneliminatedinconsolidation.

CharityCareandCommunityBenefit

NorthwesternMemorialprovidescaretopatientsregardlessoftheirabilitytopay.NorthwesternMemorialdevelopedaFreeandDiscountedCareProgram(theProgram)forboththeuninsuredandtheunderinsured.Under the Program, patients are offered discounts of up to 100% of charges on a sliding scale,which isbasedon incomeas apercentageof the federal poverty level guidelines (up to600%). TheProgramalsocontainsprovisionsthatareresponsivetothosepatientssubjecttocatastrophichealthcareexpensesanduninsured patients not covered by the provisions above. Since NorthwesternMemorial does not pursuecollectionoftheseamounts,theyarenotreportedasPatientservicerevenue,andthecostofprovidingsuchcareisrecognizedwithinoperatingexpenses.

NorthwesternMemorialestimatesthedirectandindirectcostsofprovidingcharitycarebyapplyingacostto gross charges ratio to the gross uncompensated charges associated with providing charity care topatients.Thecostofprovidingcharitycarewas$90,663and$86,199fortheyearsendedAugust31,2021and2020,respectively.NorthwesternMemorialalsoreceivedcertainfundsof$297and$372fortheyearsendedAugust31,2021and2020,respectively,tooffsetorsubsidizecharitycareservicesprovided.Thesefunds are primarily received from investment return on free care endowment funds. In theAnnualNon-ProfitHospitalCommunityBenefitsPlanReport filedwiththe IllinoisAttorneyGeneral fortheyearendedAugust 31, 2020,NorthwesternMemorial reported a total community benefit of $1,166,136 (unaudited),including unreimbursed cost of charity care of $89,728 (unaudited),which is calculated using a differentmethodologythanthatusedfortheconsolidatedfinancialstatements.Managementiscurrentlycollectingtheinformationneededtofilethe2021report;however,itdoesnotexpectamaterialchangefromtheprioryear.

UseofEstimates

The preparation of the consolidated financial statements in conformity with U.S. generally acceptedaccounting principles (GAAP) requires management to make estimates and assumptions that affect thereportedamountsofassetsandliabilitiesandthedisclosureofcontingentassetsandliabilitiesatthedateofthe consolidated financial statements and the reported amounts of revenues and expenses during thereportingperiod.Actualresultscoulddifferfromthoseestimates.


NotestoConsolidatedFinancialStatements(Inthousands)

1. OrganizationandSummaryofSignificantAccountingPolicies

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CashandCashEquivalents

Cashandcashequivalents includehighly liquid short-term investmentswithmaturitiesof90daysor lessfromthedateofpurchase,otherthanthoseincludedintheinvestmentportfolio.

PatientAccountsReceivable

Patientaccountsreceivablearebasedupontheestimatedamountsexpectedtobepaidfrompatientsandthird-partypayors.AssetsLimitedastoUse

Assetslimitedastouseconsistprimarilyofinvestmentsdesignatedforcertainmedicaleducationandhealthcareprograms.TheparticularNorthwesternMemorialcorporationthatcontrols these investmentsmakessuchdesignationsandmay,atitsdiscretion,subsequentlyusethemforotherpurposes.Inaddition,assetslimitedas touse include investmentsheldby trusteesunderdebtagreementsand for self-insuranceandcollateralrelatedtointerestrateswaps.

Investments

Investmentsinequitysecuritieswithreadilydeterminablefairvaluesandallinvestmentsindebtsecuritiesare reported at fair value based on quoted market prices. Unless in pension plan assets, alternativeinvestmentsarereportedusingtheequitymethodofaccountingbasedonnetassetvalue(NAV)providedbythe respective fundmanagers. Alternative investments can include limitedpartnership interests in hedgefunds,privateequity,venturecapitalandrealestatefunds.Alternativeinvestmentsinthepensionplanarereported at fair value based on NAV per share or equivalent. Commingled investment funds, commoncollectivetrustand103-12entitiesarevaluedusing,asapracticalexpedient, theNAVasprovidedbytherespectiveinvestmentmanagers.

DerivativeInstruments

Derivative instruments, specifically interest rate swaps, are recorded in the accompanying consolidatedbalance sheets at fair value. The change in the fair value of derivative instruments is recorded inNonoperatinggains(losses).

Inventories

Inventories,consistingprimarilyofpharmaceuticalsandothermedicalsupplies,arestatedatthe lowerofcostonthefirst-in,first-outmethodorfairvalue.

PropertyandEquipment

Property and equipment are stated at cost and are depreciated using the straight-linemethod over theestimateduseful livesoftheassets.Generally,buildingsandbuildingserviceequipmenthaveacompositelifeofapproximately40years,andequipmentandfurniturehaveusefullivesof3-20years.Interestincurredonborrowedfundsduringtheperiodofconstructionofcapitalassetsiscapitalizedasacomponentofthecostofacquiringthoseassets.


NotestoConsolidatedFinancialStatements(continued)(Inthousands)

1.OrganizationandSummaryofSignificantAccountingPolicies(continued)

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Leases

NorthwesternMemorialdetermineswhetheranarrangementisaleaseatinception.Operatingandfinanceleasesare included inRight-of-useassets-leases,net; Leaseobligations, less currentportion;andAccruedexpensesandothercurrentliabilitiesintheaccompanyingconsolidatedbalancesheets.

Right-of-use (ROU) assets represent the right to use an underlying asset for the lease term, and leaseliabilitiesrepresenttheobligationtomakeleasepaymentsarisingfromthelease.ROUassetsandliabilitiesarerecognizedatcommencementdatebasedonthepresentvalueofleasepaymentsovertheleaseterm.Sincemost leasesdonotprovideanimplicitrate,NorthwesternMemorialusesanincrementalborrowingratebasedatthecommencementdateindeterminingthepresentvalueofleasepayments.TheROUassetalsoincludesanyleasepaymentsmadeandexcludesleaseincentives.TheleasetermmayincludeoptionstoextendorterminatetheleasewhenitisreasonablycertainthatNorthwesternMemorialwillexercisetheoption.

NorthwesternMemorialdefinesashort-term leaseasany leasearrangementwitha lease termof twelvemonthsorlessthatdoesnotincludeanoptiontopurchasetheunderlyingasset.Short-termleasepaymentsarerecognizedasexpenseonastraight-linebasisover the leasetermandvariable leasepayments in theperiodinwhichtheobligationisincurred.

NorthwesternMemorialhasleasearrangementswithleaseandnon-leasecomponents,whicharegenerallyaccounted for separately. However, Northwestern Memorial has elected the practical expedient to notseparatenon-leasecomponentsforrealestateorequipmentleases.

GoodwillandOtherIntangibleAssets

Goodwillhasbeenrecordedfortheexcessofpurchasepriceoverfairvalueofassetspurchasedinbusinessacquisitions of several medical practices. Northwestern Memorial has goodwill of $34,446 and $33,375,included in Other assets, net at August 31, 2021 and 2020, respectively. There were no impairments ofgoodwillintheyearsendedAugust31,2021and2020.

Intangible assets are stated at fair value at time of purchase and are amortized using the straight‑linemethodover theestimated lifebasedon termsof theunderlyingagreement giving rise to the intangibleassets.

AssetImpairment

Northwestern Memorial considers whether indicators of impairment are present and performs thenecessaryteststodeterminewhetherthecarryingvalueofanassetisappropriate.Impairmentwrite‑downsarerecognizedinoperatingincomeatthetimetheimpairmentisidentified.Therewerenoimpairmentsoflong-livedassetsfortheyearsendedAugust31,2021and2020.

DeferredCharges

Deferred finance charges and bonddiscounts or premiums are amortized or accreted using the effectiveinterestmethodorthebondsoutstandingmethod,whichapproximatestheeffectiveinterestmethod,over




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the life of the related debt and are netted within Long-term debt, less current maturities in theaccompanyingconsolidatedbalancesheets.

NetAssets

Netassets,revenues,gainsandlossesareclassifiedbasedontheexistenceorabsenceofdonororgrantorimposedrestrictions.Accordingly,netassetsandchangesthereinareclassifiedandreportedasfollows:

NetAssetsWithoutDonorRestrictionsarenetassetsavailableforuseingeneraloperationsandnotsubjecttodonorrestrictions.Thegoverningboardhasdesignated,fromnetassetswithoutdonorrestrictions,netassetsforanoperatingreserveandboard-designatedendowment.

Net Assets With Donor Restrictions are net assets subject to donor imposed restrictions. Some donor-imposedrestrictionsaretemporaryinnature,suchasthosethatwillbemetbythepassageoftimeorothereventsspecifiedbythedonor.Otherdonorimposedrestrictionsareperpetualinnature,wherethedonorstipulatesthatresourcesbemaintainedinperpetuity.Giftsof long-livedassetsandgiftsofcashrestrictedfor the acquisition on long-lived assets are recognized as revenue when received. Donor imposedrestrictionsarereleasedwhenarestrictionexpires,thatis,whenthestipulatedtimehaselapsed,whenthestipulatedpurposeforwhichtheresourcewasrestrictedhasbeenfulfilledorboth.

Anychanges indonorrestrictionsthatchangethenetassetcategoryofpreviouslyrecordedcontributionsarerecordedasOtherintheaccompanyingconsolidatedstatementsofoperationsandchangesinnetassetsintheperiodcommunicatedbythedonor.

PatientServiceRevenue

NorthwesternMemorialhasagreementswiththird-partypayorsthatprovideforpaymentstoNorthwesternMemorial at amounts different from its established rates. Payment arrangements include prospectivelydeterminedratesperadmissionorvisit,reimbursedcosts,discountedchargesandperdiemrates.Patientservicerevenueisreportedattheestimatedamountduefrompatientsandthird-partypayorsforservicesrendered, including estimated adjustments under reimbursement agreements with third-party payors,certain of which are subject to audit by administering agencies. These adjustments are accrued on anestimatedbasisandareadjusted,asneeded,infutureperiods.

RentalandOtherRevenue

RentalandotherrevenueisrecognizedatanamountthatreflectstheconsiderationNorthwesternMemorialexpects to be entitled to in exchange for providing goods and services. The amounts recognized reflectconsideration due from customers, third-party payors and others. Primary categories of other revenueincludepharmacyrevenue,grantrevenue,corporatebilling,rentandleaserevenueandother.

Contributions

Unrestricted gifts, other than long-lived assets, are included within Rental and other revenue in theaccompanyingconsolidatedstatementsofoperationsandchangesinnetassets.Unrestrictedgiftsoflong-lived assets, such as land, buildingsor equipment, are recordedat fair value as an increase innet assetswithoutdonorrestrictions.Contributionsarereportedasassetswithdonorrestrictionsiftheyarereceived




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withdonorrestrictions.Whenadonorrestrictionexpires,thatis,whenastipulatedtimerestrictionendsorpurposerestrictionisaccomplished,assetswithdonorrestrictionsarereclassifiedasassetswithoutdonorrestrictions and reported in the accompanying consolidated statementsof operations and changes innetassetsasnetassetsreleasedfromrestrictions.

Unconditionalpromises togivecashorotherassetsare reportedaspledges receivableandcontributionswithin the appropriate net asset category. An allowance for uncollectible pledges receivable is estimatedbased on historical experience and other collection indicators. Pledges receivable with payment termsextendingbeyondoneyeararediscountedusingmarketratesofreturnreflectingthetermsandcreditofthepledgesatthetimeapledgeismade.

NorthwesternMemorialisabeneficiaryofseveralsplit-interestagreements,primarilyperpetualtrustsheldbyothers,andrecognizesitsinterestintheseperpetualtrustsasnetassetswithdonorrestrictionsbasedonitspercentageofthefairvalueofthetrusts’assets.

NonoperatingGains(Losses)

Nonoperatinggains(losses)consistprimarilyofinvestmentreturns(includingrealizedandunrealizedgainsand losses; changes in NorthwesternMemorial’s equity interest in alternative investments, interest anddividends); contributions of net assets without donor restrictions in excess of consideration paid (whereapplicable); grants and academic support provided to external organizations; net assets released fromrestrictionsandusedforgrantsandacademicsupport;andchangesinfairvalueofinterestrateswaps.

ExcessofRevenueOverExpenses

Theaccompanyingconsolidatedstatementsofoperationsandchanges innetassets includetheExcessofrevenue over expenses. Changes in net assets without donor restrictions, which are excluded from theExcess of revenue over expenses, consist primarily of contributions of long-lived assets (including assetsacquiredusingcontributions,which,bydonorrestriction,aretobeusedforthepurposesofacquiringsuchassets),transfersbetweennetassetcategoriesbasedonchangesindonorrestrictionsandPostretirementbenefit-relatedchangesotherthannetperiodicpensioncost.

NewAccountingPronouncements

InAugust2018,theFinancialAccountingStandardsBoard(FASB)issuedAccountingStandardsUpdate(ASU)2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the DisclosureRequirements for Fair Value Measurement. On September 1, 2020 this standard was adopted byNorthwesternMemorialretrospectively. ThisASUimprovestheeffectivenessofthenotestothefinancialstatementsthroughchangesinthedisclosurerequirementsforfairvaluemeasurements. TheadoptionoftheASUdidnotimpacttheconsolidatedfinancialstatements.

InAugust2018,theFASBissuedASU2018-14,Compensation-RetirementBenefits-DefinedBenefitPlans(Subtopic715-20):DisclosureFramework-ChangestotheDisclosureRequirementsforDefinedBenefitPlans.ASU 2018-14 makes minor changes to the disclosure requirements for employers that sponsor definedbenefit andotherpostretirementbenefitplans. This guidance is effective for fiscal yearsbeginningafterDecember 15, 2021. This guidance is to be applied retrospectively, and early adoption is permitted.




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Northwestern Memorial is currently evaluating the impact this guidance will have on its consolidatedfinancialstatements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software(Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud ComputingArrangementThatisaServiceContract.ASU2018-15requirescustomersinacloudcomputingagreementthat is a service contract to follow the internaluse softwareguidance inASC350-40 todeterminewhichimplementation costs to capitalize as assets. This guidance is effective for fiscal years beginning afterDecember15,2020. This guidance is tobeappliedprospectivelyor retrospectively, andearly adoption ispermitted. Northwestern Memorial is currently evaluating the impact this guidance will have on itsconsolidatedfinancialstatements.

In September 2020, the FASB issued ASU 2020-07,Not-for-Profit Entities (Topic 958): Presentation andDisclosuresbyNot-for-ProfitEntitiesforContributedNonfinancialAssets.ASU2020-07requirespresentationofcontributednonfinancialassetsasaseparatelineintheconsolidatedstatementofoperationsandchangeinnetassets,apartfromcontributionsofcashorotherfinancialassets. ThisnewguidanceiseffectiveforfiscalyearsbeginningafterJune15,2021.Thisguidanceistobeappliedretrospectively,andearlyadoptionis permitted. Northwestern Memorial is currently evaluating the impact this guidance will have on itsconsolidatedfinancialstatements.

2.MembershipSubstitutionAgreementwithPalosCommunityHospital

On January 1, 2021, Palos Community Hospital (PCH), and all other affiliatedmedical-related businessesaffiliated with PCH (Palos), becamewholly owned direct or indirect subsidiaries of NMHC pursuant to amembershipsubstitutionbetweenNMHCandSt.GeorgeCorporation,whichhadpreviouslybeentheparentcompanyofPCH.ThisaffiliationpositionsNorthwesternMemorial,undertheNorthwesternMedicinebrand,to expand its integrated academic health delivery system to the Southwest Chicagoland area, offeringpatientsaccesstoleading-edgecareclosertowheretheyliveandwork.

Theaffiliationwaseffectedthroughamembershipsubstitutionwithnoconsiderationpaid.Foraccountingpurposes,thistransactionisconsideredanacquisitionunderAccountingStandardsCodificationTopic(ASC)958-805,"Not-for-ProfitEntities:BusinessCombinations",andacontributionwasrecordedforthefairvalueof assets, net of liabilities of Palos. Northwestern Memorial has reflected the results of all third partyvaluationsreceivedintheaccompanyingconsolidatedfinancialstatements

Also effective January 1, 2021, PCH joined the NMHC Obligated Group. A Supplemental Master TrustIndenture was executed to issue obligations pursuant to the NMHCMaster Trust Indenture in order tosecurealldebtthatwaspreviouslysecuredbyobligations issuedpursuanttoTheSt.GeorgeCorporation,PalosCommunityHospitalMasterTrustIndenture(PCHMTI)priortothereleaseofPCHMTIinaccordancewithitsterms.




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The acquisition-date estimated fair value of identifiable assets and liabilities of Palos at January 1, 2021consistedofthefollowing:

Cashandcashequivalents 46,251

Othercurrentassets 54,884

Propertyandequipment 328,803

Otherlong-termassets 64,148

Currentliabilities (93,538)

Long-termdebt,lesscurrentmaturities (279,355)

Otherlong-termliabilities (59,543)

Donorrestrictednetassets (184)

Contributionofunrestrictednetassets 61,466

OperatingexpensesfortheyearendedAugust31,2021includecostsrelatedtotheintegrationofPalosintoNorthwesternMemorial,includingtransitioncostsofbenefitplans,incentiveplansandoperatingprogramswithotherhealthpractitioners,aswellascostsofvaluationandintegrationconsulting.

Following are the operating results and changes in net assets attributable to Palos for the eightmonthsendedAugust31,2021includedintheaccompanyingconsolidatedstatementsofoperationsandchangesinnetassets:

2021

Totaloperatingrevenue $ 265,384

Deficiencyofrevenueoverexpenses (28,283)

Changeinnetassetswithoutdonorrestrictions (17,187)

FollowingaretheunauditedproformaresultsasifthePalosaffiliationhadoccurredonSeptember1,2019:

2021 2020

Operatingrevenue $ 7,496,998 $ 6,402,369

Operatingincome 450,662 285,039

ExcessofrevenueoverexpensesattributabletoNMHCandsubsidiaries 2,411,252 806,760

TheproformainformationprovidedshouldnotbeconstruedtobeindicativeofNorthwesternMemorial’sresultsofoperationshadtheacquisitionbeenconsummatedonSeptember1,2019,andisnotintendedtoprojectNorthwesternMemorial’sresultsofoperationsforanyfutureperiod.



2.MembershipSubstitutionAgreementwithPalosCommunityHospital(continued)

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NorthwesternMemorial recognizesPatient service revenueat theamount that reflects the considerationexpected to be paid for providing patient care. Patient service revenue is recognized as performanceobligations are satisfied based on the nature of the services provided by Northwestern Memorial.PerformanceobligationssatisfiedovertimerelatetopatientsinNorthwesternMemorialhospitalsreceivinginpatient acute care services fromadmission to thepointwhen services areno longer required,which isgenerally at the timeofdischarge.Revenue forperformanceobligations satisfiedover time is recognizedbased on actual charges incurred in relation to total expected or actual charges. Outpatient services areperformanceobligationssatisfiedatapointintime,andrevenueisrecognizedwhengoodsorservicesareprovidedandNorthwesternMemorialdoesnotbelieveitisrequiredtoprovideadditionalgoodsorservices.Management believes thismethod provides a fair depiction of the transfer of services over the term ofperformanceobligationsbasedontheinputsneededtosatisfytheobligations.

NorthwesternMemorialhaselectedtoapplytheoptionalexemptionprovidedinFASBASC606-10-50-14(a)because all of its performance obligations relate to contracts with a duration of less than one year.Therefore,NorthwesternMemorialisnotrequiredtodisclosetheaggregateamountofthetransactionpriceallocated toperformanceobligations thatareunsatisfiedorpartially satisfiedat theendof the reportingperiod. The unsatisfied or partially unsatisfied performance obligations referred to above are primarilyrelatedtoinpatientacutecareservicesattheendofthereportingperiod.Theperformanceobligationsforthese contracts aregenerally completedwhen thepatients aredischarged,whichgenerallyoccurswithindaysorweeksoftheendofthereportingperiod.

Northwestern Memorial uses a portfolio approach to account for categories of patient contracts as acollectivegroupratherthanrecognizingrevenueonan individualcontractbasis. Theportfoliosconsistofmajor payor classes for inpatient revenue and major payor classes and types of services provided foroutpatient revenue. Basedon thehistorical collection trendsandotheranalysis,NorthwesternMemorialbelievesthatrevenuerecognizedbyutilizingtheportfolioapproachapproximatestherevenuethatwouldhavebeenrecognizedifanindividualcontractapproachwereused.

Northwestern Memorial determines the transaction price, which involves significant estimates andjudgment,basedonstandardchargesforgoodsandservicesprovided,reducedbyexplicitandimplicitpriceconcessions, including contractual adjustments provided to third-party payors, discounts provided touninsuredandunderinsuredpatientsinaccordancewithpolicy,and/orimplicitpriceconcessionsbasedonthehistoricalcollectionexperienceofpatientaccounts.NorthwesternMemorialdeterminesthetransactionprice associatedwith services provided to patients who have third-party payor coveragewithMedicare,Medicaid,BlueCross,othermanagedcareprogramsandotherthird-partypayorsbasedonreimbursementtermspercontractualagreements,discountpoliciesandhistoricalexperience.Paymentarrangementswiththosepayors includeprospectively determined rates per admissionor visit, reimbursed costs, discountedchargesperdiemratesandvalue-basedcareagreements.Reportedcostsand/or servicesprovidedundercertain of the arrangements are subject to retroactive audit and adjustment. Patient service revenuedecreasedby$4,218and$11,028in2021and2020,respectively,asaresultofchangesinestimatesduetosettlements of prior fiscal years’ cost reports and the disposition of other payor audits and settlements.FuturechangesinMedicareandMedicaidprogramsandreductioninfundinglevelscouldhaveanadverseeffect on Northwestern Memorial. There were no other significant changes to the judgements used todeterminethetransactionpriceinpriorperiods.

NorthwesternMemorial also provides care to self-pay patients.Under its Financial Assistance Policy (thePolicy), Northwestern Memorial provides medically necessary care to patients in its community with



3.PatientServiceRevenue

15

inadequatefinancialresourcesatdiscountsofupto100%ofchargesusingaslidingscalethat isbasedonpatienthouseholdincomeasapercentage(upto600%)ofthefederalpovertylevelguidelines.ThePolicyalsocontainsacatastrophicfinancialassistanceprovisionthatlimitsapatient’stotalfinancialresponsibilitytoNorthwesternMemorial.SinceNorthwesternMemorialdoesnotpursuecollectionoftheseamounts,thevaluesarereportednetofpriceconcessions.NorthwesternMemorialusespresumptiveeligibilityscreeningproceduresforfreecareandrecognizesPatientservicerevenueonservicesprovidedtoself-paypatientsatareducedtransactionpriceatthetimeservicesarerendered.

In certain instances, NorthwesternMemorial receives payment in advance of the services provided andconsiders theseamounts to representcontract liabilities.Contract liabilitiesatAugust31,2021and2020,werenotmaterial,otherthanthosedisclosedinNote19.

Managementhasdetermined that thenature,amount, timinganduncertaintyof revenueandcash flowsareaffectedbythepayorsandlineofbusinessthatrendersservicestopatients.ThecompositionofPatientservicerevenuebypayorwasasfollowsfortheyearsendedAugust31:

2021 2020Patientservicerevenue:Medicare $1,968,309 $ 1,507,994Medicaid 652,296 482,135BlueCross 2,685,817 2,194,231

Othermanagedcare 1,315,255 1,209,185

Commercialandother 171,284 137,109Self-pay 17,639 40,083TotalPatientservicerevenue $6,810,600 $ 5,570,737

ThecompositionofthePatientservicerevenuebyservicelinewasasfollowsfortheyearsendedAugust31:2021 2020

Hospitals $ 5,261,186 $ 4,316,239Physiciangroups 1,493,960 1,201,407Other 55,454 53,091

Total $ 6,810,600 $ 5,570,737



3.PatientServiceRevenue(continued)

16

NorthwesternMemorial grants creditwithout collateral to its patients,mostofwhomare local residentsand are insured under third-party payor agreements. At August 31, 2021 and 2020, patient accountsreceivable,includingpatientco-paysanddeductiblesbymajorprimarypayorsource,wereasfollows:

2021 2020

Medicare 26% 22%

Medicaid 8 17

BlueCross 28 17

Othermanagedcare 25 30

Commercialandother 5 6

Self-pay 8 8

100% 100%

4.HospitalAssessmentProgram

In June, 2018, the Illinois Hospital Assessment Program (HAP) was redesigned and reauthorized by theIllinoisGeneralAssemblyviaSB1773,whichwassubsequently signed into lawby theGovernoras IllinoisPublic Law 100-581. The Federal Centers for Medicare and Medicaid Services (CMS) approved theredesignedHAPonJune20,2018.ThisprogramexpiredonJune30,2020.TheHAPprogramprovidesforincreasedIllinoisMedicaidandIllinoisMedicaidManagedCareinpatientrates.

InMay2020,theIllinoisGeneralAssemblyunanimouslyapprovedSB2541,whichcreatesaredesignedHAPfor the State of Illinois. On July 7, 2020, Governor Pritzker signed it into law. An amendment to Illinois’existingStateMedicaidPlanestablishingtheredesignedHAPasperSB2541hasalsobeenapprovedbytheCMS.Inadditiontonewfundingfortheprogram,theredesignedHAPbetterrecognizespatientvolumes,aswellasacuity.

AsummaryoftheamountsrecognizedfortheHAPprogramisasfollows:

YearEndedAugust31

2021 2020

Patientservicerevenue-HAP $ 242,294 $ 204,202

IllinoisHospitalAssessment (187,676) (157,279)

NetexcessofHAPrevenueoverIllinoisassessment $ 54,618 $ 46,923



3.PatientServiceRevenue(continued)

17

Thecompositionofinvestments,includingassetslimitedastouse,andcashandcashequivalentsandshort-terminvestments,atAugust31isasfollows:

2021 2020Measuredatfairvalue:

CashandcashequivalentsandShort-terminvestments $ 1,579,126 $ 1,515,798Mutualfunds 401,250 353,300Corporatebonds 404,728 350,101U.S.governmentandagencyissues 428,661 398,051Equitysecurities 172,220 4,545Otherfixedincome — 300

2,985,985 2,622,095

Measuredatnetassetvalueaspracticalexpedient:Commoncollectivetrustsandcommingledfunds 1,799,433 1,193,784Interestin103-12investmententities 305,526 286,404

2,104,959 1,480,188Accountedforundertheequitymethod:

Alternativeinvestments 5,913,326 4,411,268$ 11,004,270 $ 8,513,551

Investments,includingassetslimitedastouse,andcashandcashequivalentsandshort-terminvestments,consistofthefollowingatAugust31:

2021 2020Assetslimitedastouse:Trustee-heldfunds $ 3,005 $ 26,790Self-insuranceprograms 844,057 628,999Board-designatedfunds 226,700 212,252

Totalassetslimitedastouse 1,073,762 868,041Donor-restrictedfunds 529,855 415,310Unrestricted,undesignatedfunds 8,156,109 5,878,210Totalinvestments,excludingshort-terminvestments 9,759,726 7,161,561Otherfinancialinstruments:Cashandcashequivalentsandshort-terminvestments 1,244,544 1,351,990

$ 11,004,270 $ 8,513,551



5.InvestmentsandOtherFinancialInstruments

18

ThecompositionandpresentationofinvestmentreturnsareasfollowsfortheyearsendedAugust31:

2021 2020

Interestanddividendincome $ 36,719 $ 38,873

Investmentexpenses (5,751) (4,913)

Realizedgainsonalternativeinvestments,net 275,437 83,683

Realizedgainsonotherinvestments,net 82,995 15,517

Netchangeinunrealizedgainsonalternativeinvestments 1,047,775 200,819

Netchangeinunrealizedgainsonotherinvestments 511,992 269,195

Changeinvalueofjointventures (1,583) (1,137)$ 1,947,584 $ 602,037

Reportedas:

Rentalandotherrevenue $ 192 $ 3,400

Nonoperatinginvestmentreturn 1,921,339 576,905

Withdonorrestrictioninvestmentreturn 26,053 21,732$ 1,947,584 $ 602,037

Northwestern Memorial’s investments measured at fair value include mutual funds; common equities;corporate and U.S. government debt issues; state, municipal and foreign government debt issues;commingledfunds;commoncollectivetrusts;and103-12entities.

Commingledinvestments,commoncollectivetrustsand103-12entitiesarecommingledfundsformedfromthepoolingof investmentsundercommonmanagement.Unlikeamutualfund,theseinvestmentsarenotregistered investment companies and therefore are exempt from registering with the Securities andExchangeCommission.

The investment strategy for the mutual funds, commingled funds, common collective trusts and 103-12entities involvesmaximizingtheoverall long-termreturnbyinvestinginawidevarietyofassets, includingdomesticlargecapequities,domesticsmallcapequities,internationaldevelopedequities,blendedequities,(i.e., a mix of domestic and international equities), natural resources and private investment limitedpartnerships(LPs).

NorthwesternMemorial’snon-pensionplaninvestmentsmeasuredundertheequitymethodofaccountingincludeabsolutereturnhedgefunds,equitylong/shorthedgefunds,realestate,naturalresourcesandLPs,collectively referred to as alternative investments.Alternative investments in thepensionplan assets aremeasuredatfairvalue.

Absolute return hedge funds include funds with the ability to opportunistically allocate capital amongseveral strategies. Generally, these funds diversify across strategies in an effort to deliver consistentlypositivereturnsregardlessofthemovementwithinglobalmarkets,exhibitrelatively lowvolatilityandareredeemablequarterlywitha60-daynoticeperiod.Equitylong/shorthedgefundsincludehedgefundsthatinvestboth longandshort inU.S.and internationalequities.Thesefundstypicallyfocusondiversifyingorhedgingacrossparticularsectors,regionsormarketcapitalizationsandaregenerallyredeemablequarterly



5.InvestmentsandOtherFinancialInstruments(continued)

19

witha60-daynoticeperiod.Absolutereturnandequity long/shortmanagersareredeemablequarterlyorannuallywitha45-to90-daynoticeperiod.

RealestateincludesLPsthatinvestinlandandbuildingsandseektoimprovepropertyleveloperationsbyincreasingleaserates,recapitalizingproperties,rehabilitatingaging/distressedpropertiesandrepositioningpropertiestomaximizerevenue.RealestateLPstypicallyusemoderateleverage.NaturalresourcesincludeadiversesetofLPsthatinvestinoilandnaturalgas-relatedcompanies,commodity-orientedcompaniesandtimberland.PrivateequityincludesLPsformedtomakeequityanddebtinvestmentsinoperatingcompaniesthat are not publicly traded. These LPs typically seek to influence decision-making within the operatingcompanies.Investmentstrategiesinthiscategorymayincludeventurecapital,buyoutsanddistresseddebt.Thesethreecategoriesofinvestmentscannotberedeemedwiththefunds.DistributionsfromeachfundwillbereceivedastheunderlyingassetsofthefundareexpectedtobeliquidatedperiodicallyoverthelivesoftheLPs,whichgenerallyrun10to12years.

Because of the timing of the preparation and delivery of financial statements for limited partnershipinvestments, theuseof themost recentlyavailable financial statementsprovidedby thegeneralpartnersresultsinatwomonthdelayintheinclusionofthelimitedpartnershipresultsinNorthwesternMemorial'sconsolidatedstatementsofoperationsandchangesinnetassetsduetoresultsrecordedbasedonJune30investmentstatements.Duetothisdelay,theseconsolidatedfinancialstatementsdonotreflectthemarketconditionsexperienced inthe lasttwomonthsofthefourthquarterof fiscal2021or2020forthe limitedpartnershipinvestments.

AsofAugust31,2021,$4,163,742ofalternative investments is subject tovarious redemption limitsandlockupprovisions,ofwhich$3,335,765expireswithinoneyearand$827,977expiresafteroneyearfromthebalancesheetdate.

At August 31, 2021, Northwestern Memorial had commitments to fund approximately an additional$672,000toalternativeinvestmententities.Thisfundingisexpectedtooccuroverthenext12years.



5.InvestmentsandOtherFinancialInstruments(continued)

20

Northwestern Memorial follows the requirements of ASC 820, Fair Value Measurement, in regard tomeasuring the fair value of certain assets and liabilities, as well as disclosures about fair valuemeasurements. ASC820defines fair value as theprice thatwouldbe received for an asset or paid for atransferofaliabilityinanorderlytransactiononthemeasurementdate.

The methodologies used to determine the fair value of assets and liabilities reflect market participantobjectivesandarebasedontheapplicationofathree-levelvaluationhierarchythatprioritizesobservablemarketinputsoverunobservableinputs.Thethreelevelsaredefinedasfollows:

• Level1–Inputstothevaluationmethodologyarequotedprices(unadjusted)foridenticalassetsorliabilitiesinactivemarkets.

• Level2–Inputstothevaluationmethodologyincludequotedpricesforsimilarassetsorliabilitiesinactivemarketsandinputsthatareobservablefortheassetorliability,eitherdirectlyor indirectly,for substantially the full term of the financial instrument. Examples of Level 2 inputs are quotedprices for similar assets or liabilities in inactive markets or pricing models with inputs that areobservableforsubstantiallythefulltermoftheassetorliability.

• Level3– Inputstothevaluationmethodologyaresignificanttothefairvalueoftheassetortheliabilityandlessobservable.Theseinputsreflecttheassumptionsmarketparticipantswoulduseintheestimationofthefairvalueoftheassetorliability.

FairValues

Afinancialinstrument’scategorizationwithinthevaluationhierarchyisbasedonthelowestlevelofinputthatissignificanttothefairvaluemeasurement.



6.FairValueMeasurements

21

ThefollowingtablepresentsthefinancialinstrumentsmeasuredatfairvalueonarecurringbasisatAugust31,2021:

Level1 Level2 Level3 TotalAssets:Cashandcashequivalents $1,229,066 $ — $ — $1,229,066Investments:

Short-terminvestments:Currency 15,478 — — 15,478

Totalshort-terminvestments 15,478 — — 15,478

Mutualfunds:Fixedincome 3,387 — — 3,387U.S.equities 397,863 — — 397,863

Totalmutualfunds 401,250 — — 401,250

Bonds:Corporatebonds — 404,728 — 404,728U.S.governmentandagencyissues — 428,661 — 428,661

Totalbonds — 833,389 — 833,389

Equitysecurities 172,220 — — 172,220Cashequivalentsininvestmentaccounts 373,499 — — 373,499Duetobroker (38,917) — — (38,917)

Totalinvestments 923,530 833,389 — 1,756,919Beneficialinterestintrusts — 21,069 — 21,069Totalassets $2,152,596 $ 854,458 $ — 3,007,054

InvestmentsrecordedatfairvaluebasedonNAV 2,104,959Totalassetsmeasuredatfairvalue $5,112,013

Liabilities:Interestrateswaps $ — $ 106,447 $ — $ 106,447



6.FairValueMeasurements(continued)

22

ThefollowingtablepresentsthefinancialinstrumentsmeasuredatfairvalueonarecurringbasisatAugust31,2020:

Level1 Level2 Level3 TotalAssets:Cashandcashequivalents $1,336,516 $ — $ — $1,336,516Investments:

Short-terminvestments:Currency 15,474 — — 15,474

Totalshort-terminvestments 15,474 — — 15,474



Otherfixedincome — 300 — 300

Bonds:Corporatebonds — 350,101 — 350,101U.S.governmentandagencyissues — 398,051 — 398,051

Totalbonds — 748,152 — 748,152

Equitysecurities 4,545 — — 4,545Cashequivalentsininvestmentaccounts 256,975 — — 256,975Duetobroker (93,167) — — (93,167)

Totalinvestments 537,127 748,452 — 1,285,579Beneficialinterestintrusts — 17,354 — 17,354Totalassets $1,873,643 $ 765,806 $ — 2,639,449

InvestmentsrecordedatfairvaluebasedonNAV 1,480,188

Totalassetsmeasuredatfairvalue $4,119,637

Liabilities:Interestrateswaps $ — $ 128,253 $ — $ 128,253




23

ReconciliationtotheConsolidatedBalanceSheets

A reconciliationof the fair valueof financial assets to the consolidatedbalance sheets atAugust31 is asfollows:

2021 2020Short-terminvestmentsmeasuredatfairvalue $ 15,478 $ 15,474

Investments,includingassetslimitedastousemeasuredatfairvalue 3,846,400 2,750,293

Totalinvestmentsatfairvalue 3,861,878 2,765,767

Alternativeinvestmentsaccountedforunderequitymethodincludedininvestments,includingassetslimitedastouse 5,913,326 4,411,268

Totalinvestments $ 9,775,204 $ 7,177,035

Pledgesandgrantsreceivable,lesscurrentportion:Beneficialinterestsintrustsatfairvalue $ 21,069 $ 17,354Pledgesandgrantsreceivable,lesscurrentportion,net 69,775 26,646

Totalpledgesandgrantsreceivable,lesscurrentportion $ 90,844 $ 44,000

ValuationTechniquesandInputs

Beneficial Interests in Trusts - The fair value of beneficial interests in trusts is based on NorthwesternMemorialFoundation's(theFoundation)percentageofthefairvalueofthetrusts’assetsadjustedforanyoutstandingliabilities(discountedusingarateperInternalRevenueService(IRS)regulations),basedoneachtrustarrangement.

Interest Rate Swaps - The fair value of interest rate swaps is based on generally accepted valuationtechniques, including discounted cash flow analysis on the expected cash flows of each derivative andquoted prices from dealer counterparties and other independent market sources. The valuationincorporatesobservableinterestratesandyieldcurvesforthefulltermoftheswaps.Thevaluationisalsoadjustedto incorporatenonperformancerisk forNMHCortherespectivecounterparty.Theadjustment isbasedonthecreditspreadforentitieswithsimilarcreditcharacteristicsasNMHCormarket-relateddatafortherespectivecounterparty.NorthwesternMemorialpaysvariousfixedratesandreceivescashflowsbasedon rates equal to a percentage of the London Interbank Offered Rate (LIBOR) plus a spread for certaininterestrateswaps.

Investments-ThefairvalueofLevel1investments,whichconsistofequitysecuritiesandmutualfunds, isbasedonquotedmarketpricesthatarevaluedonadailybasis.Level2investmentsconsistofgovernmentandagencies'issuesandcorporatebonds,andfixedincomeinstrumentsissuedbymunicipalitiesandforeigngovernment.ThefairvalueoftheU.S.governmentandagencies'issuesandcorporatebondsisestablishedbasedonvaluesobtainedfromnationallyrecognizedpricingservicesthatvaluethe investmentsbasedonsimilarsecuritiesandmatrixpricingofsimilarqualityandmaturitysecurities.Thefairvaluesofcommingledfunds, common collective trusts and103-12entities arebasedon theownership interest in theNAVpershare,oritsequivalent,oftherespectivefund.




24

NorthwesternMemorial’sinvestmentsareexposedtovariouskindsandlevelsofrisk.Equitysecuritiesandequity mutual funds expose Northwestern Memorial to market risk, performance risk and liquidity risk.Marketriskistheriskassociatedwithmajormovementsoftheequitymarkets.Performanceriskistheriskassociatedwithacompany’soperatingperformance.FixedincomesecuritiesandfixedincomemutualfundsexposeNorthwesternMemorialto interestraterisk,creditriskandliquidityrisk.As interestrateschange,thevalueofmanyfixedincomesecuritiesisaffected,includingthosewithfixedinterestrates.Creditriskisthe risk that the obligor of the security will not fulfill its obligations. Liquidity risk is affected by thewillingnessofmarketparticipantstobuyandsellparticularsecurities.Liquidityrisktendstobehigherforequitiesrelatedtosmallcapitalizationcompaniesandcertainalternativeinvestments.Duetothevolatilityinthe capital markets, there is a reasonable possibility of subsequent changes in fair value, resulting inadditionalgainsandlossesinthenearterm.

Thecarryingvaluesofcashandcashequivalents,accountsreceivable,currentportionofpledgesandgrantsreceivable,accountspayable,accruedexpensesandothercurrentliabilitiesandshort-termborrowingsarereasonableestimatesoftheirfairvaluesduetotheirshort-termnature.

Thefairvalueofthelong-termdebtportfolio,includingthecurrentportion,was$2,020,440and$1,771,959atAugust31,2021and2020,respectively.ThefairvalueofthisLevel2liabilityisbasedonquotedmarketpricesforthesameorsimilarissuesandtherelationshipofthosebondyieldswithvariousmarketindices.The market data used to determine yield and calculate fair value represents Aa/AA-rated tax-exemptmunicipalhealthcarebonds.Theeffectofthird-partycreditvaluationadjustments,ifany,isimmaterial.

The fair value of pledges receivable, a Level 2 asset, is based on discounted cash flow analysis andapproximatesthecarryingvalueof$91,683and$40,782atAugust31,2021and2020,respectively.

7.InvestmentinJointVentures

Northwestern Memorial has joint venture and operating partnership investment interests, ranging from25.5%to51.0%inhealth-relatedbusinesses,aswellasa33.3%restrictedinterestintwonon-health-relatedbusinesses that were donated to NorthwesternMemorial. These investment interests are accounted forundertheequitymethodofaccounting,asNorthwesternMemorialholdsa20%ormorevotinginterest.Thecarrying valueof thenon-health-related investmentsof $3,264and$4,771atAugust 31, 2021and2020,respectively, is included in Investments, including assets limited to use, less current portion in theaccompanyingconsolidatedbalancesheets.

Thecarryingvalueofthehealth-relatedinvestmentsof$26,337and$25,212atAugust31,2021and2020,respectively, is included inOtherassets,net intheaccompanyingconsolidatedbalancesheets.Netequitylossesfromthehealth-relatedinvestmentstotaled$1,583and$1,137fortheyearsendedAugust31,2021and2020,respectively,andareincludedinInvestmentreturnintheaccompanyingconsolidatedstatementsof operations and changes in net assets. The carrying valueof these investments exceeds theunderlyingequityinnetassetsby$6,627,reflectingthefairvaluechangerecordedatthetimeofacquisitionofCDH-DelnorHealthSystem(Cadence),KishHealthSystem(KishHealth),andCentegra.




25

ThefollowingisasummaryoffinancialinformationasofandfortheyearsendedAugust31relatingtotheseinvestments,whichincludestheportionoftheentitiesnotownedbyNorthwesternMemorial:

2021 2020

Currentassets $ 51,814 $ 58,717

Currentliabilities 6,290 8,887

Networkingcapital 45,524 49,830

Property,plantandequipment 36,688 35,648

Otherlong-termassets 5,246 630

Long-termliabilities 37,530 31,715

Netassets $ 49,928 $ 54,393

Revenue $ 37,630 $ 44,904

Expenses 40,345 41,877

(Deficit)excessofrevenueoverexpenses $ (2,715)$ 3,027

Net equity earnings from thenon-health-related investments totaled$836and$722 for the years endedAugust31,2021and2020,respectively,andare includedinNetassetswithdonorrestrictions investmentreturnintheaccompanyingconsolidatedstatementsofoperationsandchangesinnetassets.

NorthwesternMemorialmadenocapitalcontributionstoanyjointventuresfortheyearsendedAugust31,2021and2020.NorthwesternMemorialreceivedcashdistributionsfromsuchjointventuresof$3,836and$3,920fortheyearsendedAugust31,2021and2020,respectively.



7.InvestmentinJointVentures(continued)

26

Long-termdebtconsistsofthefollowingatAugust31:

2021 2020

TaxableRevenueBonds,Series2021(NMHC),payableinannualinstallmentsthroughJuly15,2051(fixedcouponratesrangefrom1.67%to2.63%) $ 519,735 $ —

RevenueBonds,Series2021A(NMHC),payableinannualinstallmentsthroughJuly15,2043(fixedcouponratesrangefrom3.00%to5.00%) 213,730 —

RevenueBonds,Series2017A(NMHC),payableinannualinstallmentsthroughJuly15,2047(fixedcouponratesrangefrom3.00%to5.00%) 501,505 514,575

RevenueBonds,Series2017B(NMHC),payableinannualinstallmentsbeginningJuly25,2055throughJuly25,2057(fixedcouponrateof5.00%throughDecember15,2022) 162,380 162,380

RevenueBonds,Series2015Aand2015B(NMHC),payableinmonthlyinstallmentsthroughMarch1,2035(fixedinterestratesrangefrom2.18%to2.27%throughMarch1,2023) — 9,626

RevenueBonds,Series2015E(PCH),payableinannualinstallmentsbeginningOctober2019throughOctober2037(fixedcouponrateof2.32%) 33,880 —

RevenueBonds,Series2014A(NMHC),payableinannualinstallmentsthroughSeptember1,2042(fixedcouponratesrangefrom4.63%to5.00%) — 132,325

RevenueBonds,Series2013(NMHC),payableinannualinstallmentsbeginningAugust15,2031throughAugust15,2043(fixedcouponratesrangefrom4.00%to5.00%) — 111,235

RevenueBonds,Series2012(NMHC),payableinannualinstallmentsthroughSeptember1,2038(fixedcouponratesrangefrom4.00%to5.00%) — 179,115

VariableRateDemandRevenueBonds,Series2021B(NMHC),payableinannualinstallmentsthroughJuly15,2055(weightedaverageinterestrateof0.01%fortheonemonthendedAugust31,2021) 73,000 —

VariableRateDemandRevenueBonds,Series2021C(NMHC),payableinannualinstallmentsthroughJuly15,2055(weightedaverageinterestrateof0.01%fortheonemonthendedAugust31,2021) 73,000 —

VariableRateDemandRevenueBonds,Series2021D(NMHC),payableinannualinstallmentsthroughJuly15,2055(weightedaverageinterestrateof0.02%fortheonemonthendedAugust31,2021) 63,100 —

VariableRateDemandRevenueBonds,Series2021E(NMHC),payableinannualinstallmentsthroughJuly15,2055(weightedaverageinterestrateof0.02%fortheonemonthendedAugust31,2021) 63,100 —



8.Long-TermDebt

27

2021 2020

RevenueBonds,Series2014B(NMHC),withinterestatavariableratepayablewithannualinstallmentsthroughSeptember1,2044,(weightedaverageinterestrateof0.53%and1.40%forthetwelvemonthsendedAugust31,2021and2020,respectively) 32,810 33,160

RevenueBonds,Series2014C(NMHC),withinterestatavariableratepayablewithannualinstallmentsthroughSeptember1,2044(weightedaverageinterestrateof0.69%and1.39%forthetwelvemonthsendedAugust31,2021and2020,respectively) — 24,010

RevenueBonds,Series2011Aand2011B(NMHC),withinterestatavariableratepayablewithannualinstallmentsthroughNovember1,2038,(weightedaverageinterestrateof0.49%and1.37%forthetwelvemonthsendedAugust31,2021and2020,respectively) 109,625 111,250

RevenueBonds,Series2011C(Delnor),withinterestatavariableratepayablewithannualinstallmentsthroughNovember1,2038,(weightedaverageinterestrateof0.38%and1.27%forthetwelvemonthsendedAugust31,2021and2020,respectively) — 54,725

VariableRateDemandRevenueBonds,Series2008A(NMH),payableinannualinstallmentsthroughAugust15,2038(weightedaverageinterestrateof0.06%and1.06%forthetwelvemonthsendedAugust31,2021and2020,respectively) — 58,880

VariableRateDemandRevenueBonds,Series2007A(NMH),payableinannualinstallmentsthroughAugust15,2042(weightedaverageinterestrateof0.04%and0.82%forthetwelvemonthsendedAugust31,2021and2020,respectively) — 200,600

NMHCfixedratenotedatedAugust29,2019,maturesSeptember1,2024(fixedrateof1.98%) $ 55,000 $ 55,000

TheMidlandSurgicalCenter,LLClineofcreditwasdueOctober15,2020,interestpaymentsrequiredmonthlyatavariableratenotlessthan3.75% — 321

NMHCcommercialpaperdatedOctober4,2016(weightedaverageinterestrateof0.16%and1.40%forthetwelvemonthsendedAugust31,2021and2020,respectively) 77,697 77,697

1,978,562 1,724,899

Less:

Unamortizedpremiumanddebtissuancecosts (56,475) (49,010)

Long-termdebtsubjecttoshort-termremarketingagreements 126,200 58,880

Currentmaturities 18,815 25,471

Commercialpaper,includedinShort-termdebt 77,697 77,697$ 1,812,325 $ 1,611,861



8.Long-TermDebt(continued)

28

NorthwesternMemorialhaslinesofcreditwithmultiplebanks.NorthwesternMemorialhastheoptiontoborrow at various rates expressed as an adjustment to LIBOR, prime rate or other bank-offered rates.Additionally,NorthwesternMemorialhas restrictedcertain linesof credit to secure lettersof credit. Theamountsavailable,outstandingandrestrictedtosecurelettersofcreditasofAugust31,2021areasfollows:

Available Outstanding Restricted$ 100,000 $ — $ 556 7,000 — 4,039

InAugust2021, the following transactionsoccurred related toNorthwesternMemorial’s long- and short-termdebt:

NorthwesternMemorial HealthCareObligatedGroup issued taxable fixed rate bonds, Series 2021, inaggregate amount of $519,735 on behalf of NMHC as the borrowerwith varyingmaturities through2051. Theproceedsof thesebondswereusedtoestablishanescrowto legallydefeasetheRevenueBonds, Series 2012 (NMHC) of $173,240, Series 2013 (NMHC) of $111,235 and 2014A (NMHC) of$131,055.Additionally,theremainingoutstandingprincipaloftheRevenueBondsSeries2011C(Delnor)of$54,055,Series2015A(NMHC)of$2,485andSeries2015B(NMHC)of$6,599werefullyredeemed.TheRevenueBonds,Series2007A1-4(NMH)werepartiallyredeemedintheaggregateamountof$4,000

TheIllinoisFinanceAuthorityissuedtax-exemptfixedratebonds,Series2021A,inaggregateamountof$213,730onbehalfofNMHCasborrowerwithvaryingmaturitiesthrough2043.TheproceedsofthesebondswereusedtofullyredeemtheRevenueBonds,Series2010C(PCH)of$68,830,Series2015B(PCH)of $55,930, Series 2015C (PCH) of $42,205 and Series 2015D (PCH) of $40,980. Additionally, theRevenueBonds,Series2015F(PCH)of$37,530werelegallydefeased.

The Illinois FinanceAuthority issued tax-exemptVariable RateDemandRevenueBonds, Series 2021B(NMHC) and Series 2021C (NMHC) in the aggregate amount of $146,000 on behalf of NMHC as theborrowerwith varyingmaturities through2055. Theproceedsof thesebondswereused topartiallyredeem the Revenue Bonds, Series 2007A1 and A2 (NMH) in aggregate amount of $97,550 and2008A1-2(NMH)inaggregateamountof$48,450.

The Illinois FinanceAuthority issued tax-exemptVariableRateDemandRevenueBonds, Series 2021D(NMHC) and Series 2021E (NMHC) in the aggregate amount of $126,200 on behalf of NMHC as theborrowerwithvaryingmaturitiesthrough2055.Theproceedsofthesebondswereusedtofullyredeemthe remainingoutstandingprincipalof theRevenueBonds, Series2014C (NMHC)of $23,760, 2007A3andA4(NMH)inaggregateamountof$97,550and2008A1-2(NMH)inaggregateamountof$4,890.

Thestandbybondpurchaseagreements(SBPAs)fortheIllinoisFinanceAuthorityVariableRateDemandRevenueBonds,Subseries2007A-1andSubseries2007A-3(NMH)of$99,550andSubseries2007A-2andSubseries 2007A-4 (NMH) of $99,550were terminated. New SBPAswere issued for the $73millionIllinoisFinanceAuthorityVariableRateDemandRevenueBond,Series2021B(NMHC)andfor the$73million Illinois Finance Authority Variable Rate Demand Revenue Bond, Series 2021C (NMHC) for aperiodoffiveyears.

NorthwesternMemorialhasSBPAswithtwobanksthatcovercertainvariableratedemandrevenuebonds(VRDBs).Theshort-termcreditratingforeachseriesofVRDBsisbasedontherespectivebank’sshort-term




29

credit rating. The long-term credit rating for each series of VRDBs is based onNorthwesternMemorial’slong-termcredit rating.Changes in credit ratingsmay impact the interestpaid,onor remarketingof, theVRDBs.AsofAugust31,2021,thebanksprovidedliquiditysupportintheeventofafailedremarketingasfollows:

ParValueExpiration

dateSubseries2021B 73,000 August2026Subseries2021C 73,000 August2026

NorthwesternMemorialprovides self-liquidityon theSeries2021DandSeries2021EBonds.Thesebondsare classified as Long-term debt subject to short-term remarketing in the accompanying consolidatedbalancesheets.

TheSBPAsincludereportingandfinancialrequirementsandothercovenants.IfanSBPAisnotrenewedorreplaced prior to its expiration, or if some portion, or all of the related VRDBs are not successfullyremarketed(i.e.,failedremarketing)duringthetermoftheSBPA,therelatedVRDBsarePurchasedBondsbytheSBPAproviderunder theSBPA.SuchPurchasedBondsare required tobe redeemedby theObligatedGroup over an amortization period pursuant to the SBPA. The earliest redemption associated with thePurchasedBondsis367daysfromthefailedremarketingdateortheexpirationdateoftheSBPA.Therefore,theVRDBsthataresupportedbySBPAsareclassifiedaslong-termdebtintheaccompanyingconsolidatedbalancesheets.

TheSeries2014BBondsaresubjecttoputoptionssuchthatthebondholdershaveagreedtoholdthe2014Bfor initial private placement rate periods ending on July 1, 2024, atwhich time the bonds are subject toredemption.TheObligatedGroupmayprovidewrittennoticetothebondholdernosoonerthan18monthsandnotlaterthanfourmonthspriortotheendoftheinitialprivateplacementrateperiodofitsdesiretorequestthebondholderstoextendtheinitialprivateplacementrateperiod.Thebondholdersmustprovidenoticeofacceptanceoftherequestwithin60daysofsuchrequest.Intheeventtheinitialprivateplacementrate period is not extended, NorthwesternMemorial may be required to redeem the bonds, unless thebondscanberemarketedpriortoJuly1,2024.

Scheduledprincipalrepaymentsforthenextfiveyears,assumingremarketingofvariableratedebt,onlong-termdebtareasfollows:

YearendingAugust31:2022 $ 18,8152023 18,2302024 19,0552025 79,5352026 21,075

Theprovisionsunder the respectivedebt agreements require theObligatedGroup tomaintain reporting,financial and other covenants. At August 31, 2021, the Obligated Group was in compliance with theseprovisions.




30

NorthwesternMemorialpaidinterestof$69,311and$63,440in2021and2020,respectively(whichincludes$7,083and$5,837,respectively,fornetswappayments includedinInterestexpenseintheaccompanyingconsolidated statements of operations and changes in net assets). Northwestern Memorial capitalizedinterestof$6,223and$6,556in2021and2020,respectively.

9.Derivatives

InAugust2021,NorthwesternMemorialfullyredeemedtheIllinoisFinanceAuthorityVariableRateDemandRevenueBondsSeries2007A1-4(NMH)inaggregateamountof$199,100.Theswapsrelatedtothesebondswerenotterminated.NorthwesternMemorial’sinterestrateswapsrelatedtothe2011A-Bbondswerenotimpacted.Theinterestrateswapswillremaininplaceforthesolepurposeofriskmanagement.Tomanagefluctuations in cash flows resulting from interest rate risk, NorthwesternMemorial entered into variousinterestrateswapagreements.Byusinginterestrateswapstomanagetheriskofchangesininterestrates,Northwestern Memorial exposes itself to credit risk and market risk. Credit risk is the risk that acounterpartywillfailtoperformunderthetermsofaderivativecontract.Whenthefairvalueofaswapispositive, the counterparty owes Northwestern Memorial, which creates credit risk for NorthwesternMemorial.Whenthefairvalueofaswapiszeroornegative,thecounterpartydoesnotoweNorthwesternMemorial. Northwestern Memorial minimizes the credit risk in its swap contracts by entering intotransactions that either require the counterparty to post collateral for the benefit of NorthwesternMemorialbasedonthecreditratingofthecounterpartyandthefairvalueoftheswapcontractorwhosecashflowsareinsuredbyathirdparty.Forcertaininterestrateswaps,NorthwesternMemorialisrequiredtopost collateral for thebenefitof thecounterpartywhen thenegative fair valueof the swapexceedsadefinedthreshold.Theaggregatefairvalueliabilityoftheswapsontheconsolidatedbalancesheetsreflectareductionof$2,404and$9,484fornonperformanceriskatAugust31,2021and2020,respectively.Marketriskistheadverseeffectonthevalueofafinancialinstrumentthatresultsfromachangeininterestrates.Themarketriskassociatedwithinterestratechangesismanagedbyestablishingandmonitoringparametersthat limit the types and degree ofmarket risk thatmay be undertaken.Management alsomitigates riskthroughperiodicreviewsofitsswappositionsinthecontextoftheirtotalblendedcostofcapital.

Thefollowingisasummaryoftheoutstandingpositionsunderexistinginterestrateswapagreements:

NotionalAmount

2021 2020MaturityDate RatePaid RateReceived

$ 99,550 $ 100,300 August2042 3.89% 63%of1-MonthLIBOR+28bps 99,550 100,300 August2042 3.89 63%of1-MonthLIBOR+28bps 59,575 60,050 November2038 3.82 67%of3-MonthLIBOR 59,575 60,050 November2038 3.52 67%of3-MonthLIBOR$ 318,250 $ 320,700




31

ThefairvalueofderivativeinstrumentsatAugust31isasfollows:DerivativeLiabilities

BalanceSheetLocation 2021 2020

Derivativesnotdesignatedashedginginstruments:

Interestratecontracts Interestrateswapliabilities $ 106,447 $ 128,253

Theeffectsofderivative instrumentson theconsolidated statementsofoperationsandchanges innetassetsareasfollows:

Amountof(Loss)IncomeRecognizedinExcessofRevenueOverExpenses

2021 2020

Derivativesnotdesignatedashedginginstruments:

Operatingexpense-interest $ (7,083)$ (5,837)

Nonoperating-changeinfairvalueofinterestrateswaps 21,805 (7,498)

NorthwesternMemorial’sderivative instruments containprovisions that require itsdebt to remainabovecertain credit ratings fromStandard&Poor's andMoody’s. IfNorthwesternMemorial’sdebtwere to fallbelow those levels, itwould be in violation of these provisions, and the counterparties to the derivativeinstruments could request immediate payment or demand immediate and ongoing full overnightcollateralization on derivative instruments in net liability positions. Northwestern Memorial has postedcollateral of $2,590 and $11,610 as of August 31, 2021 and 2020, respectively. If the credit-risk-relatedcontingent features underlying the agreement were triggered to the fullest extent on August 31, 2021,NorthwesternMemorialwouldberequiredtopost$106,261ofadditionalcollateraltoitscounterparties.



9.Derivatives(continued)

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At August 31, 2021, Northwestern Memorial had operating and finance leases for facilities and certainequipment and real estatewith lease terms generally ranging from 1 to 25 years,with some options toextenduptofiveyearsorterminatewithinoneyear.

TotalleaseexpensefortheyearendedAugust31consistedofthefollowing:2021 2020

Operatingleaseexpense: $ 31,492 $ 40,278

Financeleaseexpense:AmortizationofROUassets $ 4,824 $ 4,370Interestonleaseliabilities 83 145Totalfinanceleaseexpense $ 4,907 $ 4,515

Short-termleaseexpense $ 9,412 $ 7,582

Variableleaseexpense $ 648 $ 889

Consolidated supplemental cash flow information related to leases as of August 31 consisted of thefollowing:

2021 2020

Cashpaidforamountsincludedinthemeasurementofleaseliabilities:

Operatingcashflowsforoperatingleases $ 32,100 $ 32,173

Operatingcashflowsforfinanceleases 83 145

Financingcashflowsforfinanceleases 6,036 4,684

ROUassetsobtainedinexchangeforleaseobligations:

Operatingleases $ 47,295 $ 14,286

Financeleases 642 3,860

ConsolidatedbalancesheetinformationrelatedtoleasesasofAugust31consistedofthefollowing:2021 2020

Operatingleases:

ROUassets $ 183,344 $ 165,608

Othercurrentliabilities $ 32,947 $ 30,937

Leaseobligations,lesscurrentportion 165,147 145,741Totaloperatingleaseliabilities $ 198,094 $ 176,678



10.Leases

33

2021 2020Financeleases:

ROUassets $ 3,574 $ 7,814

Othercurrentliabilities $ 3,116 $ 4,194

Leaseobligations,lesscurrentportion 2,145 4,773

Totalfinanceleaseliabilities $ 5,261 $ 8,967

2021 2020Weightedaverageremainingleaseyears:

Operatingleases 10.7 10.2

Financeleases 3.0 2.7

Weightedaveragediscountrate:Operatingleases 1.36% 1.39%

Financeleases 1.00% 1.05%

Maturitiesofleaseliabilitiesforthenextfiveyearsandthereafterconsistofthefollowing:Operating Finance

2022 $ 32,948 $ 3,1162023 30,389 1,730

2024 27,378 7772025 24,242 —2026 19,982 —Thereafter 82,557 —Totalminimumleasepayments 217,496 5,623

Lessamountrepresentinginterest (19,402) (362)Presentvalueoffutureminimumleasepayments $ 198,094 $ 5,261

11.IncomeTaxStatus

ASC740,IncomeTaxes,requiresthatrealizationofanuncertainincometaxpositionismorelikelythannot(i.e.greaterthan50%likelihoodofreceivingabenefit)beforeitisrecognizedinthefinancialstatementsastheamountmost likelytoberealizedassumingareviewbytaxauthoritieshavingallrelevant informationandapplyingcurrentconventions.This interpretationalsoclarifies the financialstatementclassificationoftax-relatedpenalties and interest and sets forthnewdisclosures regardingunrecognized taxbenefits.NoamountwasrecordedfortheyearsendedAugust31,2021or2020.

EachoftheNMHCnot-for-profitentities isqualifiedundertheInternalRevenueCode(theCode)asatax-exemptorganizationand isexempt fromtaxon incomerelated to its tax-exemptpurposesunderSection501(a) of the Code. Accordingly, no income taxes are provided for the majority of the income in theaccompanyingconsolidatedfinancialstatementsforthesecorporations.Certaincorporationshadunrelated



10.Leases(continued)

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businessincome(UBI)generatedprimarilyfromthesaleofcertainservicesthatarenotdirectlyrelatedtopatient care and through limited partnershipswithin the investment portfolio. Certain corporations haveunusednetoperatinglosscarryforwardsavailabletooffsettheUBItax.Thenetoperatinglosscarryforwardsexpirethrough2038forlossesincurredpriortotheenactmentoftheTaxCutandJobsActof2017.Lossesincurred in tax years after January 1, 2018 are subject to indefinite carryforward periods though lossapplicationislimitedto80%oftaxableincome,withcaveatsduetopandemicresponseallowingfor100%application.Thedeferredtaxassetsassociatedwiththesenetoperatinglosscarryforwardsof$23,244and$15,323atAugust31,2021and2020,respectively,areoffsetbyvaluationallowancesontheaccompanyingconsolidatedbalancesheetsof$22,839and$14,139,respectively.ThetotalnetoperatinglosscarryforwardsatAugust31,2021and2020were$82,241and$53,542,respectively.

NMHCcalculatesincometaxesforitstaxablesubsidiaries.Taxableincomediffersfrompretaxbookincomeprincipally due to certain income and deductions for tax purposes being recorded in the consolidatedfinancialstatementsindifferentperiods.Deferredincometaxassetsandliabilitiesarerecordedforthetaxeffectof thesedifferencesusingenacted tax rates for theyears inwhich thedifferencesareexpected toreverse.

Inassessingtherealizabilityofdeferredtaxassets,managementconsiderswhetheritismorelikelythannotthatsomeportionorallofthedeferredtaxassetswillnotberealized.Theultimaterealizationofdeferredtax assets is dependent on the generation of future taxable income during the periods in which thosetemporarydifferencesbecomedeductible.

Provisionsforfederalandstateincometaxesof$873and$5,798fortheyearsendedAugust31,2021and2020,respectively,areincludedwithinOtherNonoperatinggains(losses)intheaccompanyingconsolidatedstatementsofoperationsandchangesinnetassets.OtherNonoperatinggains(losses)fortheyearsendedAugust 31, 2021 and 2020 also include $1,722 and ($556) related to excess compensation excise tax asenactedbytheTaxCutandJobsActof2017.



11.IncomeTaxStatus(continued)

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NetassetswithdonorrestrictionsareavailableforthefollowingpurposesatAugust31:

2021 2020Subjecttoexpenditureforspecifiedpurpose:Purchaseofpropertyandequipment $ 34,874 $ 22,152Operatingexpensesandcharitycare 244,072 99,391

Research,educationandother 154,841 146,502Totalexpenditureforspecifiedpurpose 433,787 268,045

Subjecttopassageoftime:Pledgesandtrusts 2,776 1,977

Endowments:Perpetualinnature:Purchaseofpropertyandequipment 16,004 15,754Operatingexpensesandcharitycare 85,310 82,018Research,educationandother 111,730 106,871

Totalperpetualinnature 213,044 204,643

Totalnetassetswithdonorrestrictions $ 649,607 $ 474,665

NetassetswerereleasedfromdonorrestrictionsbyincurringexpendituresforthefollowingpurposesintheyearsendedAugust31:

2021 2020Healthcareservices:Purchaseofpropertyandequipment $ 17,063 $ 5,514Clinicalexpensesandcharitycare 13,358 21,362

Research,educationandother 20,508 21,505$ 50,929 $ 48,381

Net assets released from donor restrictions reported in the consolidated statements of operations andchangesinnetassetswererecordedasfollowsfortheyearsendedAugust31:

2021 2020

Netassetsreleasedfromdonorrestrictionsandfederalandstategrants $ 25,527 $ 25,210Nonoperatingother 8,339 17,657

$ 33,866 $ 42,867

NorthwesternMemorial’sendowmentconsistsofindividualdonor-restrictedfundsestablishedforavarietyofpurposes.Netassetsassociatedwithendowmentfundsareclassifiedandreportedbasedonthedonor-imposedrestrictions.



12.NetAssetswithDonorRestrictions

36

NorthwesternMemorial has interpreted the Uniform PrudentManagement of Institutional Funds Act of2006(UPMIFA),asadoptedbytheStateofIllinois,asrequiringthepreservationofthevalueoftheoriginalgift asof thegiftdateof thedonor-restrictedendowment fundsabsentexplicitdonor stipulations to thecontrary.Asaresultofthisinterpretation,NorthwesternMemorialclassifiesasnetassetswithrestrictionstheoriginalvalueofgiftsdonatedtothepermanentendowment,theoriginalvalueofsubsequentgiftstothepermanentendowmentandaccumulationstothepermanentendowmentmadeinaccordancewiththedirectionoftheapplicabledonorgiftinstrumentatthetime.

In accordance with UPMIFA, Northwestern Memorial considers the following factors in making adeterminationtoappropriateoraccumulatedonor-restrictedfunds:

• Thedurationandpreservationofthefund• ThepurposesofNorthwesternMemorialandtheendowmentfund• Generaleconomicconditions• Thepossibleeffectsofinflationanddeflation• Theexpectedtotalreturnfrominvestmentincome• OtherresourcesofNorthwesternMemorial• TheinvestmentpoliciesofNorthwesternMemorial

NorthwesternMemorialhasadoptedinvestmentandspendingpoliciesforendowmentassetsdesignedtoprovideapredictablestreamoffundingtoprogramssupportedbyitsendowmentwhileseekingtomaintainpurchasing power of the endowment assets. Endowment assets include those assets of donor-restrictedfundsthatmustbeheldinperpetuityorforadonor-specifiedperiod.Underthispolicy,endowmentassetsareallocatedafixedannualreturn,whichiscurrentlysetat6%.

NorthwesternMemorialhasapolicythatgenerallylimitsannualspendingfromendowmentfundsto4%ofthe endowment fund balance at the midpoint of the preceding fiscal year. In establishing this policy,NorthwesternMemorialconsideredthelong-termexpectedreturnonitsendowment.Accordingly,overthelong term, Northwestern Memorial expects the spending policy to allow its endowment to grow at anaverage annual rate of 2%. This is consistentwith its objective tomaintain the purchasing power of theendowment assets held in perpetuity or for a specific term, aswell as to provide additional real growththroughnewgiftsandinvestmentreturn.



12.NetAssetswithDonorRestrictions(continued)

37

The changes in endowment net assets for the years ended August 31, 2021 and 2020, are summarizedbelow:

TotalEndowmentnetassets,August31,2019 $ 251,418Contributions 9,853Changeinvalueoftrusts 424Investmentreturn 14,713

Appropriationforexpenditure (7,297)

Other 900Endowmentnetassets,August31,2020 270,011

Contributions 7,198

Changeinvalueoftrusts 2,420Investmentreturn 15,563Appropriationforexpenditure (11,247)Other 999

Endowmentnetassets,August31,2021 $ 284,944

13.PledgesReceivable

AsofAugust31,2021,donor-restrictedpledges,whichareincludedinCurrentportionofpledgesandgrantsreceivable, net and Pledges and grants receivable, less current portion, are expected to be realized asfollows:

Lessthanoneyear $ 21,907Onetofiveyears 61,223Thereafter 32,865

Totalpledgesreceivable 115,995Lessallowances (1,526)Lesspresentvaluediscount (22,786)Netpledgesreceivable $ 91,683



12.NetAssetswithDonorRestrictions(continued)

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14.LiquidityandAvailability

Financialassetsavailable forgeneralexpenditurewithinoneyearof thebalancesheetdatecomprise thefollowingatAugust31:

2021 2020Cashandcashequivalents $ 1,229,066 $ 1,336,516Accountsreceivable 830,724 607,407Pledgesreceivable 21,907 14,136Grantsreceivable 2,150 2,893Otherreceivables 86,005 86,726Investments 8,417,372 6,203,734

Totalfinancialassetsavailablewithinoneyear $ 10,587,224 $ 8,251,412

15.Self-InsuranceLiabilitiesandRelatedInsuranceRecoverables

Northwestern Memorial retains certain levels of professional and general liability risks. NorthwesternMemorialalsoretainscertainlevelsofworkers’compensationrisksthroughStateofIllinoissanctioned self-insurancearrangementsandthroughcommercialinsuranceprogramssubjecttolargedeductibles. Forthoseself-insuredrisks,NorthwesternMemorialhasestablishedrevocabletrustfundsandtwocaptiveinsurancecompaniestopayclaimsandrelatedcosts. Inaddition,various insurancepolicieshavebeenpurchasedtoprovidecoverageinexcessofself-insuredlimits.

Northwestern Memorial’s self-insurance liability and related amounts recoverable from reinsurers arereported in theaccompanying consolidatedbalance sheetsatpresent valuebasedonanannualdiscountrateof2.0%asofAugust31,2021and2020.Thisdiscountrateisbasedonseveralfactors,includingrollingaverages of risk-free rates based on estimated payment patterns of the underlying liability. Theundiscounted gross liabilities for the self-insured programswere $1,073,011 and $841,960 atAugust 31,2021 and 2020, respectively. The undiscounted amounts recoverable from reinsurerswere $197,847 and$157,722atAugust31,2021and2020,respectively.Provisionsfortheprofessionalandgeneralliabilityrisksarebasedonanactuarialestimateoflossesusingactuallossdataadjustedforindustrytrendsandcurrentconditions and on an evaluation of claims by Northwestern Memorial’s legal counsel. The provision forestimated self-insured claims includes estimates of ultimate costs for both reported claims and claimsincurredbutnotreported.

In the opinion ofmanagement, based in part on the advice of outside actuaries, adequate provision hasbeenmade at August 31, 2021, for all claims incurred to date. Although there is considerable variabilityinherent insuchestimates,managementfurtherbelievesthattheultimatedispositionoftheseclaimswillnothaveamaterialadverseeffectontheconsolidatedfinancialpositionofNorthwesternMemorial.



39

There are twononcontributorydefinedbenefit pensionplans:NorthwesternMemorialHospital and LakeForestHospital(thePlans)maintainedwithinNorthwesternMemorialthatcoverspecifiedemployeegroups.The sponsors for the Plans approved resolutions to amend the Plans effective at the end of the day onDecember 31, 2012. The amendments implemented a hard freeze such that no participantwill earn anyadditionalornewbenefitsunderthePlansonorafterJanuary1,2013.

The following table summarizes the change in the projected benefit obligation for the years endedAugust31:

2021 2020

Projectedbenefitobligation,beginningofyear $ 732,626 $ 701,033

Interestcost 13,736 18,945

Netactuarialloss(gain) (1,842) 45,855

Benefitspaid (30,575) (33,207)

Projectedbenefitobligation,endofyear $ 713,945 $ 732,626

Thenetactuarialgain in2020wascausedprimarilybythechange inthediscountrateusedcomparedtoprioryears.

ThefollowingtablesummarizesthechangesinthePlans’assetsfortheyearsendedAugust31:

2021 2020

Planassetsatfairvalue,beginningofyear $ 786,448 $ 755,263

ActualreturnonthePlans’assets,netofexpenses 178,330 64,392

Benefitspaid (30,575) (33,207)

$ 934,203 $ 786,448

ThefollowingtablesetsforththePlans’fundedstatus,aswellasrecognizedamountsintheaccompanyingconsolidatedbalancesheetsasofAugust31:

2021 2020

Planassetsatfairvalue $ 934,203 $ 786,448

Projectedbenefitobligation 713,945 732,626

Netfundedstatus $ 220,258 $ 53,822

The funded status of theNorthwesternMemorial Hospital planwas $206,988 and $81,199 for the yearsendedAugust31,2021and2020,respectively.ThefundedstatusfortheNorthwesternLakeForestHospitalplanwas $13,270 and $(27,377) for the years ended August 31, 2021 and 2020, respectively.When theprojectedbenefitobligationisgreaterthantheplanassets,thenetliabilityisrecordedinOtherliabilities.



16.EmployeeBenefitObligations

40

IncludedinnetassetswithoutdonorrestrictionsarethePlans’amountsthathavenotyetbeenrecognizedinnetperiodicpensioncostatAugust31,asfollows:

2021 2020

Unrecognizedactuarialloss $ 120,521 $ 263,522

ChangesinthePlans’assetsandbenefitobligationsrecognizedinnetassetswithoutdonorrestrictionsfortheyearsendedAugust31includethefollowing:

2021 2020

Currentyearactuarialgain(loss) $ 136,741 $ (23,507)

Recognizedactuarialloss 6,260 5,441

$ 143,001 $ (18,066)

ThePlans’priorservicecostandnetactuariallossincludedinnetassetswithoutdonorrestrictionsexpectedtobe recognized innetperiodicpensioncostduring theyearendingAugust31,2022are$0and$1,000,respectively.

NetperiodicpensionbenefitincludedinnonoperatingresultsfortheyearsendedAugust31consistsofthefollowing:

2021 2020

Planexpenses $ 2,441 $ 2,024

Interestcostofprojectedbenefitobligation 13,737 18,945

ExpectedreturnonthePlans'assets (45,872) (44,068)

Recognizedactuarialloss 6,260 5,441

Netperiodicpensionbenefit $ (23,434)$ (17,658)

The following table sets forth the discount rate assumptions used to determine the projected benefitobligationandbenefitcostasofAugust31:

2021 2020

Usedtodetermineprojectedbenefitobligation

Discountrate-NorthwesternMemorialHospital 2.69% 2.64%

Discountrate-NorthwesternLakeForestHospital 2.78 2.79

Usedtodeterminebenefitcost

Discountrate-NorthwesternMemorialHospital 1.93% 2.80%

Discountrate-NorthwesternLakeForestHospital 2.08 2.72Expectedlong-termrateofreturnonthePlans’assets 6.00 6.00



16.EmployeeBenefitObligations(continued)

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Theexpectedlong-termrateofreturnonassetsisdeterminedbasedonacapitalmarketassetmodel,whichassumesthatfuturereturnsarebasedon long-term,historicalperformanceasadjustedforcontemporarydividend yields. The adjusted historical returns were weighted by the current long-term asset allocationtargetsandreducedby100basispointstoproduceamorenormalriskpremium.NorthwesternMemorial’sinvestmentadvisorassistedwiththeanalysis.

ThePlans’assetallocationandinvestmentstrategiesaredesignedtoearnreturnsonplanassetsconsistentwithareasonableandprudentlevelofrisk.Investmentsarediversifiedacrossclasses,sectorsandmanagerstyle to minimize the risk of loss. Northwestern Memorial uses professional investment managersspecializingineachassetcategoryand,whereappropriate,providestheinvestmentmanagerswithspecificguidelines that include allowable and/or prohibited investment types. Northwestern Memorial regularlymonitorsmanagerperformanceandcompliancewithinvestmentguidelines.

ThetargetallocationofthePlans’assetsasofAugust31isasfollows:

2021 2020

Equitysecurities 51% 51%

Alternativeinvestments 32 32

Fixedincome 17 17

100% 100%




42

ThefollowingtablepresentsthePlans’financialinstrumentsasofAugust31,2021,measuredatfairvalueonarecurringbasisbythevaluationhierarchydescribedinNote6:

Level1 Level2 Level3 TotalCashandcashequivalents $ 33 $ — $ — $ 33U.S.governmentsecurities — 14,052 — $ 14,052

Corporatedebt:Other — 22,018 — 22,018

Totalcorporatedebt — 22,018 — 22,018

Equitysecurities:U.S.equities 164 — — 164Internationalequities 115 — — 115



Commoncollectivetrustsandcommingledfunds:

U.S.equities 151,628 — — 151,628

Totalcommoncollectivetrustsandcommingledfunds 151,628 151,628

Totalassetsmeasuredonarecurringbasisatfairvalue $ 300,933 $ 36,070 $ — 337,003

InvestmentsrecordedatfairvaluebasedonNAV 597,200Totalassetsmeasuredatfairvalue $ 934,203




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ThefollowingtablepresentsthePlans’financialinstrumentsasofAugust31,2020,measuredatfairvalueonarecurringbasisbythevaluationhierarchydescribedinNote6:

Level1 Level2 Level3 Total

Cashandcashequivalents $ 991 $ — $ — $ 991

U.S.governmentsecurities — 8,828 — $ 8,828

Corporatedebt:

Other — 21,210 — 21,210

Totalcorporatedebt — 21,210 — 21,210

Equitysecurities:

Internationalequities 121 — — 121

Mutualfunds:

Fixedincome 106,883 — — 106,883

U.S.equities 34,498 — — 34,498


Commoncollectivetrustsandcommingledfunds:Internationalequities 24,797 — — 24,797U.S.equities 89,425 — — 89,425

Totalcommoncollectivetrustsandcommingledfunds 114,222 114,222

Otherfixedincome — 63 — 63

Totalassetsmeasuredonarecurringbasisatfairvalue $ 142,493 $ 30,101 $ — 286,816

InvestmentsrecordedatfairvaluebasedonNAV 499,632

Totalassetsmeasuredatfairvalue $ 786,448

ThefairvalueofLevel1investments,whichconsistofequitysecurities,certainmutualfunds,andcommoncollectivetrustsandcommingledfunds, isbasedonquotedmarketpricesthatarevaluedonadailybasis.Level2investmentsconsistofU.S.governmentsecurities,corporatebondsandU.S.equities.Thefairvalueof the U.S. government securities and corporate bonds is established based on values obtained fromnationally recognized pricing services that value the investments based on similar securities and matrixpricingofsimilarqualityandmaturitysecurities.

Included in the other pension investments are 103‑12 entities and alternative investments (principallylimitedpartnershipinterestsinhedge,privateequity,realestateandnaturalresourcesfunds)forwhichthefair values are based on NAV. The fair values of the 103-12 entities are based on the Master Trust’sownershipinterestintheNAVpershareofitsequivalentoftherespectivefund.




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The fair values of the securities held by limited partnerships that do not have readily determinable fairvaluesaredeterminedby thegeneralpartner taking intoconsideration,amongother things, the financialperformanceofunderlying investments,recentsalespricesofunderlying investmentsandotherpertinentinformation. In addition, actual market exchanges at period-end provide additional observable marketinputsof theexitprice.NAV iscalculatedby the investment’smanagementmonthly forallof theMasterTrust’s alternative investments, other than limited partnerships, whose NAV is calculated on a quarterlybasis.Themethodsdescribedabovemayproduceafairvaluecalculationthatmaynotbeindicativeofnetrealizable value or reflective of future fair values. Furthermore, while the Plans’ valuation methods areappropriate and consistent with other market participants, the use of different methodologies orassumptionstodeterminethefairvalueofcertainfinancialinstrumentscouldresultinadifferentestimateoffairvalueatthereportingdate.

InvestmentsinLPs,whichcannotberedeemedonrequest,totaled$52,370asofAugust31,2021.Certainmarketablealternative investmentsaresubject tovarious redemptionrestrictions.AsofAugust31,2021,$511,328ofalternativeinvestmentsissubjecttovariousredemptionlimitsandlockupprovisions,ofwhich$468,213expireswithinoneyearand$43,115expiresafteroneyearfromthebalancesheetdate.

ThePlans’assetsaremanagedsolely in the interestof thePlans’participantsand theirbeneficiaries.Theassets are invested with the investment objective of funding the accumulated and projected retirementbenefit obligations of the Plans consistent with the Plans’ long-term rate-of-return assumption. A timehorizon of greater than five years is assumed; therefore, interim volatility in returns is regardedwith anappropriateperspective.

NorthwesternMemorialhasnocurrentplanstocontributetothePlansduringtheyearendingAugust31,2022.

Benefitpaymentsareexpectedtobepaidasfollows:

YearendingAugust31:

2022 $ 40,769

2023 43,013

2024 43,061

2025 41,353

2026 39,937

2027-2031 186,519

NorthwesternMemorialalsomaintainsdefinedcontributionplanscoveringsubstantiallyallof its full-timeandpart-timeemployees.Participantscanmakevoluntarytax-deferredcontributionstothePlans,subjectto certain IRS limitations. Northwestern Memorial contributes a specified percentage of eligiblecompensationto thePlansonbehalfofeachparticipant.Participantsarealways fullyvested in theirowntax-deferred contributions and related earnings and become fully vested in Northwestern Memorialcontributions and relatedearningsupon completionof vesting service. Employer contributions related tothesedefinedcontributionplans,includedinEmployeebenefitsexpenseintheaccompanyingconsolidatedstatements of operations and changes in net assets, totaled $107,176 and $112,462 in 2021 and 2020,respectively.




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NMHCalsomaintainsothernoncontributorypostretirementbenefitplans (theNoncontributoryPlans) forcertainexecutiveemployees.Included in net assetswithout donor restrictions is an unrecognized actuarial loss of $677 and $1,321 atAugust31,2021and2020,respectively,fortheNoncontributoryPlansthathasnotyetbeenrecognizedinnetperiodicpensioncost.

ChangesintheNoncontributoryPlans’assetsandbenefitobligationsrecognizedinnetassetswithoutdonorrestrictionsincludethefollowing:

2021 2020

Current-yearactuarial(loss) $ (780)$ (1,417)

Recognizedactuarialnetloss 1,424 1,009

$ 644 $ (408)

As of August 31, 2021 and 2020, the Noncontributory Plans’ unfunded projected benefit obligationamounted to $16,919 and $16,508, respectively, and is included in Other liabilities in the accompanyingconsolidatedbalancesheets.TheNoncontributoryPlans’actuariallossincludedinnetassetswithoutdonorrestrictionsexpectedtoberecognizedinnetperiodicpensioncostduring2022is$780.

The following table sets forth the discount rate assumptions used to determine the projected benefitobligationasofAugust31:

2021 2020

Usedtodetermineprojectedbenefitobligation

Discountrate-SupplementalRetirementPlan 0.28% 0.46%

Discountrate-ExecutivePostretirementHealthandDentalPlan 1.52 1.92

17.FunctionalExpenses

NorthwesternMemorial provides general health care servicesprimarily to residentswithin its geographiclocation and supports research and education programs. Operating expenses directly attributable to aspecific functional area are reported as expenses of those functional areas. Expenses other thandepreciation expense are directly allocated to functional departments at the time they are incurred.Depreciationexpenseisallocatedonaproratabasis.General,administrativeandotherexpensesprimarilyincludelegal,finance,purchasing,humanresources,informationtechnology,managementandgovernance.




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ExpensesrelatedtoprovidingtheseserviceswereasfollowsfortheyearsendedAugust31:

2021

HealthCareServices

ResearchandEducation Fundraising

General,AdministrativeandOther

TotalExpenses

Salaries $ 2,342,819 $ 4,619 $ 7,443 $ 525,253 $ 2,880,134

Employeebenefits 309,869 1,171 835 82,511 394,386

Supplies 1,564,875 889 247 19,866 1,585,877

Purchasedservices 180,565 15,158 360 540,541 736,624

Depreciationandamortization 322,072 5,692 557 79,394 407,715

Insurance 175,302 — — 32,714 208,016

Rentandutilities 47,170 10 342 53,224 100,746

Repairsandmaintenance 101,477 19 533 47,634 149,663

Interest 102 — — 55,378 55,480

IllinoisHospitalAssessment 187,676 — — — 187,676

Other 37,016 100,944 147 36,769 174,876

$ 5,268,943 $ 128,502 $ 10,464 $ 1,473,284 $ 6,881,193

2020

HealthCareServices

ResearchandEducation Fundraising

General,AdministrativeandOther

TotalExpenses

Salaries $ 2,080,816 $ 4,351 $ 7,851 $ 485,197 $ 2,578,215

Employeebenefits 298,585 1,100 1,023 46,262 346,970

Supplies 1,286,581 369 437 16,188 1,303,575

Purchasedservices 159,112 14,413 230 491,845 665,600

Depreciationandamortization 289,551 5,480 979 74,981 370,991

Insurance 110,504 — — 22,277 132,781

Rentandutilities 45,403 5 401 59,204 105,013

Repairsandmaintenance 84,311 50 373 39,148 123,882

Interest 169 — — 53,177 53,346

IllinoisHospitalAssessment 157,279 — — — 157,279

Other 30,714 92,224 352 34,485 157,775

$ 4,543,025 $ 117,992 $ 11,646 $ 1,322,764 $ 5,995,427



17.FunctionalExpenses(continued)

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The researchandeducationcosts include$1,863and$2,597ofexpensessupportedby federal, stateandcorporategrants,and$21,542and$18,372ofexpensessupportedbyotherdonor-restrictedfundsin2021and2020,respectively.

18.CommitmentsandContingencies

Academic,ProgramandOtherSupport

Consistentwithitsmission,NorthwesternMemorialprovidesacademic,programandothersupporttoothernot-for-profit entities. The present value of the total remaining commitments related to this support is$76,167and$94,473atAugust31,2021and2020,respectively,whichisreportedasGrantsandacademicsupport payable, current portion and Grants and academic support payable, less current portion in theaccompanyingconsolidatedbalancesheets.

Northwestern Memorial will provide continuing funding to Northwestern University in support of theresearchandeducationmissionoftheFSM.ThiscontinuingfundingisbasedontheaveragepatientservicerevenueandoperatingresultsofNorthwesternMemorial.Theexpense incurredof$101,295and$89,213for the years ended August 31, 2021 and 2020, respectively, is recorded in Other expense in theaccompanyingconsolidatedstatementsofoperationsandchangesinnetassets;arelatedliabilityof$5,652,is recorded in Accrued expenses and other current liabilities as of August 31, 2021, and a receivable of$1,830isreportedinOthercurrentassetsintheaccompanyingconsolidatedbalancesheetsasofAugust31,2020.

Other

AsofAugust31,2021,approximately4%ofNorthwesternMemorialemployees,ona full-timeequivalentbasis,wererepresentedbyacollectivebargainingagreement.ThecollectivebargainingagreementexpiresonJanuary27,2023.

CapitalVariouscapitalprojectsarecurrentlybeingconstructedandareexpectedtobeplaced inserviceoverthenext threeyears.The totalestimatedcostof theseprojects is$1,564,000.AsofAugust31,2021,projectcommitmentstotaled$1,029,000,ofwhich$719,000hasbeenincurred.

Regulatory

LawsandregulationsgoverningtheMedicareandMedicaidprogramsareextremelycomplexandsubjecttointerpretation.Asaresult,thereisareasonablepossibilitythatrecordedamountswillchangebyamaterialamountinthenearterm.Duringthelastfewyears,asaresultofnationwideinvestigationsbygovernmentalagencies, various health care organizations have received requests for information and notices regardingalleged noncompliance with those laws and regulations, which, in some instances, have resulted inorganizationsentering intosignificant settlementagreements.Compliancewith such lawsand regulationsmayalsobesubjecttofuturegovernmentreviewandinterpretation,aswellassignificantregulatoryaction,includingfines,penaltiesandpotentialexclusionfromtheMedicareandMedicaidprograms.



17.FunctionalExpenses(continued)

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Inaddition,anincreasingnumberoftheoperationsandpracticesofnot-for-profithealthcareprovidershasbeenchallengedorquestionedtodeterminewhethertheyareconsistentwiththeregulatoryrequirementsfornonprofittax-exemptorganizations.Thesechallengesarebroaderthanconcernsaboutcompliancewithfederalandstatestatutesandregulationsofcorebusinesspracticesof thehealthcareorganizations.Thelawsandregulationsregardingthesepracticesarealsosubjectto interpretationandchallenge.Areasthathavecomeunderexaminationhaveincludedpricingpractices,billingandcollectionpractices,charitycare,community benefit, executive compensation and exemption of property from real property taxation.Northwestern Memorial expects that the level of review and audit to which it and other health careprovidersaresubjectwillincrease.TherecanbenoassurancethatregulatoryauthoritieswillnotchallengeNorthwestern Memorial’s compliance with these laws and regulations or that the laws and regulationsthemselveswill not be subject to challenge, and it is not possible to determine the impact, if any, suchclaims,penaltiesorchallengeswouldhaveonNorthwesternMemorial.

TheUnitedStatesDepartmentofHealthandHumanServicesOfficeofCivilRights(OCR) isresponsibleforenforcingtheHealthInsurancePortabilityandAccountabilityAct(HIPAA)andthePrivacyandSecurityRules.OCR has initiated a compliance review of NorthwesternMemorial of certain privacy breaches related toinappropriate access of patient information. Northwestern Memorial has complied with the OCR datarequests.Inaddition,NorthwesternMemorialisawareof,hasinvestigated,andhasmadedisclosuretoOCRwithrespecttocertainotherprivacybreachesandhasrespondedtorequestsforinformationfromtheOCR.NMHCisunabletodeterminewhetheranycorrectiveactionsorfinesmightbeimposedbyOCRasaresultofthecompliancerevieworthedisclosuresprovidedtoOCR.

Litigation

NorthwesternMemorialisadefendantinvariousotherlawsuitsarisingintheordinarycourseofbusiness.Although the outcome of these lawsuits cannot be predicted with certainty, management believes theultimate disposition of such matters will not have a material effect on Northwestern Memorial’sconsolidatedfinancialpositionoroperations.

19.COVID-19

In March 2020, the World Health Organization declared the global novel coronavirus disease 2019(COVID-19)outbreakapandemic.NorthwesternMemorialhasdevelopedandimplementedanemergencyresponse to the situation. However, COVID-19 could still materially affect Northwestern Memorial'soperationsandfinancialconditionasthedurationofthepandemicisunknown.

OnMarch27,2020,theUnitedStatesPresidentsigned into lawtheCARESAct,whichprovidedeconomicassistance to a wide array of industries, including health care. As part of this act, CMS expanded itsAccelerated and Advance Payment Program which allowed participants to receive expedited paymentsduring periods of national emergencies. As of August 31, 2020, Northwestern Memorial receivedapproximately $412,000 inMedicare advanced payments. To preserve liquidity throughout the uncertainmarket,NorthwesternMemorialretainedthesefunds,whicharerecordedinCashandcashequivalentsatAugust31,2021and2020.CMSbeganrecoupingtheseadvancedpayments inApril2021,whichwasoneyearsubsequenttotheissuanceofthefundsandarebasedonapercentageofMedicarepaymentsowedtoNorthwesternMemorial over 17months with the remaining balance due at the conclusion of that timeperiod.



18.CommitmentsandContingencies(continued)

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NorthwesternMemorialrecognized$93,000and$289,000ofHHSstimuluspaymentsduringtheyearendedAugust31,2021,and2020,respectively,recordedinNetassetsreleasedfromdonorrestrictionsandfederalandstategrants.InJune2021,HHSreleasedadditionalreportingrequirementsforhealthcareentitiesthatreceived stimulus payments from the Provider Relief Fund (PRF). The Post-Payment Notice of ReportingRequirements(theNotice)supersedesthepreviousnoticeissuedinJanuary2021. InDecember2020,theConsolidated Appropriations Act, 2021 was signed into law and provides several changes to theadministrationandreportingofdistributionsreceivedthroughthePRF.NorthwesternMemorialconsideredthe effects of the changes included in the Notice and has evaluated the impact on its consolidatedstatements of operations and changes in net assets noting no significant changes as ofAugust 31, 2021.Northwestern Memorial will continue to monitor and evaluate changes or clarifications in reportingguidancethatmaybeissuedbyHHSandwouldaffecttheaccountingfordistributionsfromthePRF.

NorthwesternMemorial has elected to defer the deposit and payment of the employer’s share of SocialSecurity taxesallowedundertheCARESAct.AsofAugust31,2021,NorthwesternMemorialhasdeferred$87,432 of such payments with $43,716 recorded in Accrued expenses and other current liabilities and$43,716inOtherliabilities.

Northwestern recognized $11,000during the year endedAugust 31, 2021, via the IllinoisHealthcare andFamily Services as part of its first round of state payments from the Coronavirus Urgent RemediationEmergencyfundrecordedinnetassetsreleasedfromdonorrestrictionsandfederalandstategrants.

ManagementwillcontinuetoreviewanyadditionalimpactoftheCARESAct.

20.SubsequentEvents

Northwestern Memorial evaluated events and transactions occurring subsequent to August 31, 2021throughDecember 7, 2021, the date of issuance of the accompanying consolidated financial statements.During this period, there were no subsequent events requiring recognition in the consolidated financialstatementsandnounrecognizedsubsequenteventsrequiringdisclosure.



19.COVID-19(continued)

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NORTHWESTERN MEMORIAL HEALTHCARE AND

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