CoverLetter

PROVIDENCE HEALTH & SERVICES, RENTON, WA

VOLUNTARY UPDATE OF QUARTERLY FINANCIAL INFORMATION

On May 10, 2016, Providence Health & Services (“Providence”) voluntarily posted its

unaudited financial statements and management discussion for the quarter ended March 31, 2016

(the “Quarterly Financial Information”). Providence is electing to provide an updated copy of

its unaudited financial statements and management discussion for the quarter ended March 31,

2016, which is attached hereto (the “Updated Quarterly Financial Information”). The Updated

Quarterly Financial Information differs from the Quarterly Financial Information only in the

following respects:

1. the discussion of a proposed lease and operation of certain facilities owned by

Greater Fairbanks Community Hospital Foundation has been deleted since a determination has

been made to not proceed with any such lease at this time.

2. the order of presentation of the line items under the “Current Liabilities” section

of the unaudited consolidated balance sheet has been adjusted so that the financial information

contained in the March 31, 2016 column for each line item corresponds to the financial

information for the same line item in the December 31, 2015 column.

Management’s Discussion and Analysis of Financial Condition

and Results of Operations Quarter ended March 31, 2016

Todd Hofheins, Executive Vice President and Chief Financial Officer

(Voluntary Supplemental Quarterly Disclosure, Updated May 16, 2016)

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Introduction to Management’s Discussion and Analysis

Management’s discussion and analysis provides additional narrative explanation of the financial condition, operational results and cash flow of Providence Health & Services (Providence) to increase understanding of the health system’s combined financial statements. The discussion and analysis should be read in conjunction with the accompanying unaudited combined financial statements. Creating healthier communities, together

As health care evolves, Providence is responding with a vision and core strategy to transform and innovate at scale. Across five states, Providence and its affiliates continue to pioneer how care is delivered by sharing one strategic plan designed to improve the health of entire populations by supporting the well-being of each person we serve. Our strategic outcome of “Creating healthier communities, together” is supported by five specific areas of focus in our strategic plan:

• Inspire: We must first inspire and develop our people. • Know: To serve our communities effectively, we are building enduring relationships with consumers. • Partner: Providing the best care requires new alignments with clinicians and care teams. • Adapt: We’ll develop and thrive under new care delivery and economic models. • Adopt: To serve more people we will grow by optimizing expert-to-expert capabilities.

This plan supports our vision, “Simplify health for everyone” and our promise to our patients, customers and communities, “Together, we answer the call of every person we serve: Know me, care for me, ease my way ®.” Through innovation, excellence, good stewardship and working together across Providence, we will continue to lead change to improve the health of our communities.

Investing in our communities to improve health and increase access

With strong support from Providence, Alaska launched Medicaid expansion in 2015 and Montana began expansion early in 2016, ensuring that all five of our states have increased eligibility under the Affordable Care Act. In an environment of decreased reimbursement for government-sponsored medical care, community benefit spending related to the unpaid costs of Medicaid was $167 million in the first quarter of 2016, which was in line with the same period in 2015. Providence cares for everyone, regardless of their ability to pay. In the first three months of 2016 we provided more than $249 million in community benefit, which was also in line with the prior year. Providence had a strong impact on landmark new payment codes that recognize the value of advance care planning by reimbursing clinicians for having these discussions with their patients. The Centers for Medicare and Medicaid Services adopted recommendations developed by Providence and our partners that advance care planning be added as an optional, separately billable, element of the annual wellness visit. Going into effect in 2016, these codes will be instrumental for Providence, other Catholic ministries, and other providers that are committed to whole-person care models.

Together, we answer the call of every person we serve: Know me, care for me, ease my way.

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This is an exciting opportunity to align biomedical innovation with real world clinical practice. Together, Providence and ISB will establish joint research projects around scientific wellness, glioblastoma, breast cancer and Alzheimer’s. Dr. Hood’s expertise will be valuable as we invest in health innovation through Providence Ventures. ISB is based in Seattle and includes more than 140 researchers.

Leading dynamic change through innovation

On-Demand Health Care Platform & Convenient Access

February 29, 2016 marked the launch of Providence’s digital scheduling for six new ExpressCare clinics in Walgreens stores in Portland and Seattle. Providence and Walgreens are collaborating to open a total of 25 clinics in Walgreens stores in Oregon and Washington by the end of the year. These launches are a critical step in creating a predictable and easy experience for both new and existing patients seeking care at these sites.

Consumer Engagement Platform

In February, Providence launched two direct-to-consumer product pilots to engage them between episodes of care. The YourVillage mobile application for expectant families during pregnancy and the first year of a baby’s life, was launched in Seattle (Swedish), Portland and Everett (Providence) targeting 200 patients for our second pilot and it was filled in less than 24 hours. The new version contains electronic medical records integration which supports appointments, provider information and small set of clinical data. The Optimal Aging pilot designed to enable the elderly to age safely and healthfully at home was launched at the First Hill, Sandpoint, and Ballard Swedish clinics.

Financial Performance

Year-to-date Results

Year-to-date operating income was $15 million in March 2016 compared to $103 million for the same period in 2015. Higher revenue and expenses correlated with an increase in volumes in the first quarter. This increase in net revenue yielded lower operating income partly because revenue growth was largely driven by capitation and insurance premium revenue, which have lower margin rates than patient revenue. Higher utilization of agency staffing resulted in higher salary and wage costs in the first quarter. The year-over-year decrease in net operating income was also partially driven by one-time gains in the prior year from CMS settlement payments and the sale of assets of $13 million and $20 million, respectively. Net income for the three months ended March 31, 2016 was $55 million as compared to $190 million in the prior year. The decrease was the result of lower net operating income and lower investment gains in 2016. Total investment gains for the three months ended March 31, 2016 were $57 million as compared to $97

Key Financial IndicatorsData is year-to-date; dollar figures presented in millions

2016 2015 Change Change %

Net Operating Revenue $3,810 $3,542 $268 8%

Net Operating Income $15 $103 -$88 -85%

Net Income $55 $190 -$135 -71%

EBIDA $253 $387 -$134 -35%

Total Community Benefit $249 $252 -$3 -1%

Operating Margin % 0.4% 2.9% -2.5% -86%

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million in the first three months of 2015. EBIDA through the first quarter was $253 million in 2016 as compared to $387 million in 2015.

Liquidity & Capital

Unrestricted cash reserves totaled $5.9 billion as of March 31, 2016 compared to $5.8 billion as of December 31, 2015. The increase was primarily driven by cash generated from operations and investment gains during the quarter, partially offset by capital purchases.

Days cash on hand (DCOH) was 156 days at March 31, 2016, a decline of three days from 159 days at December 31, 2015. As growth in patient volumes led to higher operating revenues and corresponding expenses, DCOH decreased with the increase in expense.

Volumes

Acute setting volumes have increased as a result of Providence’s continued investment in our communities and our strategy of collaborating with like-minded partners. Year-to-date inpatient admissions of 93 thousand were 2 percent higher than the prior year period. Emergency visits were 4 percent higher in 2016 as a result of higher usage of the emergency room for clinical visits in California markets. Year-to-date surgeries of 62 thousand were 4 thousand higher than the prior year period, which represented a 7 percent increase. Surgery counts increased in both inpatient and outpatient categories across most of our markets with inpatient increasing 4 percent and outpatient increasing 9 percent in the first three months of 2016 as compared to the same period of 2015. Surgery increases are partially attributed to the higher patient referrals from Group Health agreements in Washington as well as growth from clinic acquisitions in California that occurred in late 2015.

Key Volume IndicatorsData is year-to-date; presented in thousands unless noted

2016 2015 Change Change %

Inpatient Admissions 93 91 2 2%

Acute Adjusted Admissions 167 162 5 3%

Total Emergency Room Visits 381 366 15 4%

Total Surgeries 62 58 4 7%

Continuum Services Visits 586 572 14 2%

Physician Care Visits 2,221 1,920 301 16%

Connected Lives - Member Months 1,831 1,485 346 23%

Rate-Net Service Revenue/CMAA (whole value) $12,184 $11,873 $310 3%

CMI Adjusted Length of Stay (whole value) 2.9 2.9 0.0 0%

Liquidity Indicators As of 3/31/16

As of 12/31/15

Change Change %

Accounts Receivable Days 51 47 4 9%

Days of Cash on Hand 156 159 -3 -2%

Long-term Debt to Total Capitalization 34.0% 33.8% 0.2% 1%

Cash to Debt 139.5% 138.1% 1.4% 1%

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Year-to-date physician visits of 2,221 thousand were 301 thousand visits higher than the prior year period, an increase of 16 percent. The increase is partially attributed to growth from prior year clinic acquisitions in California and higher enrollment in the Providence Health Plan. Continuum services, which include long term care, hospice, housing, assisted living and home health, generated 586 thousand visits year-to-date, which was 2 percent higher than the same period in the prior year. The Providence Health Plan has continued to adapt to changes in the coverage market with an expansion of services in the past several years. Enrollment growth has continued in 2016. Connected lives member months, a measure of coverage for insured members, increased from 1,485 member months in the first quarter of 2015 to 1,831 member months in the first quarter of 2016. This growth in member coverage represented a 23 percent increase compared to the prior year.

Revenue

Year-to-date operating revenue of $3.8 billion was $0.3 billion or 8 percent greater than the prior year. Inpatient, outpatient, and primary care services all experienced growth over the prior year period in line with volumes growth, but increases were partially offset by a lower commercial payor mix in 2016 and the timing of commercial contract rate increases in 2016. Capitated revenue of $112 million was 14 percent higher than the prior year from growth in our accountable care organizations, a direct result of Providence’s continued investment in developing our Population Health programs. Total premium revenue of $470 million was 31 percent higher as membership in the Providence Health Plans expanded in 2016. Premium revenue grew at a slower rate than enrollments as more enrollees opt for high deductible plans in order to lower their premium payments. Capitated and premium revenue now represents 15 percent of Providence’s total operating revenue as compared to 13 percent in the prior year.

Operating Expenses

Operating RevenueData is year-to-date; figures presented in millions

2016 2015 Change Change %

IP Net Service Revenue $ 1,597 1,526 71 5%

OP Net Service Revenue 863 836 27 3%

Primary Care 404 409 (5) -1%

Continuum Services 191 168 23 14%

Capitated & Premium Revenue 582 456 126 28%

Other Revenue 173 147 26 18%

Total Operating Revenue $ 3,810 3,542 268 8%

Key Efficiency IndicatorsData is year-to-date

2016 2015 Change Change %

FTEs (presented in thousands) 73.7 68.0 5.7 8%

Productivity – Labor % Net Service Rev. 53.3% 49.0% 4.3% 9%

Supplies % Net Service Revenue 18.2% 17.0% 1.2% 7%

Efficiency - Expense/CMAA $ 12,130 $ 11,470 $ 660 6%

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Year-to-date operating expenses were 10 percent higher than the prior year. Like revenue growth, operating expense growth was correlated with higher patient volumes in 2016. While most expense categories grew in line with volume increases, labor expense outpaced operating expenses on a percentage basis, which drove the increase in year-over-year costs. Year-to-date labor expense, defined as the combination of salaries and wages, employee benefits, and purchased services, was $0.2 billion or 12 percent higher than the prior year. Full-time equivalents (FTEs) of 73.7 thousand increased 8 percent, which represented an increase of 5.7 thousand FTEs. Labor expense growth outpaced the increase in FTEs on a percentage basis in part due to high utilization of agency labor to staff open positions at Swedish and California facilities and for centralized services. Higher salary expense was also a reflection of higher negotiated labor rates in California and Oregon.

Non-operating Income

Non-operating gains and losses are primarily comprised of investment income, pension settlement costs, and innovation projects expense. Total investment gains for the three months ended March 31, 2016 were $57 million, compared to $97 million in the first three months of 2015. Net non-operating activity, excluding investment income, was -$17.5 million in 2016 compared to -$9.9 million in 2015. The growth in non-operating costs was primarily driven by pension settlement costs and innovation team expenses, which were $4 million and $9 million through March, respectively.

Credit Agency Ratings

Providence received affirmation on the following ratings from the three national credit rating agencies during the latest round of reviews in 2015.

Fitch: "AA" Standard and Poor's: "AA-" Moody's: "Aa3"

March 31, December 31,2016 2015

Current assets:Cash and cash equivalents 679,561$ 729,321$ Short-term management-designated investments 201,035 200,251 Accounts receivable, less allowance for bad debts of

$363,915 and $343,835, respectively 1,694,020 1,569,827 Other receivables 423,848 399,291 Supplies inventory 198,293 194,619 Other current assets 160,528 140,836 Current portion of funds held by trustee 126,893 54,740

Total current assets 3,484,178 3,288,885 Assets whose use is limited:

Management-designated cash and investments 4,980,758 4,930,858 Gift annuities, trusts, and other 101,518 93,804 Funds held by trustee 321,272 272,902

Assets whose use is limited, net of current portion 5,403,548 5,297,564Property, plant and equipment, net 6,642,342 6,580,860 Other long-term assets 575,743 572,968

Total assets 16,105,811$ 15,740,277$

Current liabilities:Current portion of long-term debt 235,480 244,532 Master trust debt classified as short-term 212,500 137,500 Accounts payable 376,923 427,567 Accrued compensation 815,959 641,406 Payable to contractual agencies 98,382 104,651 Retirement plan obligations 237,669 190,278 Current portion of self-insurance liability 118,948 118,898 Other current liabilities 528,122 463,198

Total current liabilities 2,623,983 2,328,030Long-term debt, net of current portion 3,727,716 3,729,795 Other long-term liabilities:

Self-insurance trusts 308,398 292,843 Pension benefit obligation 1,052,738 1,063,581 Other long-term liabilities 294,938 290,380

Total other long-term liabilities 1,656,074 1,646,804 Total liabilities 8,007,773 7,704,629

Net assets:Unrestricted

Controlling interest 7,599,810 7,541,875 Noncontrolling interest 45,194 44,904

Temporarily restricted 327,352 324,891 Permanently restricted 125,682 123,978

Total net assets 8,098,038 8,035,648 Total liabilities and net assets 16,105,811$ 15,740,277$

PROVIDENCE HEALTH & SERVICESUnaudited Consolidated Balance Sheets

(In thousands of dollars)

Assets

Liabilities and Net Assets

2016 2015Operating revenues:

Net patient service revenues 3,055,714$ 2,939,110$ Provision for bad debts (29,178) (47,699)

Net patient service revenues less provision for bad debts 3,026,536 2,891,411 Premium and capitation revenues 582,393 455,910 Other revenues 201,121 195,006

Total operating revenues 3,810,050 3,542,327

Operating expenses (including charity and unsponsored community benefitexpenses of $248,668 and $251,878, respectively):

Salaries and wages 1,613,372 1,417,691 Employee benefits 387,724 347,773 Puchased healthcare 337,244 335,541 Professional fees 142,498 134,591 Supplies 551,096 490,661 Purchased services 275,791 261,831 Depreciation 159,939 157,303 Interest 38,541 39,570 Amortization 146 354 Other 288,716 254,499

Total operating expenses 3,795,067 3,439,814 Excess of revenues over expenses from operations 14,983 102,513

Net nonoperating gains:Investment income, net 57,261 97,453 Other nonoperating gains (17,479) (9,915)

Total net nonoperating gains 39,782 87,538 Excess of revenues over expenses 54,765 190,051

Net assets released from restriction and other 3,174 (93) Change in noncontrolling interests in consolidated joint ventures 286 592

Increase in unrestricted net assets 58,225$ 190,550$

Three months ending March 31,

PROVIDENCE HEALTH & SERVICESUnaudited Consolidated Statement of Operations

(In thousands of dollars)

2016 2015

Operating Activities:Change in net assets 62,390$ 185,152$ Adjustments to reconcile change in net assets to net cash

provided by operating activities:Depreciation and amortization 160,085 157,658Provision for bad debt 29,178 47,843Gain on sale of property, plant, and equipment (218) (957)Equity income on joint ventures (9,769) (7,889)Changes in certain current assets and current liabilities (25,633) (360,873)Change in other long-term liabilities and other 3,897 (357)Restricted contributions and investment income received (8,017) (14,553)Net realized and unrealized losses on investments (55,968) (96,823)

Net cash provided by (used in) operating activities 155,945 (90,799)Investing activities:

Property, plant, and equipment additions (166,586) (130,609)Proceeds on the disposal of property, plant and equipment (272) 508Purchases of investments (1,356,707) (1,285,167)Proceeds from sales of investments 1,294,708 1,226,022Changes in other long-term assets and other 6,618 10,003Change in funds held by trustee, net (60,955) (66,133)

Net cash used in investing activities (283,194) (245,376)Financing activities:

Proceeds from restricted contributions and restricted net income 8,017 14,553Debt borrowings 331,010 10Debt payments (267,141) (21,149)Change in deferred financing costs and other 5,603 5,846

Net cash provided by (used in) financing activities 77,489 (740)Decrease in cash and cash equivalents (49,760) (336,915)

Cash and cash equivalents, beginning of period 729,321 1,237,337Cash and cash equivalents, end of period 679,561$ 900,422$ Supplemental disclosure of cash flow information:

Cash paid for interest (net of amounts capitalized) 72,796$ 70,177$

PROVIDENCE HEALTH & SERVICESUnaudited Consolidated Statement of Cash Flows

(In thousands of dollars)

Three months ending March 31,

Debt Supported by Self-Liquidity

PH&S has authorized $200 million in taxable commercial paper that is supported by self-liquidity. As of March 31, 2016, $125 million in commercial paper was outstanding. The System reports monthly on its cash and investment balances available to retire maturing short-term debt in the event notes cannot be remarketed. The table below summarizes the information provided to the rating agencies at the end of the first quarter describing cash and investments that could be available for liquidation.

Year-To-DateActual

Year-To-DateBudget

Year-To-Date% Variance

Year-To-DateLast Year

Year-To-Date% Variance

Volume:Acute Adjusted Admissions 167,197 168,002 -0.5% 162,474 2.9%Total Acute Admissions 93,337 93,835 -0.5% 91,347 2.2%Total Acute Patient Days 432,014 420,178 2.8% 418,259 3.3%Acute Outpatient Visits 2,143,564 2,100,706 2.0% 2,122,914 1.0%Observations 16,223 15,713 3.2% 13,037 24.4%Primary Care Visits 2,221,378 2,329,544 -4.6% 1,920,027 15.7%Long-Term Care Patient Days 99,979 104,954 -4.7% 100,407 -0.4%Home Health Visits 183,193 173,199 5.8% 172,504 6.2%Hospice Days 159,994 166,965 -4.2% 158,657 0.8%Housing and Assisted Living Days 143,381 139,722 2.6% 140,381 2.1%Health Plan Members 618,785 593,855 4.2% 500,941 23.5%Total Occupancy % 69.2% 65.7% 5.3% 67.5% 2.5%Total Average Daily Census 4,747 4,617 2.8% 4,647 2.2%

Surgeries: Inpatient 29,322 29,226 0.3% 28,084 4.4% Outpatient 32,939 33,013 -0.2% 30,233 9.0%Total Surgeries 62,261 62,239 0.0% 58,317 6.8%

Emergency Room Visits: Inpatient 50,560 51,255 -1.4% 49,709 1.7% Outpatient 330,721 317,783 4.1% 316,325 4.6%Total Emergency visits 381,281 369,038 3.3% 366,034 4.2%

Outpatient Visits: Outpatient Surgery 32,939 33,013 -0.2% 30,233 9.0% Emergency Visits 330,721 317,783 4.1% 316,325 4.6% Primary Care 2,221,378 2,329,544 -4.6% 1,920,027 15.7% Homecare Visits 183,193 173,199 5.8% 172,504 6.2% Observations 16,223 15,713 3.2% 13,037 24.4% All Other 1,763,681 1,734,197 1.7% 1,763,319 0.0%Total Outpatient Visits 4,548,135 4,603,449 -1.2% 4,215,445 7.9%

Efficiency:FTE's 73,741 74,973 -1.6% 68,048 8.4%YTD Overall Case-Mix Index 1.6061 1.5768 1.9% 1.5612 2.9%YTD Case-Mix Adj Admissions (CMAA) 268,531 264,909 1.4% 253,657 5.9%YTD Acute Care LOS (case-mix adj) 2.9 2.8 3.6% 2.9 0.0%YTD Net Svc Rev/CMAA 12,184 12,241 -0.5% 11,873 2.6%YTD Net Expense/CMAA 12,130 12,122 0.1% 11,470 5.8%YTD Paid Hours/CMAA 142 146 -2.7% 138 2.9%YTD Productive Hours/CMAA 129 130 -0.8% 125 3.2%Ave Yearly Salary/FTE (w/o benefits) 87,996 85,027 3.5% 84,492 4.1%Employee Benefits as a % of Salaries 24.0% 24.8% -3.2% 24.5% -2.0%Salary Wages as a % of Net Op Rev 42.3% 41.7% 1.4% 40.0% 5.7%Supplies as a % of Net Op Revenue 14.5% 14.6% -0.7% 13.9% 4.3%YTD Supplies Expense/CMAA 2,052 2,095 -2.1% 1,934 6.1%YTD Med Supplies Exp/CMAA 1,074 1,136 -5.5% 1,070 0.4%FTE's Per Adjusted Occupied Bed 8.67 9.07 -4.4% 8.23 5.3%

March 31, 2016 Year-to-Date

Financial Performance:Operating Margin 0.4% 0.8% -50.0% 2.9% -86.2%Total Margin 1.4% 2.3% -39.1% 5.2% -73.1%EBIDA ('000) 253,391 294,127 -13.8% 387,279 -34.6%EBIDA Margin 6.7% 7.7% -13.0% 10.9% -38.5%Debt Service Coverage 1.9 2.5 -24.0% 3.4 -44.1%Debt to Total Net Asset Ratio 34.0 33.8 0.6% 33.2 2.4%Cash to Debt Ratio 139.5 121.3 15.0% 135.1 3.3%Current Ratio 1.3 1.5 -13.3% 1.6 -18.8%Capital Spending ('000) 166,586 179,818 -7.4% 130,609 27.5%R12 Days of Total Cash on Hand 156 150 4.0% 175 -10.9%Net Patient AR Days (3 mo rolling ave) 51 46 10.9% 47 8.5%Bad Debt & Charity % Gross Svc Rev 1.5% 2.1% -28.6% 1.9% -21.1%

Community Benefit: ('000)Cost of Charity Care Provided 33,316 39,264 -15.1% 40,204 -17.1%Medicaid Charity 166,760 144,839 15.1% 167,301 -0.3%Education and Research Programs 22,640 22,640 0.0% 19,925 13.6%Unpaid Cost of Other Govt Programs 26 26 0.0% 6 333.3%Negative Margin Services and Other 16,754 18,719 -10.5% 18,212 -8.0%Non-Billed Services 9,172 7,753 18.3% 6,231 47.2%Total Community Benefit 248,668 233,242 6.6% 251,878 -1.3%