Adventist Health System/West

Annual Report: December 31, 2021

Per Continuing Disclosure Certificates:
CSCDA 2007 Series A
CHFFA 2009 Series B
CHFFA 2013 Series A
Adventist Health System/West Taxable Bonds 2013
CSCDA 2015 Series A
CHFFA 2016 Series A
Roseville Finance Authority 2017 Series B
CSCDA 2018 Series A
Multnomah County, OR 2019 Series A
Adventist Health System/West Taxable Bonds 2019

Certificate
Reference Requirement Location
Section 3(b)(2)* Long-term debt disclosure Tab “Financial Ratios”

Section 3(b)(3)* Statement regarding accounts receivable liens Tab “Financial Ratios”

Section 4(a) Audited combined financial statement Tab “AH 2021 Audited Financials”

Section 4(b)(1) Summary Listing of Hospitals Tab “Operating/Utilization Statistics”

(2) Combined Summary of Revenues & Expenses Tab “AH 2021 Audited Financials”
Note that 10.5% of Revenues are from entities
outside of the Obligated Group
(3) Combined Balance Sheet Tab “AH 2021 Audited Financials”
Note that 5.1% of Assets are from entities
outside of the Obligated Group

(4) Debt Service Coverage and Capitalization Tab “Financial Ratios”

(5) Payor Mix – Obligated Group Tab “Operating/Utilization Statistics”

(6) Utilization Statistics – Obligated Group Tab “Operating/Utilization Statistics”

(7) Operating Statistics – Obligated Group Tab “Operating/Utilization Statistics”

Section 4(c) Combining financial statements Tab “AH 2021 Audited Financials”

*Does not apply for CSCDA 2007A, CSCDA 2015A, CHFFA 2016A and Multnomah 2019A
Consolidated Financial Statements
and Supplementary Information
Adventist Health System/West
Years Ended December 31, 2021
and 2020 with Report of
Independent Auditors
Audited Consolidated Financial Statements
and Supplementary Information

Adventist Health System/West

Years Ended December 31, 2021 and 2020

Audited Consolidated Financial Statements

Report of Independent Auditors .............................................................................................................. 1

Consolidated Balance Sheets .................................................................................................................. 3
Consolidated Statements of Operations and Changes in Net Assets ......................................................... 4
Consolidated Statements of Cash Flows.................................................................................................. 6
Notes to Consolidated Financial Statements............................................................................................ 7

Supplementary Information

Report of Independent Auditors on Supplementary Information ............................................................ 36

Consolidating Balance Sheets ............................................................................................................... 37
Consolidating Statements of Operations and Changes in Net Assets...................................................... 39
 Ernst & Young LLP Tel: +1 916 218 1900
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Sacramento, CA 95814

Report of Independent Auditors

The Board of Directors

Adventist Health System/West

Opinion

We have audited the consolidated financial statements of Adventist Health System/West (Adventist Health),
which comprise the consolidated balance sheets as of December 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 (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of Adventist Health at December 31, 2021 and 2020, and the results of its operations, changes in its
net assets and its cash flows for the years then ended in accordance with accounting principles generally
accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of
America (GAAS). Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Statements section of our report. We are required to be
independent of Adventist Health and to meet our other ethical responsibilities in accordance with the relevant
ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance
with accounting principles generally accepted in the United States of America, and for 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.

In preparing the financial statements, management is required to evaluate whether there are conditions or
events, considered in the aggregate, that raise substantial doubt about Adventist Health’s ability to continue as
a going concern for one year after the date that the financial statements are issued.

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A member firm of Ernst & Young Global Limited
Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free of
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee
that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control. Misstatements are considered material if there is a substantial likelihood that, individually or
in the aggregate, they would influence the judgment made by a reasonable user based on the financial
statements.

In performing an audit in accordance with GAAS, we:

 Exercise professional judgment and maintain professional skepticism throughout the audit.

 Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, and design and perform audit procedures responsive to those risks. Such procedures include
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

 Obtain an understanding of internal control relevant to the audit 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 Adventist Health’s internal control. Accordingly, no such opinion is expressed.

 Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the financial
statements.

 Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that
raise substantial doubt about Adventist Health’s ability to continue as a going concern for a reasonable
period of time.

We are required to communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit, significant audit findings, and certain internal control-related matters
that we identified during the audit.

March 18, 2022



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A member firm of Ernst & Young Global Limited
 Adventist Health

Consolidated Balance Sheets

(In millions of dollars)

December 31
2021 2020
Assets
Cash and cash equivalents $ 304 $ 261
Short-term investments 157 176
Patient accounts receivable 689 612
Receivables from third-party payors 379 501
Other current assets 227 243
Total current assets 1,756 1,793

Noncurrent investments 2,291 2,236

Other assets 432 413
Property and equipment, net 2,185 2,302

Total assets $ 6,664 $ 6,744

Liabilities and net assets

Accounts payable $ 370 $ 265
Accrued compensation and related payables 325 306
Liabilities to third-party payors 209 232
Other current liabilities 242 140
Short-term financing 30 60
Current maturities of long-term debt 36 20
Total current liabilities 1,212 1,023

Long-term debt, net of current maturities 2,000 2,036

Other noncurrent liabilities 323 570
Total liabilities 3,535 3,629

Net assets without donor restrictions:

Controlling 3,044 3,040
Noncontrolling 15 14
Net assets with donor restrictions 70 61
Total net assets 3,129 3,115

Total liabilities and net assets $ 6,664 $ 6,744

See notes to consolidated financial statements.

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 Adventist Health

Consolidated Statements of Operations and Changes in Net Assets

(In millions of dollars)

Year Ended December 31

2021 2020
Revenues and support
Patient service revenue $ 4,660 $ 4,097
Premium revenue 189 185
Other revenue 348 477
Net assets released from restrictions for operations 18 15
Total revenues and support 5,215 4,774

Expenses
Employee compensation 2,308 2,246
Professional fees 782 587
Supplies 785 641
Purchased services and other 1,231 1,105
Interest 65 68
Depreciation and amortization 193 201
Total expenses 5,364 4,848

Loss from operations (149) (74)

Nonoperating income
Investment income 163 178
Loss on acquisition and divestitures – (1)
Other nonoperating (loss) gain (5) 6
Total nonoperating income 158 183

Excess of revenues over expenses 9 109

(Excess) deficit of revenues over expenses from noncontrolling interests (1) 2

Excess of revenues over expenses from controlling interests 8 111

See notes to consolidated financial statements.

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 Adventist Health

Consolidated Statements of Operations and Changes in Net Assets (continued)

(In millions of dollars)

Year Ended December 31

2021 2020
Net assets without donor restrictions
Controlling
Excess of revenues over expenses from controlling interests $ 8 $ 111
Net change in unrealized gains and losses on other-than-trading
securities (10) 7
Donated property and equipment – 1
Net assets released from restrictions for capital additions 5 7
Other 1 –
Increase in net assets without donor restrictions – controlling 4 126

Noncontrolling
Excess (deficit) of revenues over expenses from noncontrolling
interests 1 (2)
Increase (decrease) in net assets without donor restrictions –
noncontrolling 1 (2)

Net assets with donor restrictions

Restricted gifts and grants 32 24
Net assets released from restrictions (23) (22)
Other donor-restricted activity – 1
Increase in net assets with donor restrictions 9 3

Increase in net assets 14 127

Net assets, beginning of year 3,115 2,988

Net assets, end of year $ 3,129 $ 3,115

See notes to consolidated financial statements.

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 Adventist Health

Consolidated Statements of Cash Flows

(In millions of dollars)

Year Ended December 31

2021 2020
Operating activities
Increase in net assets $ 14 $ 127
Adjustments to reconcile increase in net assets to net cash
provided by operating activities:
Depreciation and amortization 193 201
Gain on early extinguishment of debt – (4)
Amortization of bond issuance costs and discount/premium (7) (7)
Noncash operating lease expense 38 37
Loss on note receivable 1 1
Net loss on investments (71) (27)
Net gain on sale of property and equipment 19 –
Net changes in operating assets and liabilities:
Patient accounts receivable (77) (14)
Other assets 3 (38)
Net payables to third-party payors and other liabilities 32 289
Net cash provided by operating activities 145 565

Investing activities
Purchases of property and equipment (136) (167)
Proceeds from sale of property and equipment 13 –
Proceeds of insurance for property and equipment 29 –
Purchase of investments (2,520) (1,060)
Proceeds from sale of investments 2,555 487
Net cash used in investing activities (59) (740)

Financing activities
Proceeds from issuance of short-term financing – 60
Payments on short-term financing (30) –
Proceeds from lines of credit – 200
Payments on lines of credit – (200)
Payments on long-term debt (13) (106)
Net cash used in financing activities (43) (46)

Increase (decrease) in cash and cash equivalents 43 (221)

Cash and cash equivalents, beginning of year 261 482

Cash and cash equivalents, end of year $ 304 $ 261

See notes to consolidated financial statements.

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 Adventist Health

Notes to Consolidated Financial Statements

(In millions of dollars)

Note A – Summary of Significant Accounting Policies

Reporting Entity and Principles of Consolidation: Adventist Health System/West (Adventist Health) is a
California not-for-profit religious corporation that controls and operates hospitals and other healthcare facilities,
and wellness promoting operations in the western United States and beyond (collectively, the “System”). Many
of the hospitals now controlled and operated by Adventist Health were formerly operated by various conferences
of the Seventh-day Adventist Church (the “Church”). The obligations and liabilities of Adventist Health and its
hospitals and other healthcare facilities are neither obligations nor liabilities of the Church or any of its other
affiliated organizations. Adventist Health maintains close ties to our heritage through connection to our Sponsor,
the Church. Church leaders serve on the Adventist Health Membership and the Board of Directors (the “Board”)
but the Church does not control or have ownership in the System.

The consolidated financial statements include the accounts of the following entities:

Adventist Health System/West dba Adventist Health – Roseville, California

San Joaquin Community Hospital dba Adventist Health Bakersfield – Bakersfield, California
Castle Medical Center dba Adventist Health Castle – Kailua, Hawaii
Adventist Health Clearlake Hospital, Inc., dba Adventist Health Clear Lake – Clearlake, California
Adventist Health Delano – Delano, California
Feather River Hospital dba Adventist Health Feather River – Paradise, California
Glendale Adventist Medical Center dba Adventist Health Glendale – Glendale, California
Hanford Community Hospital dba Adventist Health Hanford, Adventist Health Selma – Hanford, California
Willits Hospital, Inc., dba Adventist Health Howard Memorial – Willits, California
Lodi Memorial Hospital Association, Inc., dba Adventist Health Lodi Memorial – Lodi, California
Adventist Health Mendocino Coast – Fort Bragg, California
Adventist Health Plan, Inc – Roseville, California
Adventist Health Physicians Network – Roseville, California
Portland Adventist Medical Center dba Adventist Health Portland – Portland, Oregon
Reedley Community Hospital dba Adventist Health Reedley – Reedley, California
Rideout Memorial Hospital dba Adventist Health and Rideout – Marysville, California
Simi Valley Hospital and Health Care Services dba Adventist Health Simi Valley – Simi Valley, California
Sonora Community Hospital dba Adventist Health Sonora – Sonora, California
St. Helena Hospital dba Adventist Health St. Helena, Adventist Health Vallejo – St. Helena, California
Adventist Health Medical Center Tehachapi dba Adventist Health Tehachapi Valley – Tehachapi, California
Northwest Medical Foundation of Tillamook dba Adventist Health Tillamook – Tillamook, Oregon
Adventist Health Tulare – Tulare, California
Ukiah Adventist Hospital dba Adventist Health Ukiah Valley – Ukiah, California
White Memorial Medical Center dba Adventist Health White Memorial – Los Angeles, California
Western Health Resources dba Adventist Health Home Care Services – Roseville, California

The Board of Adventist Health or Stone Point Health serves as the legal board for each individual hospital
corporation. Adventist Health management serves as the legal board of the non-hospital corporations. All
material intercompany transactions have been eliminated in consolidation.

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 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note A – Summary of Significant Accounting Policies (continued)

Basis of Accounting: The financial statements are prepared in conformity with United States generally accepted
accounting principles (U.S. GAAP).

Cash and Cash Equivalents: Cash and cash equivalents consist primarily of unrestricted readily marketable
securities with original maturities not in excess of three months when purchased and net deposits in demand
accounts. Cash deposits are federally insured in limited amounts.

Marketable Securities: Marketable securities, stated at fair value, consist primarily of U.S. government treasury,
U.S. agency securities, corporate notes, exchange-traded funds, open-end mutual funds comprised of fixed-
income securities and domestic and international equities, and alternative investments comprised of
commingled funds and hedge funds. Investment income or loss (including realized gains and losses on
investments and unrealized gains and losses on trading investments) is included in the excess of revenues over
expenses unless the income or loss is restricted by donor or law. Interest and dividends are included in other
revenue. Securities with remaining maturity dates of one year or less as of the consolidated balance sheet date
are classified as current.

Investments and Assets Whose Use is Limited: Certain System investments are limited as to use through Board
resolution, provisions of contractual arrangements with third parties, terms of indentures, self-insurance trust
arrangements, or donors who restrict the use of specific assets. Assets that are expected to be expended within
one year are classified as current, including board-designated assets that are available and periodically borrowed
for working capital needs.

Split-interest Agreements: The System is the trustee and beneficiary of various split-interest agreements. The
carrying amounts of the System’s split-interest assets are included with investments held by trustee and donor-
restricted investments and include marketable securities and real estate. Trust assets are carried at fair value.
Assets under split-interest agreements were $8 at December 31, 2021 and 2020. Trust obligations are reported
in other noncurrent liabilities at their discounted estimated present value using actuarially determined life
expectancy tables. Discount rates range between approximately 2% and 9%. Liabilities under split-interest
agreements were $2 and $3 at December 31, 2021 and 2020, respectively.

Goodwill: The System records goodwill as the excess of purchase price and related costs over the fair value of
net assets acquired. These amounts are evaluated for impairment annually or when there is an indicator of
impairment. If it is determined that goodwill is impaired, the carrying value is reduced. The System had
goodwill of $75 and $65 at December 31, 2021 and 2020, respectively, which is included in other long-term
assets with additions of $10 and $43 in 2021 and 2020, respectively.

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 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note A – Summary of Significant Accounting Policies (continued)

Property and Equipment: Property and equipment are reported on the basis of cost, except for donated items,
which are recorded as an increase in net assets without donor restrictions based on fair market value at the date
of the donation. During the period of construction, the System capitalizes expenditures and interest costs, net
of earnings on invested bond proceeds that materially increase values, change capacities, and extend useful
lives. Accrued obligations for property and equipment are $8 as of December 31, 2021 and 2020, respectively.

Management periodically evaluates the carrying amounts of long-lived assets for possible impairment. The
System estimates that it will recover the carrying value of long-lived assets from the estimated future
undiscounted cash flows; however, considering the regulatory environment, competition, and other factors
affecting the industry, there is at least a reasonable possibility this estimate might change in the near term. The
effect of any change could be material.

Depreciation is computed using the straight-line method over the expected useful lives of the assets, which
range from 3 to 40 years. Amortization of equipment is included in depreciation expense.

Short Term Financing: In December 2020, the System initiated a taxable commercial paper program supported
by self-liquidity for general corporate purposes. Under the program, the System is registered to issue up to $150.
At December 31, 2021, $30 of commercial paper was outstanding with a maturity date of January 3, 2022 and
is included in short-term financing on the consolidated balance sheet. On January 3, 2022, the System paid down
the outstanding balance.

Debt Issuance Costs: Debt issuance costs are reported as a reduction of long-term debt and are deferred and
amortized over the life of the financings using the effective-interest method.

Bond Discounts/Premiums: Bonds payable are included in long-term debt, net of unamortized original issue
discounts or premiums. Such discounts or premiums are amortized using the effective interest method based on
outstanding principal over the life of the bonds.

Other Noncurrent Liabilities: Other noncurrent liabilities are comprised primarily of accruals for workers’
compensation claims, professional and general liability claims, deferred revenue, lease liabilities, and long-term
charitable gift annuity obligations.

Net Assets: All resources not restricted by donors are included in net assets without donor restrictions.
Resources restricted by donors for specific operating purposes, or for a period of time greater than one year, are
reported as net assets with donor restrictions. When the restrictions have been met, the net assets with donor
restrictions are reclassified to net assets without donor restrictions. Resources restricted by donors for additions
to property and equipment are initially reported as net assets with donor restrictions and are transferred to net
assets without donor restrictions when expended. Investment income is classified as net assets without donor
restrictions or net assets with donor restrictions based on the intent of the donor. Gifts of future interests are
reported as net assets with donor restrictions. Gifts, grants, and bequests not restricted by donors are reported
as other revenue.

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 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note A – Summary of Significant Accounting Policies (continued)

Charity Care: The System provides care without charge or at amounts less than its established rates to patients
who meet certain criteria under its charity care policy. In assessing a patient’s ability to pay, the System uses
federal poverty income levels and evaluates the relationship between the charges and the patient’s income. The
System did not change its charity care policy during 2021. The estimated cost of charity care was $19 and $26
in 2021 and 2020, respectively. The costs were determined using cost-to-charge ratios.

Premium Revenue: The System has agreements with various Health Maintenance Organizations (HMOs) to
provide medical services to subscribing participants. Under these agreements, the System receives monthly
capitation payments based on the number of each HMO’s covered participants, regardless of the services
actually performed by the System.

Other Revenue: Other revenue is comprised primarily of contributions received related to the Public Health and
Social Services Emergency Fund and other programs (collectively “Provider Relief Funds”), rental income,
retail pharmacy, interest and dividend income, and other miscellaneous income.

Income Tax: The principal operations of the System are exempt from taxation pursuant to Internal Revenue
Code Section 501(c)(3) and related state provisions. The System recognizes tax benefits from any uncertain tax
positions only if it is more-likely-than-not the tax position will be sustained, based solely on its technical merits,
with the taxing authority having full knowledge of all relevant information. The System records a liability for
unrecognized tax benefits from uncertain tax positions as discrete tax adjustments in the first interim period the
more-likely-than-not threshold is not met. The System recognizes deferred tax assets and liabilities for
temporary differences between the financial reporting basis and the tax basis of its assets and liabilities, along
with net operating loss and tax credit carryovers only for tax positions that meet the more-likely-than-not
recognition criteria. At December 31, 2021 and 2020, no such assets or liabilities were recorded.

The System currently files Form 990 (informational return of organizations exempt from income taxes) and
Form 990-T (business income tax return for an exempt organization) in the U.S. federal jurisdiction and the
state of California. The System is not subject to income tax examinations prior to 2018 in major tax jurisdictions.

Loss from Operations: The System’s consolidated statements of operations and changes in net assets include
an intermediate measure of operations, labeled “Loss from operations.” Items that are considered nonoperating
are excluded from loss from operations and include investment income and losses, gains and losses on
acquisitions and divestitures, and gains and losses on debt refinancing.

Excess of Revenues Over Expenses: The consolidated statements of operations and changes in net assets include
excess of revenues over expenses as a performance indicator. Changes in net assets without donor restrictions
that are excluded from excess of revenues over expenses include unrealized gains and losses on investments in
other-than-trading debt securities, contributions of long-lived assets, use of net assets with donor restricted
funds for capital additions, and losses from discontinued operations.

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 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note A – Summary of Significant Accounting Policies (continued)

Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts in the consolidated financial
statements and the accompanying notes. Actual results could differ from these estimates.

Note B – Fair Value of Financial Instruments

The System accounts for certain assets at fair value. A fair value hierarchy for valuation inputs has been
established to prioritize the valuation inputs into three levels based on the extent to which inputs used in
measuring fair value are observable in the market. Each fair value measurement is reported in one of the three
levels determined by the lowest level of input considered significant to the fair value measurement in its entirety.
These levels are defined as follows:

Level 1: Quoted prices are available in active markets for identical assets as of the measurement date.
Financial assets in this category include U.S. treasury securities, U.S. and foreign equities, and exchange-
traded mutual funds.

Level 2: Pricing inputs are based on quoted prices for similar instruments in active markets, quoted prices
for identical or similar instruments in markets that are not active, and model-based valuation techniques
for which all significant assumptions are observable in the market or can be corroborated by observable
market data for substantially the full term of the assets. Financial assets in this category generally include
U.S. government agencies and municipal bonds, asset-backed securities, and U.S. corporate bonds.

Level 3: Pricing inputs are generally unobservable for the assets and include situations where there is
little, if any, market activity for the investment. The System had no Level 3 investments at December 31,
2021 or 2020.

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 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note B – Fair Value of Financial Instruments (continued)

The following represents assets measured at fair value or at net asset value (NAV) as a practical expedient on a
recurring basis at December 31, 2021:

Quoted Prices
in Active
Markets for Significant
Identical Observable
Instruments Inputs
(Level 1) (Level 2) Totals

Cash and cash equivalents $ 304 $ – $ 304

Money market funds 38 – 38
Fixed income:
U.S. government treasury obligations 50 – 50
U.S. corporation and agency debentures – 47 47
U.S. agency mortgage-backed securities – 6 6
U.S. corporate debt securities – 429 429
Municipal bonds – 8 8
Mutual funds 217 164 381
Equities:
Equities 9 – 9
Mutual funds 929 – 929
Total financial assets stated at fair value $ 1,547 $ 654 2,201

Commercial real estate 23

Investments measured at NAV 528
Other investments 86
Total cash and investments $ 2,838

Money market funds of $38 at December 31, 2021 includes funds held in the investment portfolio for self-
insurance programs. The money market funds are used for both buying investments and self-insurance program
claims. The amounts are internally separated into a separate account; however, such funds are not restricted and
can be used for any purpose.

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 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note B – Fair Value of Financial Instruments (continued)

The following represents assets measured at fair value or at NAV as a practical expedient on a recurring basis
at December 31, 2020:

Quoted Prices
in Active
Markets for Significant
Identical Observable
Instruments Inputs
(Level 1) (Level 2) Totals

Cash and cash equivalents $ 261 $ – $ 261

Money market funds 71 – 71
Fixed income:
U.S. government treasury obligations 143 – 143
U.S. corporation and agency debentures – 51 51
U.S. agency mortgage-backed securities – 4 4
U.S. corporate debt securities – 227 227
Municipal bonds – 24 24
Mutual funds 679 200 879
Equities:
Equities 6 – 6
Mutual funds 717 – 717
Total financial assets stated at fair value $ 1,877 $ 506 2,383

Commercial real estate 26

Investments measured at NAV 264
Other investments 79
Total cash and investments $ 2,752

Money market funds of $71 at December 31, 2020 includes funds held in the investment portfolio for self-
insurance programs. The money market funds are used for both buying investments and self-insurance program
claims. The amounts are internally separated into a separate account; however, such funds are not restricted and
can be used for any purpose.

Commercial real estate investments are recorded at cost or fair market value if donated. These investments are
periodically reviewed for impairment and written down if necessary. Other investments include retirement plan
assets, joint ventures, and partnerships and are included in other assets.

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 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note B – Fair Value of Financial Instruments (continued)

As of December 31, 2021 and 2020, the Level 2 instruments listed in the fair value hierarchy tables above use
the following valuation techniques and inputs:
U.S. corporation and agency debentures: The fair value of investments in U.S. corporation and agency
debentures is primarily determined using consensus pricing methods of observable market-based data.
Significant observable inputs include quotes, spreads, and data points for yield curves.
U.S. agency mortgage-backed securities: The fair value of U.S. agency mortgage-backed securities is
primarily determined using matrices. These matrices utilize observable market data of bonds with similar
features, prepayment speeds, credit ratings, and discounted cash flows. Additionally, observed market
movements, tranche cash flows, and benchmark yields are incorporated in the pricing models.
U.S. corporate debt securities: The fair value of investments in U.S. corporate debt securities is primarily
determined using techniques that are consistent with the market approach. Significant observable inputs
include reported trades, dealer quotes, security-specific characteristics, and multiple sources of spread
data points in developing yield curves.

Municipal bonds: The fair value of municipal bonds is determined using a market approach. The inputs
include yield benchmark curves, prepayment speeds, and observable market data, such as institutional
bids, dealer quotes, and two-sided markets.

Certain of the investments are reported using a calculated NAV or its equivalent. These investments are not
expected to be sold at amounts that are different from NAV. The following table and explanations identify
attributes relating to the nature of the risk of such investments:

December 31, 2021

Redemption Redemption
Frequency Notice Period
Unfunded (if currently (if currently
NAV Commitments Eligible) Eligible)

Commingled funds – equity

securities $ 107 $ – Weekly/Monthly 4-30 days
Weekly/Monthly/
Hedge funds 313 10 Quarterly 30-65 days
Private equity funds 108 100 None None
Total $ 528 $ 110

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 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note B – Fair Value of Financial Instruments (continued)

December 31, 2020

Redemption Redemption
Frequency Notice Period
Unfunded (if currently (if currently
NAV Commitments Eligible) Eligible)

Commingled funds – equity

securities $ 96 $ – Weekly/Monthly 4-30 days
Hedge funds 139 23 Monthly/Quarterly 45-60 days
Private equity funds 29 36 None None
Total $ 264 $ 59

Commingled funds – equity securities: This class includes investments in commingled funds that invest
primarily in U.S. or foreign equity securities and attempt to match the returns of specific equity indices.

Hedge funds: This class includes investments in hedge funds that expand the universe of potential investment
approaches available by employing a variety of strategies and techniques within and across various asset classes.
The primary objective for these funds is to balance returns while limiting volatility by allocating capital to
external portfolio managers selected for expertise in one or more investment strategies, which may include, but
are not limited to, equity long/short, event driven, relative value, and directional. The following summarizes the
redemption criteria for the hedge fund portfolio as of December 31, 2021:

% of Hedge Notice
Funds Redemption Criteria Period

31% Redeemable weekly 30 days

26% Redeemable monthly 45-65 days
38% Redeemable quarterly 45-65 days
5% Up to 12.5% redeemable quarterly on non-consecutive quarters 60 days

Private equity funds: These investments cannot be redeemed by the System; rather, the System has committed
an amount to invest in the private funds over the respective commitment periods. After the commitment period
has ended, the nature of the investments in this category is that the distributions are received through the
liquidation of the underlying assets.

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 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note C – Patient Accounts Receivable

The System’s primary concentration of credit risk is patient accounts receivable, which consists of amounts
owed by various governmental agencies, insurance companies, and self-pay patients. The System manages its
receivables by regularly reviewing its patient accounts and contracts and by providing an appropriate allowance
for contractual reimbursement, policy discounts, charity, and price concessions. These allowances are estimated
based upon an evaluation of governmental reimbursements, negotiated contracts, and historical payments.

The following is a summary of significant concentrations of net patient accounts receivable:

December 31
2021 2020

Medicare 31% 33%

Medicaid 20 19
Other third-party payors 47 46
Self-pay 2 2

100% 100%

-16-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note D – Investments and Assets Whose Use is Limited

The following is a summary of unrestricted investments and assets whose use is limited:

December 31
2021 2020

Total unrestricted investments $ 2,352 $ 2,232

Assets designated by the Board, primarily for

property and equipment 24 13

Investments held by trustees for:

Self-insurance programs 55 150
Charitable annuities and other 2 3
Total investments held by trustees 57 153

Donor-restricted investments for:

Charitable trusts and life estate tenancies 6 5
Other purposes 9 9
Total donor-restricted investments 15 14

Total investments 2,448 2,412

Less short-term investments 157 176

Total noncurrent investments $ 2,291 $ 2,236

Total investments and assets whose use is limited above excludes other investments of $86 and $79 at December
31, 2021 and 2020, respectively which includes retirement plan assets, joint ventures, and partnerships and are
included in other assets.

Liquidity Management: As part of its liquidity management, the System’s strategy is to structure its financial
assets to be available to satisfy general operating expenses, current liabilities, and other obligations as they come
due. The System invests cash in excess of daily requirements in short-term investments and has a committed
syndicated line of credit and a commercial paper program to help manage unanticipated liquidity needs.
Additionally, other unrestricted noncurrent investments of $2,253 at December 31, 2021 may be utilized if
necessary.

-17-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note D – Investments and Assets Whose Use is Limited (continued)

The System’s financial assets available for general operating expenses within one year are as follows:

December 31
2021

Cash and cash equivalents $ 304

Short-term investments 157
Patient accounts receivable 689
Receivables from third-party payors 379
Other current assets 63
$ 1,592

Note E – Investment Income

Net realized and unrealized investment income, including capital gains on unrestricted, board designated, and
trustee-held funds, includes the following:

Year Ended December 31

2021 2020

Realized gains, net $ 87 $ 37

Unrealized gains, net 76 141
163 178
Interest and dividend income 48 38
$ 211 $ 216

Interest and dividend income are included in other revenue. For purposes of performance evaluation,
management considers interest and dividend earnings to be components of operating income. Realized and
unrealized gains and losses are components of nonoperating income and are reported in investment income on
the accompanying consolidated financial statements.

Changes in net unrealized gains and losses on other-than-trading debt securities, reported at fair value, are
separately disclosed in the consolidated statements of operations and changes in net assets. Unrealized gains
and losses associated with these securities relate principally to market changes in interest rates for similar types
of securities. Since the System has the intent and ability to hold these securities for the foreseeable future, and
it is more-likely-than-not that the System will not be required to sell the investments before their recovery, the
declines are not reported as realized unless they are deemed to be other-than-temporary. In determining whether
the losses are other-than-temporary, the System considers the length of time and extent to which the fair value
has been less than cost or carrying value, the financial strength of the issuer, and the intent and ability of the
System to retain the security for a period of time sufficient to allow for anticipated recovery or maturity.

-18-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note F – Property and Equipment

The following is a summary of property and equipment:

December 31
2021 2020

Land $ 178 $ 179

Land improvements 92 101
Buildings and improvements 3,009 3,016
Equipment 1,328 1,307
4,607 4,603
Less accumulated depreciation (2,492) (2,402)
2,115 2,201
Construction-in-progress 70 101

$ 2,185 $ 2,302

The System has commitments to complete certain construction projects approximating $56 (unaudited) at
December 31, 2021.

The System is in the process of developing internal use software for clinical and financial operations.
Depreciation expense for the software placed in service totaled $19 for the years ended 2021 and 2020. Amounts
capitalized are included in property and equipment as follows:

December 31
2021 2020

Equipment $ 281 $ 278

Less accumulated depreciation (198) (179)
83 99
Construction-in-progress 4 3

$ 87 $ 102

-19-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note G – Long-Term Debt

A master note under the master bond indenture provides security for substantially all long-term debt. Under the
terms of the master bond indenture, substantially all System consolidated entities are jointly and severally
obligated for the payments to be made under the master note. In addition, security is provided by bank letters of
credit aggregating to $47 at December 31, 2021. Bonds are not secured by any property of the System.

The System has a syndicate line of credit to meet temporary capital requirements and to provide flexibility in
meeting the System’s capital needs of $350. There were no draws outstanding under this line of credit at
December 31, 2021 and 2020.

The System is obligated under variable-rate demand instruments, which are subject to certain market risks. The
letters of credit, which the System intends to renew on a long-term basis, expire between 2024 and 2025, with
the arrangements converting any unpaid amounts to term loans due within three years after conversion. The
term loans would bear interest based on prime or the London Interbank Offered Rate.

Certain financing agreements impose limitations on the issuance of new debt by the System and require it to
maintain specified financial ratios. The System was in compliance with its debt covenants at December 31,
2021.

Interest paid, net of amounts capitalized, totaled $66 and $64 in 2021 and 2020, respectively. Interest capitalized
totaled $2 and $2 in 2021 and 2020, respectively.

In February 2020, the System defeased in full $14 of bonds issued in 2012 through the City of Delano for
Adventist Health Delano. The bonds were defeased with assets placed in an irrevocable trust and derecognized
at the date of refunding. The extinguishment and defeasance of this bond issue resulted in a loss on refinancing
of $1.

In September 2020, the System redeemed $60 of bonds. The redemption of these bonds resulted in a gain on
refinancing of $4.

No significant financing transactions were undertaken in 2021.

-20-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note G – Long-Term Debt (continued)

The following is a summary of long-term debt:

December 31
2021 2020
Non-taxable debt:
Long-term bonds payable, with fixed rates
currently ranging from 3.00% to 5.00%,
payable in installments through 2048 $ 1,049 $ 1,058

Long-term bonds payable, with rates that vary

with market conditions, payable in installments
through 2038 47 47

Taxable debt:
Long-term bonds payable, with fixed rates
currently ranging from 2.43% to 3.63%,
payable in installments through 2049 802 802

Long-term notes payable, with fixed rates

currently ranging from 3.00% to 6.50%,
payable in installments through 2045 76 80

Net unamortized debt issuance costs and original

issue premiums and discounts 62 69
2,036 2,056
Less current maturities (36) (20)

$ 2,000 $ 2,036

-21-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note G – Long-Term Debt (continued)

Scheduled maturities of long-term debt are as follows as of December 31, 2021:

Long-Term
Debt

2022 $ 30
2023 81
2024 184
2025 31
2026 31
Thereafter 1,617
$$ 1,974

Note H – Leases

The System leases certain locations, office space, land, and equipment. The System determines whether an
arrangement contains a lease at inception. Assets held under finance leases are included in property and
equipment. Operating leases are expensed on a straight-line basis over the life of the lease beginning on the
commencement date. Any direct and indirect costs for the leases are expensed and are immaterial for the System.

At lease commencement, the System determines the lease term by assuming the exercise of the renewal options
that are reasonably certain to be exercised. The exercise of lease renewal or termination options is at the
System’s sole discretion. The depreciable life of assets and leasehold improvements is limited by the expected
lease terms, unless there is a transfer of title or purchase option reasonably certain of exercise.

Some lease agreements include rental payments based on annual percentage increases, and others include rental
payments adjusted periodically for inflation. Certain leases require the System to pay real estate taxes, insurance,
maintenance, and other operating expenses associated with the leased premises.

The System’s lease agreements do not contain any material residual value guarantees or material restricted
covenants.

The System uses the incremental borrowing rate based on the information available at the lease commencement
date to determine the present value of lease payments.

The System elected the package of practical expedients within the lease transitional guidance, which allow it to
carry forward its historical assessments of 1) whether contracts are or contain leases; 2) lease classification; and
3) initial direct costs, where applicable. The System also elected the practical expedient to not separate lease
components from non-lease components for all existing lease classes. The System implemented a policy of not
recording leases on its balance sheets when the leases have a term of 12 months or less. The System did not
elect the practical expedient allowing the use of hindsight, which would require the System to reassess the lease
term of its leases based on all facts and circumstances through the effective date.

-22-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note H – Leases (continued)

December 31
Classification 2021 2020
Right-of-use Assets
Operating Other assets $ 186 $ 186
Finance Other assets 7 –
$ 193 $ 186

Current Lease liabilities

Operating Other current liabilities $ 30 $ 28
Finance Other current liabilities 2 –

Noncurrent Lease liabilities

Operating Other noncurrent liabilities 162 162
Finance Other noncurrent liabilities 5 –
Total lease liabilities $ 199 $ 190

December 31
Classification 2021 2020
Operating lease expense
Operating lease cost Purchased services and other $ 38 $ 36
Finance lease cost:
Amortization of leased assets Depreciation and amortization $ 1 $ –
Interest on lease liabilities Interest $ – $ –

Cash paid for amounts not included in December 31

the measurement of lease liabilities 2021 2020
Operating cash outflows for operating leases $ 38 $ 37

Right-of-use assets obtained in exchange December 31

for lease obligations 2021 2020
Operating $ 39 $ 46
Finance $ 7 $ –

-23-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note H – Leases (continued)

Operating lease payments include payments relating to options to extend lease terms that are reasonably certain
of being exercised. Excluded are any legally binding lease payments for signed leases not yet commenced,
which are immaterial for the System. Minimum lease payments for operating and finance leases with initial
terms in excess of one year are as follows for the period ended December 31, 2021:

Operating Finance
Maturity of Lease Liabilities Leases Leases
2022 $ 35 $ 2
2023 30 2
2024 26 1
2025 22 1
2026 17 1
Thereafter 104 –
Total lease payments 234 7
Less imputed interest (42) –
$ 192 $ 7

December 31
Lease Term and Discount Rate 2021

Weighted average operating remaining lease term (years) 10.25

Weighted average finance remaining lease term (years) 4.50
Weighted average operating lease discount rate 3.47%
Weighted average finance lease discount rate 2.42%

-24-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note I –Net Assets with Donor Restrictions

The System receives donations from generous individuals and organizations that support certain programs and
services. Donations included in net assets with donor restrictions were maintained for the following purposes:

December 31
2021 2020
Subject to expenditure for specified purpose:
Capital projects and medical equipment $ 27 $ 23
Research and education 27 25
54 48

Subject to passage of time 4 3

Investment in perpetuity – endowment 12 10
$ 70 $ 61

The Board has designated certain net assets without donor restrictions funds to be used in the future for specific
projects. Board-designated funds included in net assets without donor restrictions are held for the following
purposes:

December 31
2021 2020

Capital $ 15 $ –
Subject to expenditures for patient care, education, and other 4 6
Board designated – endowments 5 7
$ 24 $ 13

Note J – Patient Service Revenue and Premium Revenue

Patient service revenue is reported at the amount the System expects to be paid for providing patient care. These
amounts are due from patients and third-party payors (including health insurers and government programs) and
include variable consideration for retroactive revenue adjustments due to the settlement of audits, reviews, and
investigations. Generally, the System bills the patients and third-party payors soon after the services are
performed.

Patient service revenue is recognized as performance obligations are satisfied based on the nature of the services
provided by the System. Revenue for performance obligations that are satisfied over time is recognized based
on actual charges incurred in relation to total expected or actual charges. The System believes that this method
provides a faithful depiction of the transfer of services over the term of the performance obligation based on the
inputs needed to satisfy the obligation. Generally, performance obligations satisfied over time relate to patients
receiving inpatient services. The System measures the performance obligation for inpatient services from
admission into the hospital to the point when it is no longer required to provide services to that patient, which
is generally at the time of discharge. The System measures the performance obligations for outpatient services

-25-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note J – Patient Service Revenue and Premium Revenue (continued)

over a period of less than one day when goods or services are provided and the System does not believe it is
required to provide additional goods or services to the patient.

Because all its performance obligations relate to contracts with a duration of less than one year, the System has
elected to apply the optional exemption provided in ASC 606. Under this exemption, the System is not required
to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied
or partially unsatisfied at the end of the reporting period. Since the unsatisfied or partially unsatisfied
performance obligations referred to above are primarily related to inpatient services at the end of the reporting
period, the performance obligations for these contracts are generally completed within days or weeks of the end
of the reporting period.

The System determines the transaction price based on standard charges for goods and services provided, reduced
by contractual adjustments provided to third-party payors, discounts provided to uninsured patients in
accordance with the System’s policy, and other implicit price concessions provided to uninsured patients. The
System determines its estimates of contractual adjustments and discounts based on contractual agreements, its
discount policies, and its historical settlement experience. The System determines its estimate of implicit price
concessions for uninsured patients based on its historical collection experience with this class of patients.

Agreements with third-party payors typically provide for payments at amounts less than established charges. A
summary of the payment arrangements with major third-party payors follows:

• Medicare: Certain services are paid at prospectively determined rates based on clinical, diagnostic, and
other factors. Certain services are paid based on cost-reimbursement methodologies (subject to certain
limits) with final settlement determined after Medicare Administrative Contractors have audited annual
cost reports submitted by the System. Physician services are paid based upon established fee schedules
based on services provided.

• Medicaid: Reimbursements for Medicaid services are generally paid at prospectively determined rates
per discharge, per occasion of service, or per covered member. Supplemental funding is generally
provided by the various states in which the System operates for Medicaid Disproportionate Share and
hospital fee programs.

• Other: Payment agreements with certain commercial insurance carriers, HMOs, and preferred provider
organizations provide for payment using prospectively determined rates per discharge, discounts from
established charges, and prospectively determined daily rates.

-26-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note J – Patient Service Revenue and Premium Revenue (continued)

The healthcare industry is subject to laws and regulations concerning government programs, including Medicare
and Medicaid, which are complex and subject to varying interpretation. Compliance with such laws and
regulations may also be subject to future government review and interpretation as well as significant regulatory
action, including fines, penalties, and potential exclusion from the related programs. While the System operates
a compliance program, which reviews its compliance with these laws and regulations, there can be no assurance
that regulatory authorities will not challenge the System’s compliance with these laws and regulations, and it is
not possible to determine the impact (if any) such claims or penalties would have upon the System. In addition,
the contracts the System has with commercial payors also provide for retroactive audit and review of claims.

Settlements with third-party payors for retroactive adjustments due to audits, reviews, or investigations are
considered variable consideration and are included in the determination of the estimated transaction price for
providing patient care. These settlements are estimated based on the terms of the payment agreement with the
payor, correspondence from the payor, and the System’s historical settlement activity, including an assessment
to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not
occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated
settlements are adjusted in future periods as adjustments become known (that is, new information becomes
available), or as years are settled or are no longer subject to such audits, reviews, and investigations. Subsequent
revisions compared favorably to original estimates by $29 and $7 for the years ended December 31, 2021 and
2020, respectively.

Consistent with the System’s mission, care is provided to patients regardless of their ability to pay. Therefore,
the System has determined it has provided implicit price concessions to uninsured patients and patients with
other uninsured balances (for example, copays and deductibles). For uninsured patients, the System applies a
policy discount from standard charges to determine amounts billed to those patients. The implicit price
concessions included in estimating the transaction price represent the difference between amounts billed to
patients and the amounts the System expects to collect based on its collection history with that class of patients.

Subsequent changes to the estimate of the transaction price are generally recorded as adjustments to patient
service revenue in the period of the change. Subsequent changes that are determined to be the result of an
adverse change in the patient’s ability to pay are recorded as bad debt expense. Bad debt expense for the years
ended December 31, 2021 and 2020 was not significant.

-27-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note J – Patient Service Revenue and Premium Revenue (continued)

The composition of net patient service revenues by payor is as follows:

Year Ended December 31

2021 2020

Medicare $ 1,649 $$ 1,520

Medicaid 1,428 1,292
Other payors 1,583 1,285

$ 4,660 $$ 4,097

The composition of patient service revenues by area of operation and business type is as follows:

Year Ended December 31, 2021

Pacific Northern Central Southern
Northwest California California California Other Total

Inpatient $ 261 $ 728 $ 1,098 $ 851 $ (21) $ 2,917

Outpatient and other 209 226 275 158 54 922
Emergency 60 89 205 83 – 437
Physician services 75 96 182 11 106 470
Eliminations (11) (18) (26) (15) (16) (86)
Grand total $ 594 $ 1,121 $ 1,734 $ 1,088 $ 123 $ 4,660

Year Ended December 31, 2020

Pacific Northern Central Southern
Northwest California California California Other Total

Inpatient $ 248 $ 579 $ 877 $ 772 $ (5) $ 2,471

Outpatient and other 179 214 344 134 61 932
Emergency 54 24 184 69 – 331
Physician services 66 127 168 11 75 447
Eliminations (14) (23) (23) (11) (13) (84)
Grand total $ 533 $ 921 $ 1,550 $ 975 $ 118 $ 4,097

-28-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note J – Patient Service Revenue and Premium Revenue (continued)

Premium revenues: The System has entered into payment agreements with certain HMOs to provide medical
services to subscribing participants. Under these agreements, the System receives monthly capitation payments
based on the number of each HMO’s covered participants regardless of the services actually provided by the
System. The transaction price may be adjusted for stop loss recoveries, ceded premiums, and risk adjustment
factors. Performance obligations are satisfied over the passage of time by standing ready to provide services.

The composition of premium revenues based on area of operation and payor class is as follows:
Year Ended December 31, 2021
Pacific Northern Central Southern
Northwest California California California Other Total

Medicaid managed care $ 6 $ 79 $ 1 $ 52 $ 40 $ 178

Other managed care 1 – – (6) 16 11
$ 7 $ 79 $ 1 $ 46 $ 56 $ 189

Year Ended December 31, 2020

Pacific Northern Central Southern
Northwest California California California Other Total

Medicaid managed care $ 21 $ 85 $ 11 $ 41 $ 3 $ 161

Other managed care 2 – – – 22 24
$ 23 $ 85 $ 11 $ 41 $ 25 $ 185

The composition of premium revenues based on type of service and area of operation is as follows:
Year Ended December 31, 2021
Pacific Northern Central Southern
Northwest California California California Other Total

Institutional services $ – $ 37 $ (1) $ 46 $ 36 $ 118

Professional services 7 42 1 – 21 71
$ 7 $ 79 $ – $ 46 $ 57 $ 189

Year Ended December 31, 2020

Pacific Northern Central Southern
Northwest California California California Other Total

Institutional services $ 17 $ 74 $ 9 $ 41 $ – $ 141

Professional services 6 11 2 – 25 44
$ 23 $ 85 $ 11 $ 41 $ 25 $ 185

-29-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note J – Patient Service Revenue and Premium Revenue (continued)

The System recorded variable consideration from state programs for serving a disproportionate share of
Medicaid and low-income patients in the amount of $66 and $49 in 2021 and 2020, respectively, including final
settlements on prior years.

The State of California enacted legislation for a hospital fee program to fund certain Medi-Cal program coverage
expansions. The program charges hospitals a quality assurance fee that is used to obtain federal matching funds
for Medi-Cal with the proceeds redistributed as supplemental payments to California hospitals that treat Medi-
Cal patients. There was one hospital fee program active in 2020: a 30-month program covering the period from
July 1, 2019 to December 31, 2021, which was submitted to CMS for approval on September 30, 2019, and was
approved on February 26, 2020. Accordingly, all related supplemental payments have been recognized as
variable consideration and related quality assurance fees recognized as expense as of December 31, 2021.

Federal and state payments received from these programs are included in patient service revenue, and fees paid
or payable to the state and California Health Foundation and Trust (CHFT) are included in purchased services
and other expenses, as follows:

Year Ended December 31

2021 2020

Patient service revenue $ 486 $ 432

Purchased services:
Quality assurance fees 186 167
CHFT payments 4 3
Total purchased services and other expenses 190 170

Income from operations $ 296 $ 262

Accrued net receivables related to the hospital fee programs are included in receivables from third-party payors,
and amount to $419 and $422 as of December 31, 2021 and 2020, respectively.

-30-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note K – COVID-19

On March 11, 2020, the World Health Organization declared the novel coronavirus disease (COVID-19) a
pandemic. Following this, the Centers for Disease Control and Prevention declared a national public health
emergency, followed by state emergency declarations, and the Centers for Medicare & Medicaid Services
(CMS) issued guidance regarding elective procedures. Several national restrictions were put in place and the
governors in the states in which the System has operations issued shelter-in-place orders and executive orders
postponing nonessential or elective surgeries. Several unavoidable factors are impacting both revenue and
expense as the result of necessary actions by the System as well as local, state, and federal governments to
mitigate the spread and effect of the virus.

In response to COVID-19, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was
enacted on March 27, 2020 and the American Rescue Plan (“ARP”) was enacted on March 11, 2021. The
CARES Act and the ARP authorize funding to hospitals and other healthcare providers through Provider Relief
Funds. Grant payments from the Provider Relief Fund are intended to reimburse healthcare providers for lost
revenue and increased expenses due to the pandemic. The System received approximately $288 through
December 31, 2020 and an additional $174 through December 31, 2021. The consolidated statements of
operations and changes in net assets recognized contributions in other revenue in the amount of $105 and $288
for the years ended 2021 and 2020, respectively.

On March 28, 2020, CMS expanded the existing Accelerated and Advance Payments Program to a broader
group of Medicare Part A providers and Part B suppliers. At the end of April 2020, the System received
approximately $358 of Medicare advance payments as part of the CMS Accelerated and Advance Payments
Program. Originally, CMS announced that it would begin to offset the payments by future Medicare
reimbursements up to 210 days after disbursement, depending on whether a facility is an acute or non-acute
facility. On October 1, 2020, a continuing resolution was signed, which included an extension to delay
repayments to one year from receipt of these accelerated and advance disbursements. The repayment terms
specify that for the first 11 months after repayment begins, repayment will occur through an automatic
recoupment of 25% of Medicare payments otherwise owed to the provider. At the end of the eleven-month
period, recoupment will increase to 50% for six months. At the end of the six months (29 months from the
receipt of the initial accelerated payment), Medicare will issue a letter for full repayment of any remaining
balance, as applicable. In other current liabilities, the System has recorded $180 and $160 for the years ended
2021 and 2020, respectively. In other noncurrent liabilities the system has recorded $0 and $198 for the years
ended 2021 and 2020, respectively.

The CARES Act also allows for deferred payment of the employer portion of certain payroll taxes between
March 27, 2020 and December 31, 2020, with half due December 31, 2021 and the remaining half due
December 31, 2022. As of December 31, 2020, the System had deferred payroll tax payments of approximately
$37.5 and $75 for years ended 2021 and 2020, respectively, with $37.5 included in accrued compensation and
related payables for years ended 2021 and 2020. Included in other noncurrent liabilities in the consolidated
balance sheet is $0 and $37.5 for years ended 2021 and 2020, respectively.

Due to the evolving nature of the COVID-19 pandemic, the future impact to the System and its consolidated
financial condition is presently unknown.

-31-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note L – Functional Classification of Expenses

The System groups like expenses into financial statement lines and classifies programmatic expenses by
business line. Expenses that are attributable to one or more programs or supporting functions are allocated based
on operating expenses, square footage, and other criteria.

The following is a functional classification of the System’s expenses:

Year Ended December 31, 2021

Program General and
Services Administrative Total

Employee compensation $ 1,837 $ 471 $ 2,308

Professional fees 689 93 782
Supplies 777 8 785
Purchased services and other 1,013 218 1,231
Interest 65 – 65
Depreciation and amortization 182 11 193
Total expenses $ 4,563 $ 801 $ 5,364

Year Ended December 31, 2020

Program General and
Services Administrative Total

Employee compensation $ 1,835 $ 411 $ 2,246

Professional fees 496 91 587
Supplies 631 10 641
Purchased services and other 895 210 1,105
Interest 68 – 68
Depreciation and amortization 191 10 201
Total expenses $ 4,116 $ 732 $ 4,848

-32-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note M – Retirement Plan

Most of the System’s operating entities participate in a single defined contribution plan (the “Plan”). The Plan
is exempt from the Employee Retirement Income Security Act of 1974. The Plan provides, among other things,
that the employer will contribute 3% of wages plus additional amounts for employees earning more than the
Social Security wage base capped by the IRS compensation limit for the Plan year. Additionally, the Plan
provides that the employer will match 50% of the employee’s contributions up to 4% of the contributing
employee’s wages. Substantially all full-time employees who are at least 18 years of age are eligible for
coverage in the Plan. The cost to the System for the Plan is included in employee compensation in the amount
of $74 and $64 for the years ended December 31, 2021 and 2020, respectively.

Note N – Self-Insurance Liability Programs

The System has established a separate self-insurance program (the “System Program”) that covers the System’s
entities for professional and general liability claims up to $9 per occurrence and $25 in the aggregate for the
years ended December 31, 2021 and 2020. The System contracts with Adhealth, Limited (Adhealth), a Bermuda
company, to provide excess coverage for professional and general liability claims that exceed the System
Program limits. Adhealth provided excess coverage with aggregate and per claim limits of $125 for professional
and general liability claims for the years ended December 31, 2021 and 2020, which brought total coverage per
claim and aggregate limits to $134 for the years ended December 31, 2021 and 2020. Adhealth has purchased
reinsurance through commercial insurers for 100% of the excess limits of coverage.

Claim liabilities (reserves) for future losses and related loss adjustment expenses for professional liability claims
have been determined by an actuary at the present value of future claim payments using a 2% discount rate for
program years 2021 and 2020. Such claim reserves are based on the best data available to the System; however,
these estimates are subject to a significant degree of inherent variability. Accordingly, there is at least a
reasonable possibility that a material change to the estimated reserves will occur in the near term. The System
Program’s accrued liability for professional and general liability claims is included in the consolidated balance
sheets in the amount of $115 and $119 at December 31, 2021 and 2020, respectively.

The System has a 50% ownership position in Adhealth at December 31, 2021 and 2020, and accounts for its
investment using the equity method of accounting. The cost of acquiring commercial insurance by Adhealth is
reflected as an expense in the consolidated statements of operations and changes in net assets.

The System maintains a self-insured workers’ compensation plan to pay for the cost of workers’ compensation
claims. The System has entered into an excess insurance agreement with an insurance company to limit its losses
on claims. The cost of workers’ compensation claims is accrued using actuarially determined estimates that are
based on historical factors. Such claim reserves are based on the best data available to the System; however,
these estimates are subject to a significant degree of inherent variability. Accordingly, there is at least a
reasonable possibility that a material change to the estimated reserves will occur in the near term.

Workers’ compensation claim liabilities have been determined by an actuary at the present value of future claim
payments using a 2% discount rate for program years 2021 and 2020. The System’s accrued liability for
workers’ compensation claims is recorded in the consolidated balance sheets in the amount of $78 and $80 at
December 31, 2021 and 2020, respectively.

-33-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note O – Commitments and Contingencies

Certain member organizations are involved in litigation and investigations arising in the ordinary course of
business. In addition, certain member organizations in the ordinary course of business identified matters that
they have reported to CMS, CMS contractors, or Medicaid/Medi-Cal contractors. Such disclosures typically
involve simple repayment of affected claims; however, federal and state contractors may refer these matters to
the Department of Health and Human Services’ Office of Inspector General to investigate whether certain
member organizations have submitted false claims to the Medicare and Medicaid programs or have violated
other laws. Submission of false claims or violation of other laws can result in substantial civil and/or criminal
penalties and fines, including treble damages and/or possible debarment from future participation in such
programs. The System is committed to cooperating in such investigations as they arise. Although management
does not believe these matters will have a material adverse effect on the System’s consolidated financial
position, there can be no assurance that this will be the case.

Note P – Acquisitions

On March 10, 2020, the System finalized the purchase of Blue Zones, LLC and Thrive Production, Inc. for $78
in initial consideration. These companies focus on supporting a number of activities, including charitable and
education activities, designed to help people live longer and better through community transformation programs
that lower healthcare costs, improve productivity, and boost national recognition as great places to live, work,
and play. The purchase resulted in $42 of goodwill and $30 of other identifiable intangible assets primarily
related to trade name and customer relationships.

The following unaudited pro forma consolidated operating results for the year ended December 31, 2020. The
pro forma consolidated operating results do not necessarily represent the System’s consolidated operating
results had the acquisitions occurred on the date assumed, nor are these results necessarily indicative of the
System’s future consolidated operating results.

December 31
2020

Pro forma revenues and support $ 4,775

Pro forma excess of revenues over expense 109
Pro forma increase in net assets without donor restrictions 126
Pro forma increase (decrease) in donor-restricted net assets 3

In July 2020, the System commenced a long-term lease with Mendocino Coast Health Care District to become
the sole operator of Mendocino Coast District Hospital, located in Fort Bragg, California. The lease agreement
specifies that the hospital remain an acute care in-patient hospital, maintain at least 25 beds (the current number),
and continue to provide emergency room services. It is expected that, as a result of the affiliation, more resources
will be available to recruit and retain staff as well as bolster departments that currently have unmet needs such as
new equipment and upgrading existing facilities. A new community board was formed with members appointed
by Adventist Health consisting of 15 members, including two members from Adventist Health, two members from
the Mendocino Coast Health District Board, the hospital’s Chief of Staff, and ten representatives from the local
community.

-34-
 Adventist Health

Notes to Consolidated Financial Statements – Continued

(In millions of dollars)

Note Q – Camp Fire Impact

In November 2018, the System’s Adventist Health Feather River (AHFR) facilities in Paradise, California, and
neighboring communities incurred extensive damage as a result of the Camp Fire; most of the AHFR properties,
including the 100-bed acute care hospital, remain closed.

At the time of the Camp Fire, the System maintained an insurance policy with an insurance company providing
for total per occurrence aggregate coverage of $1,000 subject to a one hundred twenty-five thousand dollars
per-occurrence deductible with other limitations. The System also filed a claim against Pacific Gas and Electric
(PG&E), which has accepted responsibility for the Camp Fire and filed for bankruptcy protection in January
2019.

When all property insurance coverage and PG&E claims applicable to the above-mentioned Camp Fire damaged
and destroyed buildings and assets are considered, the System believes it is entitled to the recovery of
substantially all Camp Fire related expenses and reconstruction costs. In addition, pursuant to the business
interruption policy, the System believes it is entitled to substantially all lost income at the impacted properties
resulting from the Camp Fire. However, there can be no assurance that the System will ultimately collect
substantially all of the Camp Fire related expenses and reconstruction costs and the lost income resulting from
the related interruption of business at the impacted properties.

As of December 31, 2021, the System received additional Camp Fire related insurance payments of $68. $30 of
this payment has been applied to a casualty loss receivable and $29 was applied against the net book value of
the impaired assets at December 31, 2021. This resulted in a gain of $9 recorded in other revenue.

Note R – Subsequent Events

The System has evaluated subsequent events and disclosed all material events through March 18, 2022, the date
the accompanying consolidated financial statements were issued.

-35-
 Ernst & Young LLP Tel: +1 916 218 1900
Suite 900 ey.com
400 Capitol Mall
Sacramento, CA 95814

Report of Independent Auditors on Supplementary Information

The Board of Directors

Adventist Health System/West

Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The
accompanying consolidating financial statement schedules for Adventist Health System/West is presented for
purposes of additional analysis and is not a required part of the financial statements. Such information is the
responsibility of management and was derived from and relates directly to the underlying accounting and other
records used to prepare the financial statements. The information has been subjected to the auditing procedures
applied in the audits of the financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to prepare the
financial statements or to the financial statements themselves, and other additional procedures in accordance
with auditing standards generally accepted in the United States of America. In our opinion, the information is
fairly stated, in all material respects, in relation to the financial statements as a whole.

March 18, 2022



A member firm of Ernst & Young Global Limited

-36-
Adventist Health
Consolidating Balance Sheets
(In millions of dollars)
December 31, 2021

Adventist Adventist Adventist Adventist

Adjustments Health Adventist Adventist Adventist Adventist Health Adventist Adventist Health Health
Consolidated and System Health Health Health Health Feather Health Health Howard Lodi
Balances Eliminations Office Bakersfield Castle Clear Lake Delano River Glendale Hanford Memorial Memorial
Assets
Cash and cash equivalents $ 304 $ (2,089) $ 15 $ 100 $ 112 $ 31 $ 120 $ 79 $ 41 $ 434 $ 69 $ 45
Short-term investments 157 – 154 – – – – – 1 – – –
Patient accounts receivable 689 (13) – 65 22 32 9 1 78 51 12 41
Receivables from third-party payors 379 (7) – 48 1 13 26 4 14 75 4 29
Other current assets 227 (444) 447 36 12 4 2 5 15 10 2 15
Total current assets 1,756 (2,553) 616 249 147 80 157 89 149 570 87 130

Noncurrent investments 2,291 (9) 2,261 – 17 – – 3 3 – – –

Other assets 432 8 159 10 20 5 – – 33 24 10 7
Property and equipment, net 2,185 – 292 133 121 36 48 10 172 165 45 125

Total assets $ 6,664 $ (2,554) $ 3,328 $ 392 $ 305 $ 121 $ 205 $ 102 $ 357 $ 759 $ 142 $ 262

Liabilities and net assets

Accounts payable $ 370 $ – $ 124 $ 24 $ 9 $ 5 $ 5 $ 1 $ 22 $ 18 $ 5 $ 20
Accrued compensation and related payables 325 (13) 175 14 7 5 5 – 18 11 3 8
Liabilities to third-party payors 209 (7) 8 4 9 2 7 – 26 21 10 13
Other current liabilities 242 (447) 222 38 16 31 5 1 32 28 6 25
Short-term financing 30 (99) 33 – – – – – – – – –
Current maturities of long-term debt 36 – 10 3 1 1 – – 5 3 1 4
Total current liabilities 1,212 (566) 572 83 42 44 22 2 103 81 25 70

Long-term debt, net of current maturities 2,000 – 369 94 73 65 15 18 179 234 28 135
Other noncurrent liabilities 323 (1,988) 2,124 7 4 4 – – 24 4 9 5
Total liabilities 3,535 (2,554) 3,065 184 119 113 37 20 306 319 62 210

Net assets (deficit) without donor restrictions:

Controlling 3,044 – 261 206 181 7 168 80 42 439 79 48
Noncontrolling 15 – – – – – – – – – – –
Net assets with donor restrictions 70 – 2 2 5 1 – 2 9 1 1 4
Total net assets 3,129 – 263 208 186 8 168 82 51 440 80 52

Total liabilities and net assets $ 6,664 $ (2,554) $ 3,328 $ 392 $ 305 $ 121 $ 205 $ 102 $ 357 $ 759 $ 142 $ 262

See accompanying auditors’ report on supplementary information. -37-

 Adventist Adventist Adventist Adventist
Health Health Adventist Adventist Adventist Adventist Adventist Adventist Adventist Health Adventist Adventist Adventist Health Western
Mendocino Physicians Health Health Health Health and Health Health Health Tehachapi Health Health Health White Health
Coast Network Plan Portland Reedley Rideout Simi Valley Sonora St. Helena Valley Tillamook Tulare Ukiah Valley Memorial Resources

$ – $ 8 $ 6 $ 160 $ 170 $ 46 $ – $ 214 $ – $ 19 $ 62 $ – $ 126 $ 536 $ –

– – – – – – – – – – – – – 2 –
9 12 – 48 26 78 32 36 31 9 14 15 21 50 10
2 – 2 2 8 25 6 26 7 – – 15 20 59 –
13 19 – 7 2 15 5 9 15 2 2 2 9 20 3
24 39 8 217 206 164 43 285 53 30 78 32 176 667 13

– – – – – – – – 16 – – – – – –
8 – – 32 42 12 15 12 10 1 3 8 10 1 2
1 – – 114 42 336 115 82 98 42 10 7 73 117 1

$ 33 $ 39 $ 8 $ 363 $ 290 $ 512 $ 173 $ 379 $ 177 $ 73 $ 91 $ 47 $ 259 $ 785 $ 16

$ 3 $ 3 $ 1 $ 12 $ 6 $ 32 $ 7 $ 11 $ 14 $ 4 $ 4 $ 7 $ 9 $ 21 $ 3
2 2 – 10 5 19 7 8 8 1 3 2 6 16 3
– – 2 13 3 33 9 15 14 3 7 – 7 10 –
10 19 3 38 49 26 14 17 21 4 6 6 25 39 8
17 – – – – – 4 – 16 – – 44 – – 15
– – – – – 2 2 2 1 – – – 1 – –
32 24 6 73 63 112 43 53 74 12 20 59 48 86 29

– – – 92 53 166 103 84 60 60 6 41 53 71 1
6 1 – 29 30 14 7 10 8 1 2 4 8 9 1
38 25 6 194 146 292 153 147 142 73 28 104 109 166 31

(7) 14 2 164 144 205 19 231 10 (2) 63 (57) 149 613 (15)
– – – – – 15 – – – – – – – – –
2 – – 5 – – 1 1 25 2 – – 1 6 –
(5) 14 2 169 144 220 20 232 35 – 63 (57) 150 619 (15)

$ 33 $ 39 $ 8 $ 363 $ 290 $ 512 $ 173 $ 379 $ 177 $ 73 $ 91 $ 47 $ 259 $ 785 $ 16

-38-
Adventist Health
Consolidating Statements of Operations and Changes in Net Assets
(In millions of dollars)
Year Ended December 31, 2021

Adventist Adventist Adventist Adventist

Adjustments Health Adventist Adventist Adventist Adventist Health Adventist Adventist Health Health
Consolidated and System Health Health Health Health Feather Health Health Howard Lodi
Balances Eliminations Office Bakersfield Castle Clear Lake Delano River Glendale Hanford Memorial Memorial
Revenues and support
Patient service revenue $ 4,660 $ (85) $ (21) $ 478 $ 179 $ 143 $ 98 $ (8) $ 495 $ 375 $ 85 $ 261
Premium revenue 189 (22) – – 2 7 – – – 21 3 –
Other revenue 348 (741) 787 19 20 11 5 10 23 22 5 11
Net assets released from restrictions
for operations 18 – – 1 – 3 – – 2 2 1 –
Total revenues and support 5,215 (848) 766 498 201 164 103 2 520 420 94 272

Expenses
Employee compensation 2,308 (111) 430 159 89 67 37 – 212 126 34 94
Professional fees 782 – 73 63 7 32 17 – 54 43 10 38
Supplies 785 – (6) 90 36 13 13 – 88 51 12 38
Purchased services and other 1,231 (737) 348 173 56 42 28 2 191 116 24 85
Interest 65 (5) 18 3 2 2 – – 6 7 1 4
Depreciation and amortization 193 – 33 11 7 4 6 1 17 13 4 11
Total expenses 5,364 (853) 896 499 197 160 101 3 568 356 85 270

(Loss) gain income from operations (149) 5 (130) (1) 4 4 2 (1) (48) 64 9 2

Nonoperating income
Investment income 163 (5) 70 4 9 2 5 2 3 16 2 2
Other nonoperating losses (5) – (5) – – – – – – – – –
Total nonoperating income 158 (5) 65 4 9 2 5 2 3 16 2 2

Excess (deficit) of revenues over expenses 9 – (65) 3 13 6 7 1 (45) 80 11 4

Less: excess of revenues over expenses from

noncontrolling interests (1) – – – – – – – (1) – – –

Excess (deficit) of revenues over expense

from controlling interests 8 – (65) 3 13 6 7 1 (46) 80 11 4

See accompanying auditors’ report on supplementary information. -39-

 Adventist Adventist Adventist Adventist
Health Health Adventist Adventist Adventist Adventist Adventist Adventist Adventist Health Adventist Adventist Adventist Health Western
Mendocino Physicians Health Health Health Health and Health Health Health Tehachapi Health Health Health White Health
Coast Network Plan Portland Reedley Rideout Simi Valley Sonora St. Helena Valley Tillamook Tulare Ukiah Valley Memorial Resources

$ 56 $ 107 $ – $ 331 $ 175 $ 468 $ 196 $ 286 $ 225 $ 52 $ 96 $ 34 $ 170 $ 412 $ 52

– 21 36 5 2 – – – 29 – – – 40 45 –
2 14 – 17 28 7 6 27 23 7 2 1 24 17 1

– – – – – 1 – 1 2 – 1 – 1 3 –
58 142 36 353 205 476 202 314 279 59 99 35 235 477 53

28 51 – 168 69 198 80 102 88 21 42 28 68 185 43

14 96 – 24 37 78 18 39 30 8 11 12 34 42 2
9 15 – 48 13 83 31 53 62 6 11 9 35 73 2
10 (20) 36 98 49 164 67 67 99 13 26 28 69 187 10
1 – – 3 1 5 3 3 2 2 – 3 2 2 –
– – – 11 3 21 9 7 8 2 1 2 6 16 –
62 142 36 352 172 549 208 271 289 52 91 82 214 505 57

(4) – – 1 33 (73) (6) 43 (10) 7 8 (47) 21 (28) (4)

– – – 6 4 4 – 8 3 1 2 – 4 21 –
– – – – – – – – – – – – – – –
– – – 6 4 4 – 8 3 1 2 – 4 21 –

(4) – – 7 37 (69) (6) 51 (7) 8 10 (47) 25 (7) (4)

– – – – – – – – – – – – – – –

(4)_ – – 7 37 (69) (6) 51 (7) 8 10 (47) 25 (7) (4)

-40-
Adventist Health
Consolidating Statements of Operations and Changes in Net Assets (continued)
(In millions of dollars)
Year Ended December 31, 2021

Adventist Adventist Adventist Adventist

Adjustments Health Adventist Adventist Adventist Adventist Health Adventist Adventist Health Health
Consolidated and System Health Health Health Health Feather Health Health Howard Lodi
Balances Eliminations Office Bakersfield Castle Clear Lake Delano River Glendale Hanford Memorial Memorial
Net assets without donor restrictions
Controlling
Excess (deficit) of revenues over expenses
from controlling interests $ 8 $ – $ (65) $ 3 $ 13 $ 6 $ 7 $ 1 $ (46) $ 80 $ 11 $ 4
Net change in unrealized (losses) on other-
than-trading securities (10) – (10) – – – – – – – – –
Net assets released from restrictions for
capital additions 5 – – – 1 – – – – – –
Transfers from (to) related parties – – 537 (52) (20) (28) – 2 (59) (50) (6) (27)
Other 1 – 1 – – – – – – – – –
Increase (decrease) in net assets without donor
restrictions – controlling 4 – 463 (49) (6) (22) 7 3 (105) 30 5 (23)

Noncontrolling
Excess of revenues over expenses
from noncontrolling interests 1 – – – – – – – 1 – – –
Increase in net assets without donor restrictions –
noncontrolling 1 – – – – – – – 1 – – –

Net assets with donor restrictions

Restricted gifts and grants 32 – 1 1 3 3 – – 4 2 1 1
Net assets released from restrictions (23) – – (1) (1) (3) – – (2) (2) (1) –
Increase (decrease) in net assets with
donor restrictions 9 – 1 – 2 – – – 2 – – 1

Increase (decrease) in net assets 14 – 464 (49) (4) (22) 7 3 (102) 30 5 (22)

Net assets, beginning of year 3,115 – (201) 257 190 30 161 79 153 410 75 74

Net assets, end of year $ 3,129 $ – $ 263 $ 208 $ 186 $ 8 $ 168 $ 82 $ 51 $ 440 $ 80 $ 52

See accompanying auditors’ report on supplementary information. -41-

 Adventist Adventist Adventist Adventist
Health Health Adventist Adventist Adventist Adventist Adventist Adventist Adventist Health Adventist Adventist Adventist Health Western
Mendocino Physicians Health Health Health Health and Health Health Health Tehachapi Health Health Health White Health
Coast Network Plan Portland Reedley Rideout Simi Valley Sonora St. Helena Valley Tillamook Tulare Ukiah Valley Memorial Resources

$ (4) $ – $ – $ 7 $ 37 $ (69) $ (6) $ 51 $ (7) $ 8 $ 10 $ (47) $ 25 $ (7) $ (4)

– – – – – – – – – – – – – – –

– – – – 1 – – – 2 – – – – 1 –
(2) 13 – (43) (32) (46) (18) (35) (30) (5) (13) – (20) (59) (7)
– – – – – – – – – – – – – – –
(6) 13 – (36) 6 (115) (24) 16 (35) 3 (3) (47) 5 (65) (11)

– – – – – – – – – – – – – –` –

– – – – – – – – – – – – – – –

2 – – – – 1 – – 8 – 1 – 1 3 –
– – – – (1) (1) – (1) (4) – (1) – (1) (4) –

2 – – – (1) – – (1) 4 – – – – (1) –

(4) 13 – (36) 5 (115) (24) 15 (31) 3 (3) (47) 5 (66) (11)

(1) 1 2 205 139 335 44 217 66 (3) 66 (10) 145 685 (4)

$ (5) $ 14 $ 2 $ 169 $ 144 $ 220 $ 20 $ 232 $ 35 $ – $ 63 $ (57) $ 150 $ 619 $ (15)

-42-
Section 4(b)(4)

Debt Service Coverage 2021

Excess of Revenues over Expenses from

Continuing Operations $ 8

Net unrealized gains and losses on investments (76)

Loss on acquisition -

Depreciation, amortization, interest expense

and non-cash charges 258

Income available for debt service 190

Maximum annual debt service 112

Debt service coverage ratio 1.70

Capitalization 2021

Long-term Debt (including current maturities) $ 2,036

Unrestricted Net Assets 3,059

Total Capitalization 5,095

Total Long-term Debt as a Percentage of

Total Capitalization 40.0%
 Adventist Health System/West
Municipal Secondary Market Disclosure
December 31, 2021
(In millions of dollars)

The following information is provided pursuant to Section 3(b) of the Continuing Disclosure Certificate
executed by the System in connection with the issuance of:

California Health Facilities Financing Authority Revenue Bonds, 2009 Series B

California Health Facilities Financing Authority Revenue Bonds, 2013 Series A
Adventist Health System/West Taxable Bonds, Series 2013

Section 3(b)(2) Long-term debt disclosure:

On December 31, 2021, the long-term debt of the Members of the Obligated Group (including current
maturities) totaled $2,030. Of that amount, $47 was variable interest rate debt, with the remaining $1,983 being
fixed interest rate debt.

Section 3(b)(3) Statement regarding accounts receivable liens:

During the year ended December 31, 2021 no Member of the Obligated Group has granted a Lien on
accounts receivable nor sold any accounts receivable as permitted under the Master Indenture.

 
Section 4(b)(1).  Below is a listing of the System's hospital facilities, grouped by state, and sorted
within each state alphabetically.

Summary Listing of the System's Hospitals

Number of
Licensed Beds 2021
at December Total Revenue
Obligated Group Hospital Name Location 31, 2021 (in millions)

Adventist Health Bakersfield Bakersfield, CA 254 $498

Adventist Health Delano Delano, CA 156 103
Adventist Health Hanford Hanford, CA 235 420
Adventist Health Feather River Paradise, CA ‐ 2
Adventist Health Glendale Glendale, CA 515 520
(1)
Adventist Health Howard Memorial Willits, CA 25 94
Adventist Health Lodi Memorial Lodi, CA 194 272
Adventist Health Reedley Reedley, CA 49 205
Adventist Health and Rideout Marysville, CA 366 476
Adventist Health Simi Valley Simi Valley, CA 144 202
Adventist Health Sonora Sonora, CA 152 314
Adventist Health St Helena Deer Park, CA 212 279
Adventist Health Ukiah Valley Ukiah, CA 68 235
Adventist Health White Memorial Los Angeles, CA 353 477
Adventist Health Castle Kailua, HI 160 201
Adventist Health Portland Portland, OR 302 353
(1)
Adventist Health Tillamook Tillamook, OR 25 99

Non‐Obligated Group Hospital Name

Adventist Health Clear Lake(1) Clearlake, CA 25 164

Adventist Health Mendocino Coast (1) Fort Bragg, CA 25 58
Adventist Health Tehachapi Valley (1) Tehachapi, CA 25 59
Adventist Health Tulare Tulare, CA 108 35
                                
(1) 
Critical Access Hospital.

Source:  The Corporation.
Adventist Health System/West
Obligated Group Operating Statistics

Section 4(b)(5) Payor Mix

2019 2020 2021

Medicare 44.7% 44.4% 43.9%

Medicaid 30.5% 30.3% 30.4%
HMO/PPO 19.7% 20.7% 21.2%
Commercial 2.8% 2.4% 2.5%
Self‐Pay and Other 2.4% 2.2% 1.9%

Section 4(b)(6) Patient Days (Including Sub‐Acute)

Hospital 2019 2020 2021

Adventist Health Hanford       42,428   49,201       52,475
Adventist Health Portland       31,831   28,492       30,810
Adventist Health Reedley         4,318      6,016         7,703
Adventist Health Castle       28,231   25,561       25,679
Adventist Health Feather River             ‐          ‐             ‐
Adventist Health Glendale       95,227   90,374       91,885
Adventist Health Howard Memorial         7,409      7,389         8,067
Adventist Health Lodi Memorial       30,204   27,152       30,723
Adventist Heatlh and Rideout       55,490   55,226    112,867
Adventist Health St Helena       44,538   32,299       39,124
Adventist Health Bakersfield       60,860   60,037       70,154
Adventist Health Delano             ‐   24,913       25,737
Adventist Health Sonora       39,072   35,794       34,809
Adventist Health Simi Valley       29,414   29,128       34,047
Tillamook Regional Medical Center         4,373      3,780         4,160
Adventist Health Ukiah Valley       12,534   12,719       13,797
Adventist Health White Memorial       88,418   81,513       79,272
   574,347    569,594        661,309

Average Length of Stay

Hospital 2019 2020 2021

Adventist Health Hanford 3.82           4.56 4.90
Adventist Health Portland 3.43           3.69 4.13
Adventist Health Reedley 2.42           3.46 4.36
Adventist Health Castle 3.95           3.92 4.04
Adventist Health Feather River             ‐             ‐                ‐
Adventist Health Glendale 4.76           5.42 5.44
Adventist Health Howard Memorial 4.17           4.20 4.33
Adventist Health Lodi Memorial 3.65           3.91 4.45
Adventist Health and Rideout 4.92           4.98 8.97
Adventist Health St Helena 6.74           7.33 7.13
Adventist Health Bakersfield 3.60           4.07 4.46
Adventist Health Delano             ‐ 12.76 12.03
Adventist Health Sonora 7.55           7.50 7.14
Adventist Health Simi Valley 3.90           4.41 4.57
Tillamook Regional Medical Center 3.20           3.17 3.86
Adventist Health Ukiah Valley 3.47           3.55 3.95
Adventist Health White Memorial 4.47           4.56 4.56
4.36           4.81 5.41
Adventist Health System/West
Obligated Group Operating Statistics

Section 4(b)(6) Discharges (Including Sub‐Acute)

Hospital 2019 2020 2021

Adventist Health Hanford       11,097       10,784          10,709
Adventist Health Portland         9,272         7,722            7,465
Adventist Health Reedley         1,785         1,738            1,768
Adventist Health Castle         7,142         6,513            6,350
Adventist Health Feather River             ‐             ‐                ‐
Adventist Health Glendale       20,003       16,687          16,884
Adventist Health Howard Memorial         1,775         1,761            1,865
Adventist Health Lodi Memorial         8,284         6,945            6,898
Adventist Health and Rideout       11,270       11,087          12,578
Adventist Health St Helena         6,611         4,409            5,484
Adventist Health Bakersfield       16,902       14,766          15,743
Adventist Health Delano             ‐         1,952            2,139
Adventist Health Sonora         5,173         4,775            4,872
Adventist Health Simi Valley         7,533         6,606            7,447
Tillamook Regional Medical Center         1,366         1,192            1,078
Adventist Health Ukiah Valley         3,608         3,585            3,496
Adventist Health White Memorial       19,785       17,869          17,385
   131,606    118,391        122,161

Section 4(b)(7) Other Key Volume Indicators

2019 2020 2021

Number of Licensed Beds         3,049         3,210            3,210
Discharges    131,606    118,391        122,161
Patient Days    574,347    569,594        661,309

Occupancy ‐ Licensed Beds 51.6% 48.6% 56.4%

Average Length of Stay 4.36 4.81 5.41

Outpatient Revenues as % of Gross Pt. Revenues 46.1% 43.5% 44.8%
     
 
   

Management Discussion and Analysis of 
Financial Condition and Results of Operations 
 

Year End: December 31, 2021 

 
 
    Management Discussion and Analysis | 2 
 
Adventist Health Overview 
Adventist  Health  System/West,  doing  business  as  Adventist  Health  (the  “Corporation”),  is  a  faith‐based,  nonprofit 
organization.  The  health  system  serves  more  than  80  communities  in  California,  Hawaii,  Oregon  and  Washington 
(collectively  with  the  Corporation,  the  “System”  or  “Adventist  Health”)  along  with  more  than  60  others  nationwide 
through its Blue Zones organization. With a workforce of approximately 37,000 associates including physicians, allied 
health professionals and support services, this transformational organization is realizing its mission by providing health, 
wholeness  and  hope.  Teams  of  clinical  staff  provide  coordinated  care  across  networks  utilizing  advanced  medical 
technology,  innovative  models  of  health  transformation  and  compassionate  care,  to  revolutionize  the  delivery  of 
health.  Adventist  Health owns  or operates  23  hospitals, 379  clinics  (physician  clinics,  hospital‐based clinics,  and  the 
largest  rural  health  clinic  network  in  California),  15  home  care  agencies,  eight  hospice  agencies,  one  fully‐owned 
continuing care retirement community and three joint‐venture retirement centers. 

With an emphasis on wellness and prevention of disease rooted in the Adventist healthcare legacy, the team is focused 
on caring for mind, body and spirit. The System is dedicated to the integration of hospitals, physicians and other providers 
in  a  manner  that  best  serves  and  cooperates  with  its  communities,  both  in  terms  of  commitment  to  quality  and  a 
demonstrated ability to provide cost‐effective care in an environment increasingly driven by competitive market forces. 

Adventist Health’s brand is woven throughout the Western United States. The map on the next page of this analysis shows 
the location of the Corporation’s headquarters and the System’s owned or leased hospital facilities. The corporate office is 
centrally located in Roseville, California. Outside California, the System includes Hawaii medical services, two medical centers 
in Oregon and a clinic and joint‐venture retirement center in Washington. While the map does not show the location of each 
of the System’s 379 clinics, the geographic area served by the System’s clinics, as well as its hospital facilities, is depicted in 
the map. 
 

Strategy and Mission 
The 2030 Strategy: 

Adventist Health has laid out an aggressive plan based on the calling of our mission of living God’s love by inspiring health, 
wholeness  and  hope.  The  diversified,  growth‐oriented  strategy  focuses  on  building  an  organization  that  will  bring 
“affordable consumer health and well‐being within reach” for everyone we serve. Within 10 years we will grow to reach 
more than 10 million individuals annually with well‐being initiatives or health services, operate near a 10% margin, and 
achieve $10 billion of annual revenue.  
 
Embedded within the Adventist Health strategy are several key themes: 
 Becoming a consumer‐oriented company by using consumer insights and segmentation to develop products and 
services to better serve individuals on their personal well‐being path. 
 Transforming  costs  and  pricing  to  improve  affordability  of  health  services  for  individuals,  employers, 
communities and payers. 
 Integrating with payers to manage health of populations, lower costs, and improve market share.  
 Innovating and integrating around early‐intervention behavioral health services.  
 Developing standalone community well‐being businesses that can be implemented in and beyond communities 
where Adventist Health has care delivery services.  
 Elevating and uniting philanthropic efforts in support of both community care services and large‐scale well‐being 
initiatives. 

 
 
 
 
    Management Discussion and Analysis | 3 
 
Adventist Health Overview (Continued) 

 
 
    Management Discussion and Analysis | 4 
 
Organization Structure 
Operating Structure Updates: 
 
Adventist Health has reorganized itself to build unity, optimize performance and enhance its core expertise of serving 
millions of patients. Six care networks that are situated geographically work hand‐in‐hand with system shared services. 
The system Executive Cabinet includes both network presidents and system leaders in clinical care, operations, mission, 
human resources, strategy, philanthropy and other areas.   
 
Kerry  Heinrich  became  the  organization’s  new  president  and  CEO  in  January  2022.    Kerry  brings  extensive  executive 
experience and expertise to this role, having led Loma Linda University Medical Center, Children’s Hospital, Medical Center 
‐  Murrieta,  East  Campus,  Surgical  Hospital  and  Behavioral  Medicine  Center.  Named  one  of  Becker’s  Hospital  Review’s 
“Nonprofit Hospital and Health System CEOs to Know” in 2016 and 2017, Kerry has more than 30 years of experience in 
healthcare  legal  counsel  and  leadership.  He  earned  his  bachelor’s  degree  in  history  and  a  minor  in  business  with  an 
emphasis in finance and management from Walla Walla University in Washington, followed by his juris doctor (JD) degree 
from the University of Oregon’s School of Law.   
 
 

 
 
Affiliation and Other Activities 
Dameron Hospital 
In December 2019, Adventist Health entered into an 18‐month agreement to manage Dameron Hospital in Stockton, 
California.  This  agreement  was  subsequently  extended  to  March  31,  2027.  Extending  the  service  area  of  Adventist 
Health Lodi Memorial in neighboring Lodi, California, Dameron Hospital adds more than 200 inpatient beds to Adventist 
Health’s  footprint  and  ensures  ongoing  access  to  a  population  of  more  than  310,000.  At  the  conclusion  of  the 
management services agreement, the corporation will have the option to pursue a membership transfer. 
 
 
    Management Discussion and Analysis | 5 
 
Adventist Health Mendocino Coast 
On  March  3,  2020  more  than  90%  of  the  voters  of  the  Mendocino  Coast  Healthcare  District  in  Mendocino  County, 
California voted to approve terms of Adventist Health’s long‐term lease of Mendocino Coast District Hospital (MCDH) 
in  Fort  Bragg.    Adventist  Health  entered  into  a  management  services  agreement  with  MCDH  effective  May  4,  2020 
allowing Adventist Health to manage MCDH alongside the other Adventist Health assets in the county.  A long‐term 
lease agreement commenced on July 1, 2020 and the hospital is now operating as Adventist Health Mendocino Coast 
(AHMC).  AHMC  is  a  25‐bed  critical  access  acute  care  hospital  that  includes  operations  of  rural  health  clinics.  The 
agreement  extends  Adventist  Health’s  coverage  in  Mendocino  County  and  ensures  continued  access  to  a  coastal 
population of more than 15,000. 

Adventist Health Feather River ‐ Camp Fire 
In November 2018, the System’s Adventist Health Feather River (AHFR) facilities in Paradise, California and neighboring 
communities  incurred  extensive  damage  as  a  result  of  the  most  destructive  wildfire  in  California  history.  The  fire 
destroyed the majority of homes and businesses throughout the community.  Most of the AHFR properties, including 
the  100‐bed  acute  care  hospital,  remain  temporarily  closed  and  non‐operational  as  the  System  completes  damage 
assessments.  As of December 31, 2021, the timelines of Adventist Health’s fixed acute care services in Paradise was 
yet to be determined.  

Adventist Health St. Helena ‐ Glass Fire 
On  September  27,  2020,  a  large  fire  erupted  near  St.  Helena,  California  causing  local  residents  to  evacuate  and 
businesses to temporarily close, including Adventist Health St. Helena’s hospital and adjacent Medical Office Building. 
The hospital building endured minimal damage, although there was extensive damage to the outlying water and sewer 
systems.  While  the  hospital  and  clinics  at  the  Medical  Office  Building  were  temporarily  closed,  services  that  were 
available on campus were relocated to local clinics, thus minimizing the disruption of services to the community.  The 
Medical Office Building reopened on November 18, 2020, and the hospital reopened on December 8, 2020. 

COVID‐19 Update 
On  March  11,  2020,  the World  Health  Organization  declared the  novel  coronavirus  disease  (COVID‐19)  a  pandemic. 
Following  this,  the  Centers  for  Disease  Control  declared  a  national  public  health  emergency,  followed  by  state 
emergency declarations and the Centers for Medicare and Medicaid Services (CMS) issued guidance regarding elective 
procedures. Several national restrictions were put into place and the governors in the states in which the System has 
operations issued shelter‐in‐place orders and executive orders postponing nonessential or elective surgeries.  

Several unavoidable factors are impacting both revenue and expense as the result of necessary actions by our System 
as well as local, state, and federal governments to mitigate the spread and effects of the virus. Clinic visits and elective 
surgical  volumes  have  dropped  as  patients  have  been  directed  or  have  chosen  to  stay  home  to  avoid  unnecessary 
exposure.  Medical  patient  volumes  in  most  markets  have  experienced  significant  fluctuations  throughout  the  year. 
Labor costs have increased as a result of shortages in nurses and support teams that have been quarantined related to 
COVID‐19  or  are  faced  with  childcare  issues  related  to  school  closures  or  exposures.  Supply  shortages  are  ongoing, 
impacting cost per unit, and changes in treatment protocol have increased the quantity of supplies required. These 
factors along with cost inflation have caused significant increases in supplies expense.  

The System took measures to respond to COVID‐19 including: 

 Initiated System and hospital incident command centers to coordinate readiness, resolve issues and monitor 
and manage labor, personal protective equipment (PPE) and other supplies 

 Ensured local, state, and federal guidelines were followed for screening, triaging, testing, isolating, and caring 
for COVID‐19 patients while protecting staff and other patients 

 Launched virtual ambulatory care services that allow patients to visit their doctors by phone or computer 

 
 
    Management Discussion and Analysis | 6 
 
 Opened a virtual hospital, Adventist Health Hospital@Home, in collaboration with Medically Home and Huron, 
to  create  capacity  for  COVID‐19  patients  by  caring  for  patients  with  the  coronavirus  and  other  specified 
diagnoses in their homes through medical command centers and rapid response teams 

 Reconfigured  facilities  to  maximize  patient  service  capacity  during  COVID‐19  surge  periods  and  to  allow  for 
social distancing, screening and taking other safety measures 

 Temporarily closed unused services or minimized services at medical office buildings to meet the critical need 
to conserve PPE, and limit exposure to COVID‐19 for both team members and patients 

 Launched web pages, a chatbot and patient email responses to answer community members’ questions and 
direct them to appropriate services 

 Used  System  marketing  and  communication  campaigns  to  remind  community  members  not  to  neglect 
emergency care, informed the community as services resumed, shared enhanced safety measures to reduce 
patients’ fears and promoted COVID‐19 vaccination 

 Adjusted supplemental and contract workforce, flexed staffing, furloughed positions and announced temporary 
or permanent staff reductions 

 The System administered 349,852 COVID‐19 vaccine doses at 30 locations as of December 31, 2021 

In response to COVID‐19, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), was enacted on 
March  27,  2020  and  the  American  Rescue  Plan  was  enacted  on  March  11,  2021.  These  Acts  authorize  funding  to 
hospitals and other healthcare providers through the Public Health and Social Services Emergency Fund (Provider Relief 
Fund) and other mechanisms. Grant payments from these Acts are intended to reimburse healthcare providers for lost 
revenue and increased expenses due to the pandemic and to fund treatment and mitigation of the impacts of COVID‐
19. As of December 31, 2021, the System has received approximately $462 million of provider relief funds from various 
provisions in these Acts, of which $105 million and $288 million have been recognized in 2021 and 2020, respectively, 
as contributions in other revenue in the consolidated statement of operations and changes in net assets. 

On March 28, 2020, CMS expanded the existing Accelerated and Advance Payments Program to a broader group of 
Medicare  Part  A  providers  and  Part  B  suppliers.  At  the  end  of  April  2020,  the  System  received  approximately  $358 
million of Medicare advance payments as part of the CMS Accelerated and Advance Payments Program. Originally, CMS 
announced  that  it  would  begin  to  offset  the  payments  by  future  Medicare  reimbursements  up  to  210  days  after 
disbursement, depending on whether a facility was an acute or non‐acute facility. On October 1, 2020, a continuing 
resolution was signed, which included an extension to delay repayments to one year from receipt of these accelerated 
and advance disbursements. Repayment terms specify that for the first 11 months after repayment begins, repayment 
will occur through an automatic recoupment of 25% of Medicare payments otherwise owed to the provider. At the end 
of the 11‐month period, recoupment will increase to 50% for six months. At the end of the six months (29 months from 
the receipt of the initial accelerated payment), Medicare will issue a letter for full repayment of any remaining balance, 
as applicable. The System has recorded $180 million in other current liabilities in the consolidated balance sheet as of 
December 31, 2021. 

The CARES Act also allows for deferred payment of the employer portion of certain payroll taxes between March 27, 
2020 and December 31, 2020, with half due December 31, 2021 and the remaining half due December 31, 2022. As of 
December 31, 2021, the System had deferred payroll tax payments of approximately $37.5 million included in accrued 
compensation and related payables in the consolidated balance sheet.  

Due to the evolving nature of the COVID‐19 pandemic, the future impact to the System and its financial condition is 
presently unknown. 
 
 

 
 
    Management Discussion and Analysis | 7 
 
Ratings and Outlook Updates 
In September 2021, Fitch Ratings downgraded its long‐term rating from ‘A+’ to ‘A’ while maintaining a Stable outlook 
and S&P Global Ratings affirmed its ‘A’ long‐term rating and revised the outlook from Stable to Negative on Adventist 
Health’s bonds. The Fitch rating reflects Adventist Health's historically solid operating income levels, which have more 
recently, through a series of one‐time events and the lingering deleterious impact from the novel coronavirus, resulted 
in lower than anticipated operating EBIDA margins. Strength of the credit is still conferred through Adventist's position 
as  the  leading  acute  care  provider  in  multiple  growing  markets,  a  gradually  improving  balance  sheet,  and  accretive 
affiliation and expansion activity. The S&P outlook revision reflects a multiyear trend of negative operating performance 
that has pressured the financial profile. Precluding a downgrade is Adventist Health’s historical operating strength prior 
to fiscal 2019, indicating a solid run rate can be achieved, as well as the System's largescale improvement plan being 
implemented during the outlook period. In addition, Adventist Health's balance sheet continues to improve. 

 
Key Operating Metrics: Volume Trends 
During the twelve months ended December 31, 2021, the System’s inpatient discharges increased by 4.3%. Combined 
inpatient and observation stays increased by 4.6% from the same period in the previous year. On a same store basis 
that excludes Adventist Health Mendocino Coast, inpatient discharges increased by 4.1% primarily driven by impacts of 
COVID‐19.  

Total inpatient surgeries increased by 2.7% and outpatient surgeries increased by 15.6% from the same period in the 
previous year. On a same store basis, inpatient surgeries increased by 2.6% and outpatient surgeries increased by 14.7% 
from the same period in the previous year.  
 
UTILIZATION STATISTICS 

Twelve Months Ended December 31,               2021                          2020 
  
Discharges  128,128  122,794   
 
Patient days  688,221  588,519 
 
Observation stays  19,480  18,618   
Outpatient procedures  3,977,724  3,554,932   
 
Emergency department visits  682,364  638,246 
 
Inpatient surgeries  22,539  21,953 
Outpatient surgeries  51,327  44,384 
 
Capitated lives  224,912  217,768   
Average length of stay (in days)  5.4  4.8 
 
Outpatient revenues as  
46.3%  45.0% 
% of gross patient revenue   
 
 
 
 
    Management Discussion and Analysis | 8 
 
Key Operating Metrics: Total Operating Revenue and Income from Operations 
Total operating revenue increased 9.2% for the twelve months ended December 31, 2021 as compared to the previous 
year. On a same store basis, total operating revenue increased 8.7% for the twelve months ended December 31, 2021 
as compared to the previous year. The increase in operating revenue was the result of recognizing $105 million of CARES 
Act and American Rescue Plan funds and stronger inpatient volume (measured in patient days) and inpatient acuity 
(measured in Case Mix Index) compared to the prior year, offset by aged A/R write‐off at recently acquired hospital. 
2020  Q2  volumes  were  weak  due  to  patient  hesitancy  and  restrictions  imposed  at  the  beginning  of  the  pandemic. 
Approximately $288 million CARES Act Provider Relief Funds were recognized as of December 31, 2020.  

Total  operating  expenses  increased  11.5%  for  the  twelve  months  ended  December  31,  2021  as  compared  to  the 
previous year. On a same store basis, total operating expenses increased 10.9% for the twelve months ended December 
31, 2021 as compared to the previous year.  Salaries and benefits expenses increased 2.8% for the twelve months ended 
December 31, 2021 as compared to the previous year.  This increase was primarily due to challenges from retaining and 
recruiting staff during the peak of the COVID‐19 pandemic. It was compounded by increases in contract labor which are 
reported as Professional Fees and were 33.2% above the previous year.  

Supplies increased by 22.5% from the previous year due to increase in per unit pricing and utilization of PPE and other 
supplies related to COVID‐19.  

Purchased services and other increased by 11.4% from the previous year due to the consolidation of Adventist Health 
Plan, which was previously unconsolidated, an increase in revenue cycle costs and purchased services under capitated 
contracts and an outsourcing of certain costs that were previously performed internally. 

On both an all‐inclusive and same‐store basis, income (loss) from operations as a percent of total operating revenue 
was (2.9%) and (1.6%) for the twelve months ended December 31, 2021 and December 31, 2020, respectively.  

Lost  revenue  and  expenses  attributed  to  the  COVID‐19  pandemic  exceeded  relief  funds  by  $161  million  in  the  year 
ended December 31, 2020 and by $153 million in the year ended December 31, 2021.  The System is pursuing additional 
opportunities to fund these losses, most notably FEMA.  The amount and timing of further relief payments is uncertain. 

A  multi‐pronged  approach  is  underway  to  address  financial  performance.  There  are  nine  areas  of  focus:  growth, 
revenue  optimization,  labor  and  benefits,  length  of  stay,  administrative  cost  structure,  program  review,  focused 
markets,  purchased  services  and  supplies  and  professional  fees.  Additionally,  efforts  to  minimize  COVID‐19‐related 
volume declines, specifically in surgery and clinics, are underway along with yield enhancement through revenue cycle 
initiatives. Capital deployment is focused on critical and high return projects. 

 
 

 
 
    Management Discussion and Analysis | 9 
 
TOTAL OPERATING REVENUE AND INCOME FROM OPERATIONS 

 
    Twelve Months Ended December 31,                  2021                        2020 
 
 
Total operating revenue  $5,215  $4,774   
 
Total EBIDA expenses  $5,106  $4,579 
 
EBIDA  $109  $195   
EBIDA as a percentage of total operating   
revenue  2.1%  4.1%   
 
Depreciation and interest expense  $258  $269   
 
Loss from operations  ($149)  ($74) 
Loss from operations as a percentage of   
(2.9%)  (1.6%) 
total operating revenue 
 

 
Key Operating Metrics: Total Nonoperating Income 
Investment income decreased by 8.4% for the twelve months ended December 31, 2021 as compared to the previous 
year. Management maintains a long‐term asset allocation strategy. 

 
NONOPERATING INCOME 

  Twelve Months Ended December 31,                 2021                         2020   
 
 
Investment income  $163   $178   
Other nonoperating gains (losses)  ($5)   $6 
 
 
Nonoperating income before gain on   
$158   $184 
acquisition and divestitures   
Gain (Loss) on acquisition and divestitures  $0   ($1) 
 
 
Nonoperating income  $158   $183   
 
 
 
 

 
 
    Management Discussion and Analysis | 10 
 
Balance Sheet Ratios 
Cash and unrestricted investments increased by $174 for the twelve months ended December 31, 2021. Days cash on 
hand decreased to 189.2 on December 31, 2021 from 197.4 at December 31, 2020. Long‐term debt to capitalization 
decreased to 39.5% on December 31, 2021 from 40.0% at December 31, 2020. Adventist Health is able to maintain 
lower‐than‐median cash to debt and long‐term debt to capitalization ratios as the system has no pension liability and 
operates under a defined contribution plan.  

 
BALANCE SHEET RATIOS 
 
Period Ended                                                Dec 31, 2021          Dec 31, 2020 
 
 
Total cash and unrestricted investments  $2,680  $2,506 
 
 
Days cash on hand  189.2  197.4   
 
Cash to debt  134%  123%   
 
Long‐term debt to capitalization  39.5%  40.0%   
 
Debt service coverage (Obligated Group)  2.0  2.1   
 
Capital expenditures as a percentage of 
 
70.5%  83.1%   
depreciation expense 

 
 
 
 
 
 
 
 
 
 
 

 
 
    Management Discussion and Analysis | 11 
 
Adventist Health Hospitals 
OBLIGATED GROUP MEMBERS 
 
Adventist Health Bakersfield 
Adventist Health Castle 
Adventist Health Delano 
Adventist Health Feather River 
Adventist Health Glendale 
Adventist Health Hanford 
    Adventist Health Selma 
Adventist Health Howard Memorial 
Adventist Health Lodi Memorial 
Adventist Health Portland 
Adventist Health Reedley 
Adventist Health and Rideout 
    United Com‐Serve 
Adventist Health Simi Valley 
Adventist Health Sonora 
Adventist Health St. Helena 
    St. Helena Center for Behavioral Health 
Adventist Health Tillamook 
Adventist Health Ukiah Valley 
Adventist Health White Memorial 
 
NON‐MEMBER ENTITIES 
 
Adventist Health Clear Lake 
Adventist Health Plan, Inc. 
Adventist Health Mendocino Coast 
Adventist Health Tehachapi Valley 
Adventist Health Tulare 
 
 
 
Entities in italics are consolidated with their respective parent entities