AdvocateAuroraHealth,Inc.
ConsolidatedFinancialStatementsandSupplementaryInformation
AsofandfortheYearsEndedDecember31,2020and2019
DocumentDatedasofMarch22,2021
ADVOCATEAURORAHEALTH,INC.
TABLEOFCONTENTS
REPORTOFINDEPENDENTAUDITORS 2
FINANCIALINFORMATION
ConsolidatedBalanceSheets 4-5
ConsolidatedStatementsofOperationsandChangesinNetAssets 6-7
ConsolidatedStatementsofCashFlows 8
NotestoConsolidatedFinancialStatements 9-44
SUPPLEMENTARYINFORMATION
ReportofIndependentAuditorsonSupplementaryInformation 46
ConsolidatingBalanceSheet 47-48
ConsolidatingStatementofOperations 49
NotestoSupplementaryInformation 50
1
A member firm of Ernst & Young Global Limited
Ernst & Young LLP
155 North Wacker Drive
Chicago, IL 60606-1787
Tel: +1 312 879 2000
Fax: +1 312 879 4000
ey.com
1
Report of Independent Auditors
The Board of Directors
Advocate Aurora Health, Inc.
We have audited the accompanying consolidated financial statements of Advocate Aurora Health,
Inc., which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and the
related consolidated statements of operations and changes in net assets, and cash flows for the
years then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in conformity with U.S. generally accepted accounting principles; this includes the design,
implementation and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free of material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States
of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express
no such opinion. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
2
2
A member firm of Ernst & Young Global Limited
2
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Advocate Aurora Health, Inc. at December 31, 2020 and
2019, and the consolidated results of their operations and their cash flows for the years then ended
in conformity with U.S. generally accepted accounting principles.
EY
March 22, 2021
3
3
ADVOCATEAURORAHEALTH,INC.
CONSOLIDATEDBALANCESHEETS
(inthousands)
December31,2020 December31,2019
Assets
Currentassets
Cashandcashequivalents $ 959,878 $ 449,712
Assetslimitedastouse 125,053 106,529
Patientaccountsreceivable 1,570,738 1,605,607
Othercurrentassets 686,686 619,542
Third-partypayorsreceivables 16,933 15,331
Collateralproceedsundersecuritieslendingprogram 19,789 18,284
Totalcurrentassets 3,379,077 2,815,005
Assetslimitedastouse 11,107,210 9,140,565
Propertyandequipment,net 5,851,977 5,901,923
Otherassets
Reinsurancereceivable 50,514 52,312
Goodwillandintangibleassets,net 82,752 76,830
Investmentsinunconsolidatedentities 210,303 212,415
Operatingleaseright-of-useassets 309,678 352,295
Othernoncurrentassets 458,132 382,024
Totalotherassets 1,111,379 1,075,876
Totalassets $ 21,449,643 $ 18,933,369
(Continued)
4
ADVOCATEAURORAHEALTH,INC.
CONSOLIDATEDBALANCESHEETS
(inthousands)
December31,2020 December31,2019
Currentliabilities
Long-termdebtandcommercialpaper,currentportion $ 101,996 $ 184,098
Long-termdebtsubjecttoshort-termfinancingarrangements 119,660 147,535
Operatingleaseliabilities,currentportion 79,934 77,957
Accruedsalariesandemployeebenefits 1,207,672 950,391
Accountspayableandotheraccruedliabilities 1,341,619 912,644
Third-partypayorspayables 318,801 303,300
Accruedinsuranceandclaimcosts,currentportion 130,391 114,741
Collateralundersecuritieslendingprogram 19,789 18,284
Totalcurrentliabilities 3,319,862 2,708,950
Noncurrentliabilities
Long-termdebt,lesscurrentportion 3,310,401 2,729,366
Operatingleaseliabilities,lesscurrentportion 268,575 314,106
Accruedinsuranceandclaimscost,lesscurrentportion 593,739 544,839
Accruedlossessubjecttoinsurancerecovery 50,514 52,312
Obligationsunderswapagreements 118,620 91,340
Othernoncurrentliabilities 1,387,888 793,792
Totalnoncurrentliabilities 5,729,737 4,525,755
Totalliabilities 9,049,599 7,234,705
Netassets
Withoutdonorrestrictions
Controllinginterest 12,012,719 11,309,819
Noncontrollinginterestinsubsidiaries 154,645 146,740
Totalnetassetswithoutdonorrestrictions 12,167,364 11,456,559
Withdonorrestrictions 232,680 242,105
Totalnetassets 12,400,044 11,698,664
Totalliabilitiesandnetassets $ 21,449,643 $ 18,933,369
Seeaccompanyingnotestoconsolidatedfinancialstatements.
5
ADVOCATEAURORAHEALTH,INC.
CONSOLIDATEDSTATEMENTSOFOPERATIONSANDCHANGESINNETASSETS
(inthousands)
YearEnded
December31,2020
YearEnded
December31,2019
Revenue
Patientservicerevenue $ 10,216,386 $ 10,660,969
Capitationrevenue 1,121,428 1,264,162
Otherrevenue 1,794,375 880,292
Totalrevenue 13,132,189 12,805,423
Expenses
Salaries,wagesandbenefits 7,427,903 6,988,562
Supplies,purchasedservicesandother 4,200,203 3,999,005
Contractedmedicalservices 502,420 543,716
Depreciationandamortization 560,215 569,956
Interest 112,126 106,314
Totalexpenses 12,802,867 12,207,553
Operatingincomebeforenonrecurringexpenses 329,322 597,870
Nonrecurringexpenses 116,355 116,800
Operatingincome 212,967 481,070
Nonoperatingincome(loss)
Investmentincome,net 593,283 1,053,898
Lossondebtrefinancing (12,244) (21,665)
Changeinfairvalueofinterestrateswaps (27,280) (21,079)
Pensionsettlementloss (119,658) —
Othernonoperating(loss)income,net (38,943) 54,473
Totalnonoperatingincome,net 395,158 1,065,627
Revenueinexcessofexpenses 608,125 1,546,697
Lessnoncontrollinginterest (50,093) (60,749)
Revenueinexcessofexpenses-attributabletocontrollinginterest
$ 558,032 $ 1,485,948
(Continued)
6
ADVOCATEAURORAHEALTH,INC.
CONSOLIDATEDSTATEMENTSOFOPERATIONSANDCHANGESINNETASSETS
(inthousands)
YearEnded
December31,2020
YearEnded
December31,2019
Netassetswithoutdonorrestrictions,controllinginterest
Revenueinexcessofexpenses-attributabletocontrollinginterest
$ 558,032 $ 1,485,948
Pension-relatedchangesotherthannetperiodicpensioncosts
138,208 (106,221)
Netassetsreleasedfromrestrictionsforpurchaseofpropertyandequipment
6,206 4,839
Other,net
454 1,108
Increaseinnetassetswithoutdonorrestrictions,controllinginterest
702,900 1,385,674
Netassetswithoutdonorrestrictions,noncontrollinginterest
Revenuesinexcessofexpenses
50,093 60,749
Distributionstononcontrollinginterest
(41,948) (32,488)
Other,net
(240) 11
Increaseinnetassetswithoutdonorrestrictions,noncontrollinginterest
7,905 28,272
Netassetswithdonorrestrictions
Contributions
22,971 27,627
Investmentincome,net
9,948 14,400
Netassetsreleasedfromrestrictionsforoperations
(17,074) (18,596)
Netassetsreleasedfromrestrictionsforpurchaseofpropertyandequipment
(6,206) (4,839)
CentralILnetassetswithdonorrestrictionssold
(18,949) —
Other,net
(115) (278)
(Decrease)increaseinnetassetswithdonorrestrictions
(9,425) 18,314
Increaseinnetassets
701,380 1,432,260
Netassetsatbeginningofperiod
11,698,664 10,242,977
AdoptionofASC2016-02(Leases) — 23,427
Netassetsatendofperiod $ 12,400,044 $ 11,698,664
Seeaccompanyingnotestoconsolidatedfinancialstatements.
7
ADVOCATEAURORAHEALTH,INC.
CONSOLIDATEDSTATEMENTSOFCASHFLOWS
(inthousands)
YearEnded
December31,2020
YearEnded
December31,2019
Cashflowsfromoperatingactivities
Increaseinnetassets $ 701,380 $ 1,432,260
Adjustmentstoreconcilechangeinnetassetstonetcashprovidedbyoperating
activities:
Depreciation,amortizationandaccretion 555,515 564,270
Amortizationofoperatingleaseright-of-useassets 63,840 64,801
Lossondebtrefinancing 12,244 21,665
Lossonsaleofpropertyandequipment 12,571 2,618
Changeinfairvalueofswapagreements 27,280 21,079
Pension-relatedchangesotherthannetperiodicpensioncost (138,208) 106,221
Netassetsreleasedfromrestrictionsforoperations (17,074) (18,596)
Distributiontononcontrollinginterest 50,205 29,446
Distributionsfromunconsolidatedentities 14,951 23,707
GainonBayAreaMedicalCenteracquisition — (81,736)
LossonsaleofCentralILdisposalgroup
21,346
—
CentralILnetassetswithdonorrestrictionssold
18,949
—
Changesinoperatingassetsandliabilities
Tradingsecurities,net (2,025,066) (1,433,305)
Accountsreceivable,net 31,871 (103,625)
Accountspayableandaccruedliabilities 1,006,265 203,877
Third-partypayorsreceivablesandpayables,net 16,896 1,640
Otherassetsandliabilities,net 240,620 (280,549)
Netcashprovidedbyoperatingactivities 593,585 553,773
Cashflowsfrominvestingactivities
Capitalexpenditures (703,611) (653,207)
Proceedsfromsaleofpropertyandequipment 1,998 4,102
Salesofinvestmentsdesignatedasnon-trading,net 241 69
Investmentsinunconsolidatedentities,net (8,016) (31,005)
InvestmentsacquiredinBayAreaMedicalCenteracquisition — 34,018
CashreceivedfromsaleofCentralILdisposalgroup 190,000 —
Other (15,879) (7,534)
Netcashusedininvestingactivities (535,267) (653,557)
Cashflowsfromfinancingactivities
Proceedsfromissuanceofdebt 695,915 496,074
Repaymentsoflong-termdebt (226,781) (544,046)
Distributiontononcontrollinginterest (50,205) (29,446)
Proceedsfromrestrictedcontributionsandincome(loss)oninvestments 32,919 42,027
Netcashprovidedby(usedin)financingactivities 451,848 (35,391)
Netincrease(decrease)incashandcashequivalents 510,166 (135,175)
Cashandcashequivalentsatbeginningofperiod 449,712 584,887
Cashandcashequivalentsatendofperiod $ 959,878 $ 449,712
Supplementaldisclosuresofnoncashinformation
Operatingleaseright-of-useassetsinexchangefornewoperatingleaseliabilities $ 24,272 $ 425,142
Seeaccompanyingnotestoconsolidatedfinancialstatements.
8
ADVOCATEAURORAHEALTH,INC.
NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS
FORTHEYEARENDEDDECEMBER31,2020
(dollarsinthousands)
1. ORGANIZATIONANDBASISOFPRESENTATION
DescriptionofBusiness
Advocate Aurora Health, Inc., is a Delaware nonprofit corporation (the "Parent Corporation"). The
ParentCorporationisthesolecorporatememberofAdvocateHealthCareNetwork,anIllinoisnot-for-
profit corporation ("Advocate") and Aurora Health Care, Inc., a Wisconsin nonstock not-for-profit
corporation("Aurora").TheParentCorporation,Advocate,Auroraandtheircontrolledsubsidiariesare
collectivelyreferredtohereinasthe“System.”TheSystemwasformedinfurtheranceoftheparties’
commonandunifyingcharitablehealthcaremissiontopromoteandimprovethequalityandexpand
the scope and accessibility of affordable health care and health care-related services for the
communitiestheyserve.
TheSystemiscomprisedofvariousnot-for-profitandfor-profitentities,theprimaryactivitiesarethe
deliveryofhealthcareservicesandtheprovisionofgoodsandservicesancillarythereto.
TheSystemprovidesacontinuumofcarethroughits24acutecarehospitals,anintegratedchildren’s
hospital and a psychiatric hospital, primary and specialty physician services, outpatient centers,
physicianofficebuildings,pharmacies,rehabilitationandhomehealthandhospicecareinnorthernand
centralIllinoisandeasternWisconsin.
OnApril1,2019,theSystembecamethesolecorporatememberofBayAreaMedicalCenter("BAMC")
through the acquisition of the remaining 51% interest in BAMC and its results have been fully
consolidatedintotheconsolidatedfinancialstatementsoftheSystemasofthisdate.Theacquisition
willimprovetheavailability,scopeandaccesstohealthcareinthecommunitiesservedbyBAMC.
PrinciplesofConsolidation
Included in the System’s consolidated financial statements are all of its wholly owned or controlled
subsidiaries.Allsignificantintercompanytransactionshavebeeneliminatedinconsolidation.
2. SIGNIFICANTEVENTS
Due to the COVID-19 pandemic, the behavior of businesses and people globally was altered in a
manner that had a negative impact on global and local economies including significant investment
marketvolatility,varioustemporarybusinessclosuresresultinginincreasedunemploymentandother
effects which have and could continue to result in supply disruptions, lower collections on patient
accountsreceivableand/ordecisionstodefermedicaltreatmentsattheSystem’sfacilities.
At various times in 2020 and at various locations the System postponed or canceled elective
procedures to comply with public health protocols. This, along with the growth in the volume of
COVID-19patients,hadanegativeimpactonoperationsandrevenuesandhasalsocausedtheSystem
toestimatethetiming,sourceandrateofreimbursementforCOVID-19relatedpatientcare.
Thetotalimpactof theCOVID-19pandemiconthe Systemisdifficulttopredictandcouldadversely
impactthebusiness,investmentportfolio,financialconditionorresultsofoperationsand,accordingly,
9
may have a material adverse impact on the financial condition of the System. The System is
monitoringliquidityandcashflowandhastaken,andwillcontinuetotake,stepstoprotectitsfiscal
health,includingafocusonmaintainingliquiditytomeetitsobligations.Inaddition,theSystemhas
applied for certain COVID-19 related resources, including supplies, financial support, payroll tax
deferralsandreliefandotherassistancemadeavailablethroughlocal,stateandfederalgovernments.
AsofDecember31,2020,theSystemreceived$786,655ingrantpaymentsfromtheU.S.Department
of Health and Human Services ("HHS") from the Provider Relief Fund established under the
Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), which has been recognized as
revenueandincludedinotheroperatingrevenuewithintheconsolidatedstatementofoperationsand
changes in netassets. Payments fromthe Provider Relief Fund are intendedto cover unreimbursed
healthcarerelated expenses and lost revenuefrompatientcare attributed to COVID-19 andarenot
requiredtoberepaidprovidedtherecipientatteststoandcomplieswiththetermsandconditionsof
thegrantfunds.ManagementoftheSystembelievestheSystemisincompliancewiththetermsand
conditions of the Provider Relief Fund distributions and will continue to monitor compliance. The
CARESActalsoentitledeligibleemployerstoanemployeeretentiontaxcreditdesignedtoencourage
employerstokeepemployeesontheirpayroll.Therefundabletaxcreditislimitedto50%ofupto$10
inqualifiedwagespaidtoeachemployeebyaneligibleemployerwhosebusinesshadbeenfinancially
impactedbyCOVID-19. As of December 31, 2020, the System recognizedapproximately $37,000 of
revenuefortheemployeeretentiontaxcredit,whichisincludedinotheroperatingrevenuewithinthe
consolidatedstatementofoperationsandchangesinnetassetsandacorrespondingreceivablethatis
includedinothercurrentassetsintheconsolidatedbalancesheets.TherecognitionoftheCOVID-19
falls under the grant accounting guidance of accounting principles generally accepted in the United
States.Thisguidancerequiresallsignificanttermsandconditionstohavebeenmetforrecognitionto
occur.ManagementoftheSystemwillcontinuetomonitorcompliancewiththetermsandconditions
oftheCARESActgrantfundsandtheimpactofthepandemicontheSystem’srevenuesandexpenses.
Inaddition,theSystemreceivedapproximately$773,000fromtheCentersforMedicareandMedicaid
Services("CMS")as an advancepaymentforMedicareservices during 2020. Thefundsareprovided
through the expansion of the Medicare Accelerated and Advance Payment Program to ensure
providersandsuppliershavetheresourcesneededtocombattheCOVID-19pandemic.Theadvances
will be recouped by withholding future Medicare fee-for-service payments for claims until the full
acceleratedpaymenthasbeenrecouped,unlesstheSystemelectstorepaytheadvancespriortofull
recoupment. Recoupments are scheduled to begin in April 2021. Subsequent to the twenty-nine
monthrecoupmentperiodanyunpaidremainingbalanceissubjecttoaninterestchargeof4percent
per annum. Medicare accelerated andadvance payments of approximately $285,000 and $488,000
are included in accounts payable and other accrued liabilities and other noncurrent liabilities,
respectively, within the consolidated balance sheets at December 31, 2020. The CARES Act also
permitted employers to defer the employer portion of social security taxes through December 31,
2020.Employersarerequiredtoremitone-halfoftheamountdeferredbyDecember31,2021andthe
remaining half by December 31, 2022. Through December 31, 2020, the System deferred
approximately$215,000ofthesetaxes.AtDecember31,2020,approximately$107,500isincludedin
accrued salaries and employee benefits and other noncurrent liabilities, respectively, within the
consolidatedbalancesheets.
OnJuly1,2020,theSystemsoldamajorityoftheassetsandcertainliabilities(the"disposalgroup")
relatedtooperationsoftheSysteminCentralIllinois.Thedisposalgrouphadassetssoldinexcessof
liabilities transferred of $205,273, consisting primarily of property and equipment and certain
investment interests in unconsolidated entities. The purchase price for the disposal group was
$190,000. The System recorded a loss, inclusive of selling costs, of $21,346 that is included in
nonrecurringexpensesintheconsolidatedstatementsofoperationsandchangesinnetassets.
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3. SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES
UseofEstimates
The preparation of the consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates, assumptions and
judgmentsthataffectthereportedamountsofassets,liabilitiesandamountsdisclosedinthenotesto
theconsolidatedfinancialstatementsatthedateoftheconsolidatedfinancialstatements.Estimates
also affect the reported amounts of revenues and expenses during the reporting period. Although
estimatesareconsideredtobefairlystatedatthetimemade,actualresultscoulddiffermateriallyfrom
thoseestimates.
CashEquivalents
The System considers all highly liquid investments with a maturity of three months or less when
purchased,otherthanthoseincludedintheinvestmentportfolio,tobecashequivalents.
Investments
The System has designated substantially all of its investments as trading. Investments in debt and
equitysecuritieswithreadilydeterminablefairvaluesaremeasuredatfairvalueusingquotedmarket
prices or otherwise observable inputs. Investments in private equity limited partnerships and
derivative products (hedge funds) are reported at fair value using net asset value as a practical
expedient.Commingledfundsarecarriedatfairvalue based on other observable inputs. Investment
incomeorloss(includingrealizedgainsandlosses,interest,dividendsandunrealizedgainsandlosses)
isincludedinthe nonoperating section of the consolidated statements of operationsand changes in
netassets,unlesstheincomeorlossisrestrictedbydonororlaworisrelatedtoassetsdesignatedfor
self-insuranceprograms.Investmentincomeonself-insurancetrustfundsisreportedinotherrevenue
in the accompanying consolidated statements of operations and changes in net assets. Investment
incomethatisrestrictedbydonororlawisreportedasachangeinnetassetswithdonorrestrictions.
AssetsLimitedastoUse
AssetslimitedastouseconsistofinvestmentssetasidebytheSystemforfuturecapitalimprovements
and certain medical education and other health care programs. TheSystem retains control of these
investmentsandmay,atitsdiscretion,subsequentlyusethemforotherpurposes.Additionally,assets
limitedastouseincludeinvestmentsheldbytrusteesorintrustunderdebtagreements,self-insurance
trusts,assetsheldinreinsurancetrustaccountsanddonor-restrictedfunds.
PatientServiceRevenueandAccountsReceivable
PatientservicerevenueisreportedattheamountthatreflectstheconsiderationtowhichtheSystem
expectstobe entitled in exchange for providing patientcare. These amountsare duefrom patients,
third-partypayors(including managedcarepayorsandgovernment programsandexcludesrevenues
for services provided to patients under capitated arrangements) and others and include variable
consideration for retroactive revenue adjustments due to settlement of audits, reviews and
investigations.Generally,patientsandthird-partypayorsarebilledwithindaysaftertheservicesare
performed or after discharge. Revenue is recognized as performance obligations are satisfied.
Provisionsfor third-partypayorsettlementsand adjustmentsareestimatedin the periodtherelated
servicesareprovidedandadjustedinfutureperiodsasadditionalinformationbecomesavailableand
finalsettlementsaredetermined.
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AstheSystem'sperformanceobligationsrelatetocontractswithadurationoflessthanoneyear,the
Systemhasappliedtheoptionalexemptionprovidedintheguidanceand,therefore,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. The unsatisfied or partially
unsatisfied performance obligations referred to above are primarily related to inpatient acute care
services at the end of the reporting period. The performance obligations for these contracts are
generallycompletedwhenthepatientsaredischarged,whichgenerallyoccurswithindaysorweeksof
theendofthereportingperiod.
TheSystemdoesnotadjustthepromisedamountofconsiderationfrompatientsandthird-partypayors
fortheeffects ofasignificantfinancing component, duetotheexpectation that theperiodbetween
thetimetheserviceisprovidedtoapatientandthetimethatthepatientorathird-partypayorpays
forthatservicewillbeoneyearorless.
TheSystemhasenteredintopaymentarrangementswithpatientsthatallowforpaymentsoveraterm
inexcessofoneyear.TheSystemhasevaluatedhistoricalcollectionsinexcessofoneyearandcurrent
marketinterestratestodeterminewhetherasignificantfinancingcomponentexiststhatwouldrequire
an adjustment to the promised amount of consideration from patients and third-party payors. The
Systemhasdeterminedthattheimpactofimplicitfinancingarrangementsforpaymentagreementsin
excess of one year is insignificant to the consolidated statements of operations and changes in net
assets.
TheSystemdoesnotincursignificantincrementalcostsinobtainingcontractswithpatients.Anycosts
incurred are expensed in the period of occurrence, as the amortization period ofany assetthat the
Systemwouldhaverecognizedisoneyearorlessinduration.
Laws and regulations governing the Medicare and Medicaid programs are complex and subject to
interpretation. As a result, there is a possibility that recorded estimates will change by a material
amount.
Inventories
Inventories,consistingprimarilyofmedicalsupplies,pharmaceuticalsanddurablemedicalequipment,
are stated at the lower of cost (first-in, first-out) or market. Retail pharmaceutical inventories are
statedatreplacementcost.
ReinsuranceReceivables
Reinsurance receivables are recognized in a manner consistent with the liabilities relating to the
underlyingreinsuredcontracts.
GoodwillandIntangibleAssets,Net
Goodwillof$63,740and$62,172isincludedingoodwillandintangibleassets,netintheaccompanying
consolidated balance sheets as of December 31, 2020 and 2019, respectively. In 2019, the System
elected to amortize goodwill prospectively using the straight-line method over a 10-year period in
accordancewithAccountingStandardsUpdate("ASU")2019-06.Goodwillamortizationof$7,255and
$6,982isincluded in depreciation and amortization inthe accompanyingconsolidatedstatements of
operationsandchangesinnetassetsfortheyearsendedDecember31,2020and2019,respectively.
Intangibleassetswithexpectedusefullivesareamortizedoverthatperiod.
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AssetImpairment
The System considers whether indicators of impairment are present and, if indicators are present,
performsthenecessaryteststodetermineifthecarryingvalueofanassetisrecoverable.Impairment
write-downsarerecognizedintheaccompanyingconsolidatedstatementsofoperationsandchangesin
netassetsasacomponentofoperatingexpenseatthetimetheimpairmentisidentified.Therewere
nomaterialimpairmentchargesrecordedfortheyearsendedDecember31,2020and2019.
PropertyandEquipment,Net
Propertyandequipmentarereportedatcostor,ifdonated,atfairvalueatthedateofthegift.Costsof
computersoftwaredevelopedorobtainedforinternaluse,includingexternalandinternaldirectcosts
of materials and labor directly associated with internal-use software development projects, are
capitalizedduringtheapplicationdevelopmentstageandincludedinpropertyandequipment.Internal
laborandinterestexpenseincurredduringtheperiodofconstructionofsignificantcapitalprojectsare
capitalizedasacomponentofthecostsoftheasset.
Propertyandequipmentcapitalizedunderdirectfinancingleasesarerecordedatthepresentvalueof
future lease payments, addinginitial direct costs and prepaid lease payments, reduced by any lease
incentives.Propertyandequipment capitalized under direct financing leases are amortizedusingthe
straight-line method over the related lease term. Amortization of property and equipment under
financingleasesisincludedintheaccompanyingconsolidatedstatementsofoperationsandchangesin
netassetsindepreciationandamortizationexpense.
Propertyandequipmentassetsaredepreciatedonthestraight-linemethodoveraperiodrangingfrom
3yearsto80years.
OperatingLeaseRight-of-useAssets
TheSystemrecordsanoperatingleaseright-of-useasset(anassetthatrepresentstheSystem'srightto
usetheleasedassetfortheleaseterm)forleasesthatdonotmeetthecriteriaasasales-typeleaseor
adirectfinancinglease.
TheSystemrecordsoperatingleaseright-of-useassetsatthepresentvalueoffutureleasepayments,
addinginitialdirectcostsandprepaidleasepayments,reducedbyanyleaseincentives.Operatinglease
right-of-use assets are amortized using the straight-line method over the related lease term.
Amortization of operating lease right-of-use assets is included in the accompanying consolidated
statementsofoperationsandchangesinnetassetsinsupplies,purchasedservicesandotherexpense.
Includedwithinoperatingleaseright-of-useassetsareassetsthattheSystempreviouslysoldandthen
leased back. Those sale/leaseback transactions, which related to various administrative and medical
supportbuildings,didnotmeettheaccountingcriteriaasasales-typeleaseoradirectfinancinglease.
Thebuyer-lessorsforsuchtransactionsaregenerallyunrelatedspecial-purposeentities.
InvestmentsinUnconsolidatedEntities
Investmentsinunconsolidatedentitiesareaccountedforusingthecostorequitymethod.TheSystem
appliestheequitymethodofaccountingforinvestmentsinunconsolidatedentitieswhenitsownership
ormembershipinterestis50%orlessandtheSystemhastheabilitytoexercisesignificantinfluence
over the operating and financial policies of the investee. All other unconsolidated entities are
accounted for using the cost method. The income (loss) on health-related unconsolidated entities is
includedinotherrevenueintheaccompanyingconsolidatedstatementsofoperationsandchangesin
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netassets.Theincomeorlossonnon-health-relatedunconsolidatedentitiesisincludedwithinother
nonoperating(loss)income,net.
DerivativeFinancialInstruments
The System has entered into transactions to manage its interest rate, credit and market risks.
Derivative instruments, including exchange-traded and over-the-counter derivative contracts and
interestrateswaps,arerecordedaseitherassetsorliabilitiesatfairvalue.Subsequentchangesina
derivative'sfairvaluearerecognizedinnonoperating(loss)income,net.
BondIssuanceCosts,DiscountsandPremiums
Bond issuance costs, discounts and premiums are amortized over the term of the bonds using the
effectiveinterestmethodandareincludedinlong-termdebt,lesscurrentportionintheaccompanying
consolidatedbalancesheets.
GeneralandProfessionalLiabilityRisks
Theprovisionforself-insuredgeneralandprofessionalliabilityclaimsincludesestimatesoftheultimate
costsforbothreportedclaimsandclaimsincurredbutnotreported.TheSystemmeasuresthecostof
itsunfundedobligationsundersuchprogramsbaseduponactuarialcalculationsandrecordsaliability
onadiscountedbasis.
NetAssetsWithDonorRestrictions
NetassetswithdonorrestrictionsarethoseassetswhoseusebytheSystemhasbeenlimitedbydonors
toaspecifictimeperiodorpurposeorconsistofgiftswithcorpusvaluesthathavebeenrestrictedby
donorstobemaintainedinperpetuity.Netassetswithdonorrestrictionsareusedinaccordancewith
the donor's wishes primarily to purchase property and equipment, to fund medical education or to
fundhealthprograms.
Assets released from restrictions to fund purchases of property and equipment are reported in the
accompanying consolidated statements of operations and changes in net assets as increases to net
assets without donor restrictions. Those assets released from restriction for operating purposes are
reported in the accompanying consolidated statements of operations and changes in net assets as
other revenue. When restricted, earnings are recorded as net assets with donor restrictions until
amountsareexpendedinaccordancewiththedonor'sspecifications.
NonrecurringExpenses
The System has incurred salaries, purchased services and other expenses in connection with the
formationoftheSystem,theimplementationofanelectronicmedicalrecordsandbillingsystem,the
implementation of an enterprise resource planning system and, as part of the initiative to reduce
operatingexpenses,anearlyretirementincentiveprogramandpositionrestructuring.Alsorecordedin
nonrecurringexpensesisthelossincurredonthedivestitureofCentralIllinoisdisposalgroup(seeNote
2. SIGNIFICANT EVENTS). Due to the nature of these expenses, the costs were recorded as
nonrecurringintheaccompanyingconsolidatedstatementsofoperationsandchangesinnetassets.
OtherNonoperating(Loss)Income,Net
Revenuesandexpenses from delivering health care services and theprovision ofgoods and services
ancillary thereto are reportedin operations. Income andlosses that arise fromtransactions that are
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peripheralorincidentaltotheSystem'smainpurposeareincludedinothernonoperating(loss)income,
net. Other nonoperating (loss) income, net primarily consists of a gain on the acquisition of BAMC,
fund-raisingexpenses,contributionstocharitableorganizations,incometaxesandthenetnon-service
componentsoftheperiodicbenefitexpenseontheSystem'spensionplans.
RevenueinExcessofExpensesandChangesinNetAssets
The accompanying consolidated statements of operations and changes in net assets include the
revenue in excess of expenses as the performance indicator. Changes in net assets without donor
restrictions,whichareexcludedfromrevenueinexcessofexpenses,primarilyincludecontributionsof
long-livedassets(includingassetsacquiredusingcontributions,whichbydonorrestrictionweretobe
used for the purposes of acquiring such assets), pension-related changes other than net periodic
pensioncostsanddistributionstononcontrollinginterests.
AccountingPronouncementsAdopted
InFebruary2016,theFinancialAccountingStandardsBoard("FASB")issuedASU2016-02,Leases(Topic
842). This guidance introduced a lessee modelthat brings most leases on to the balance sheet.The
standard also aligns certain of the underlying principles of the new lessor model with those in ASU
2014-09,therevenuerecognitionstandard.ThisstandardwasadoptedbytheSystemeffectiveJanuary
1, 2019, using the modified retrospective approach. The System elected the package of practical
expedients permitted under the transition guidance within the new standard, which among other
things,allowedtheSystemtocarryforwardthehistoricalleaseclassification.
TheSystemrecordedaright-of-useassetof$388,097,whichisnetoftenantimprovementspreviously
recordedpriortoadoption,andright-of-useliabilitiesof$426,794duetotheadoptionofthisstandard
onJanuary1,2019.Additionally,theSystemrecognizedacumulative-effectadjustmentof$23,427to
netassetswithoutdonorrestrictionsonJanuary1,2019,relatedtothedeferredgainsonvarioussale-
leasebacktransactions.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software
(Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing
ArrangementThatIsaServiceContract.Thisguidancerequiresanentityinahostingarrangementthat
is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation
coststocapitalizeasanassetandwhichcoststoexpenseasincurred.Also,thisguidancerequiresthe
entity to expense the capitalized implementation costs of a hosting arrangement that is a service
contractoverthetermofthehostingarrangement.Further,theguidancerequirestheentitytopresent
theexpenserelatedtothecapitalizedimplementationcostsinthesamelineitemintheconsolidated
statements of operations and changes in netassets as thefees associated withthe hosting element
(service) of the arrangement and classify payments for capitalized implementation costs in the
consolidatedstatementsofcashflowsinthesamemanneraspaymentsmadeforfeesassociatedwith
thehostingelement.Theentityisalsorequiredtopresentthecapitalizedimplementationcostsinthe
consolidated balance sheets in the same line item that a prepayment for the fees of the associated
hostingarrangementwouldbepresented.Thisguidanceiseffectiveforthefiscalyearsbeginningafter
December 15, 2020, and interim periods within annual periods beginning after December 15, 2021.
Early adoption is permitted. The System early adopted thisguidance effectiveJanuary 1, 2019, on a
prospective basis. This guidance did not have a material impact on the System’s accompanying
consolidatedfinancialstatements.
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4. COMMUNITYBENEFIT
TheSystemprovideshealthcareserviceswithoutchargetopatientswhomeetthecriteriaofitscharity
carepolicies.Charitycareservicesarenotreportedaspatientservicerevenue,becausepaymentisnot
anticipatedwhiletherelatedcoststoprovidethehealthcareareincludedinoperatingexpenses.
Charitycareisprovidedtopatientswhomeetthecriteriaestablishedundertheapplicablefinancial
assistancepolicy.Qualifyingpatientscanreceiveupto100%discountsfromchargesandextended
paymentplans.TheSystem’scostofprovidingcharitycarewas$106,789and$153,307fortheyears
endedDecember31,2020and2019,respectively,asdeterminedusingtotalcosttochargeratios.
In addition to the provision of charity care, the System provides significant financial support to its
communitiestosustainandimprovehealthcareservices.
Theseactivitiesinclude:
• TheunreimbursedcostofprovidingcaretopatientscoveredbytheMedicareandMedicaid
programs.
• Thecostofprovidingservicesthatarenotself-sustaining,forwhichpatientservicerevenues
arelessthanthecostsrequired to provide the services. Such services benefit uninsured and low-
income patients, as well as the broader community, but are not expected to be financially self-
supporting.
• Othercommunitybenefitsincludetheunreimbursedcostsofcommunitybenefitsprograms
andservicesforthegeneralcommunity,notsolelyforthosedemonstratingfinancialneed,including
theunreimbursedcostofmedicaleducation,healtheducation,immunizationsforchildren,support
groups,healthscreeningsandfairs.
5. REVENUEANDRECEIVABLES
Patientservicerevenue
PatientservicerevenueisreportedattheamountthatreflectstheconsiderationtowhichtheSystem
expectstobe entitled in exchange for providing patientcare. These amountsare duefrom patients,
third-partypayors(including managedcarepayorsandgovernment programsandexcludesrevenues
for services provided to patients under capitated arrangements) and others and include variable
consideration for retroactive revenue adjustments due to settlement of audits, reviews and
investigations.Generally,patientsandthird-partypayorsarebilledshortlyafterdischarge.Revenueis
recognizedasperformanceobligationsaresatisfied.
Performance obligations are identified based on the nature of the services provided. Revenue
associated with performance obligations satisfied over time is recognized based on actual charges
incurredinrelationtototalexpected(oractual)charges.Performanceobligationssatisfiedovertime
relate to patients receiving inpatient acute care services. The System measures the performance
obligationfromadmissionintothehospitaltothepointwhentherearenofurtherservicesrequiredfor
the patient, which is generally the time of discharge. For outpatient services, the performance
obligationissatisfiedasthepatientsimultaneouslyreceivesandconsumesthebenefitsprovidedasthe
servicesareperformed.Inthecaseoftheseoutpatientservices,recognitionoftheobligationovertime
yields the same result as recognizing the obligation at a point in time. Management believes this
method provides a faithful depiction of the transfer of services over the term of performance
obligationsbasedontheinputsneededtosatisfytheobligations.
The System uses a portfolio approach to account for categories of patient contracts as a collective
groupratherthanrecognizingrevenueonanindividualcontractbasis.Theportfoliosconsistofmajor
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payor classes for inpatient revenue and major payor classes and types of services provided for
outpatientrevenue.Basedonthehistoricalcollectiontrendsandotheranalyses,theSystembelieves
thatrevenuerecognizedbyutilizingtheportfolioapproachapproximatestherevenuethatwouldhave
beenrecognizedifanindividualcontractapproachwereused.
TheSystemdeterminesthetransactionprice,whichinvolvessignificantestimatesandjudgment,based
onstandardchargesforgoodsandservicesprovided,reducedbyexplicitandimplicitpriceconcessions,
includingcontractualadjustmentsprovidedtothird-partypayors,discountsprovidedtouninsuredand
underinsured patients in accordance with policy and/or implicit price concessions based on the
historical collection experience of patient accounts. The System determines the transaction price
associated with services provided to patients who have third-party payor coverage based on
reimbursement terms per contractual agreements, discount policies and historical experience. For
uninsured patients who do not qualify forcharity care, the System determines the transactionprice
associated with services based on charges reduced by implicit price concessions. Implicit price
concessions included in the estimate of the transaction price are based on historical collection
experienceforapplicablepatientportfolios.PatientswhomeettheSystem'scriteriaforcharitycareare
providedcarewithoutcharge;suchamountsarenotreportedasrevenue.Subsequentchangestothe
estimateofthetransactionpricearegenerallyrecordedasadjustmentstopatientservicerevenuein
the period of the change. 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 using the most likely
outcome method. These settlements are estimated based on the terms of the payment agreements
with the payor, correspondence from the payor and 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 new information
becomes available or as years are settled or are no longer subject to such audits, reviews and
investigations.
FortheyearsendedDecember31,2020and2019,changesintheSystem’sestimatesofimplicitprice
concessions, discounts and contractual adjustments or other reductions to expected payments for
performanceobligationsrelatedtoprioryearswerenotsignificant.
In the normal course of business, the System does receive payments in advancefor certainservices
providedandwouldconsidertheseamountstorepresentcontractliabilities.Theamountsreceivedin
thenormalcourse ofbusinessatDecember 31,2020and 2019werenotmaterial. In2020theCMS
accelerated and advance payments received in relation to the COVID-19 pandemic for Medicare
servicesaredeemedcontractliabilitiesatDecember31,2020.SeeNote2.SIGNIFICANTEVENTS.
Currently, the State of Illinois utilizes supplemental reimbursement programs to increase
reimbursementtoproviderstooffsetaportionofthecostofprovidingcaretoMedicaidandindigent
patients.TheseprogramsaredesignedwithinputfromtheCMSandarefundedwithacombinationof
stateandfederalresources,includingassessmentsleviedontheproviders.Underthesesupplemental
programs, the System recognizes revenue and related expenses in the period in which amounts are
estimable and collection is reasonably assured. Reimbursement and the assessment under these
programsarereflectedintheaccompanyingconsolidatedstatementsofoperationsandchangesinnet
assetsareasfollows:
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Classification
YearEnded
December31,2020
YearEnded
December31,2019
Reimbursement Patientservicerevenue $ 286,105 $ 271,260
Assessment Supplies,purchasedservicesandother 171,312 165,222
TheStateofWisconsinassessesafeeortaxongrosspatientservicerevenue.Therevenuesfromthis
assessment are used to increase paymentsmade to hospitals for services provided to Medicaid and
other medically indigent patients. The System’s patient service revenue reflects this increase in
payment for servicesto Medicaid and other medicallyindigent patients and hospital tax assessment
expense reflects the fees assessed by the State. Reimbursement and the assessment under these
programsarereflectedintheaccompanyingconsolidatedstatementsofoperationsandchangesinnet
assetsareasfollows:
Classification
YearEnded
December31,2020
YearEnded
December31,2019
Reimbursement Patientservicerevenue $ 137,317 $ 117,150
Assessment Supplies,purchasedservicesandother 101,477 100,777
Management has determined that the nature, amount, timing and uncertainty of revenue and cash
flows are affected by thepayor's geographical location, the lineof business that renders servicesto
patientsandthetimingofwhenrevenueisrecognizedandbilled.
Thecompositionofpatientservicerevenuebypayorisasfollows:
YearEnded
December31,2020
YearEnded
December31,2019
Managedcare $ 5,521,363 53% $ 5,829,566 55%
Medicare 3,124,812 31% 3,380,458 31%
Medicaid-Illinois 773,851 8% 694,406 7%
Medicaid-Wisconsin 481,215 5% 457,583 4%
Self-payandother 315,145 3% 298,956 3%
$ 10,216,386 100% $ 10,660,969 100%
Deductibles,copaymentsandcoinsuranceunderthird-partypaymentprogramswhicharethepatient's
responsibilityareincludedwithintheprimarypayorcategoryinthetableabove.
CapitationRevenue
TheSystemhasagreementswithvariousmanagedcareorganizationsunderwhichtheSystemprovides
or arranges for medical care to members of the organizations in return for a monthly payment per
member.RevenueisearnedeachmonthasaresultoftheSystemagreeingtoprovideorarrangefor
theirmedicalcare.
OtherRevenue
OtherrevenueisrecognizedatanamountthatreflectstheconsiderationtowhichtheSystemexpects
to be entitled in exchange for providing goods and services. The amounts recognized reflect
considerationduefromcustomers,third-partypayorsandothers.Primarycategoriesofotherrevenue
includegrantrevenuesfromtheCARESAct,incomefromjointventures,retailpharmacyrevenue,grant
revenue,cafeteriarevenue,rentrevenueandothermiscellaneousrevenue.
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Revenuedisaggregationbystateandbusinesslineareasfollows:
YearEnded
December31,2020
YearEnded
December31,2019
Illinois $ 5,713,977 $ 6,086,737
Wisconsin 5,623,837 5,838,394
Totalpatientservicerevenueandcapitation 11,337,814 11,925,131
Otherrevenue 1,794,375 880,292
Totalrevenue $ 13,132,189 $ 12,805,423
Hospital $ 7,611,197 $ 7,859,715
Clinic 2,231,783 2,450,681
HomeCare 240,043 241,151
Other 133,363 109,422
Totalpatientservicerevenue 10,216,386 10,660,969
Capitatedrevenue 1,121,428 1,264,162
Otherrevenue 1,794,375 880,292
Totalrevenue $ 13,132,189 $ 12,805,423
Patientaccountsreceivable
TheSystem'spatientaccountsreceivableisreportedattheamountthatreflectstheconsiderationto
whichitexpectstobeentitled,inexchangeforprovidingpatientcare.Patientaccountsreceivableare
reported at net realizable value based on certain assumptions. For third-party payors, including
Medicare,MedicaidandManagedCare,thenetrealizablevalueisbasedontheestimatedcontractual
reimbursementpercentage,whichisbasedoncurrentcontractpricesorhistoricalpaidclaimsdataby
payor. For self-pay, the net realizable value is determined using estimates of historical collection
experience including an analysis by aging category. These estimates are adjusted for expected
recoveries and any anticipated changes in trends, including significant changes in payor mix and
economicconditionsortrendsinfederalandstategovernmentalhealthcarecoverage.
Thecompositionofpatientaccountsreceivableissummarizedasfollows:
December31,2020 December31,2019
Managedcare $ 681,078 43% $ 698,731 44%
Medicare 350,948 22% 327,723 20%
Medicaid-Illinois 188,280 12% 216,618 13%
Medicaid-Wisconsin 41,694 3% 44,357 3%
Self-payandother 308,738 20% 318,178 20%
$ 1,570,738 100% $ 1,605,607 100%
Theself-paypatientaccountsreceivableaboveincludesamountsduefrompatientsforco-insurance,
deductibles,installmentpaymentplansandamountsduefrompatientswithoutinsurance.
6. INVESTMENTS
TheSysteminvestsinadiversifiedportfolioofinvestments,includingalternativeinvestments,suchas
realassetfunds,hedgefundsandprivateequitylimitedpartnerships,whosefairvaluewas$4,504,346
and$4,123,306atDecember31,2020and2019,respectively.Collectively,thesefundshaveliquidity
termsrangingfromdailytoannualwithnoticeperiodstypicallyrangingfrom1to90days.Certainof
these investments have redemption restrictions that may restrict redemption for up to 11 years.
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However,thepotentialfortheSystemtosellitsinterestinthesefundsinasecondarymarketpriorto
theendofthefundtermdoesexistforpricesatorotherthanthecarryingvalue.
At December 31, 2020, the System had additional commitments to fund alternative investments,
includingrecallabledistributionsof$1,406,684overthenextsevenyears.
In the normal course of operations and within established investment policy guidelines, the System
may enter into various exchange-traded and over-the-counter derivative contracts for trading
purposes, including futures, options and forward contracts. These instruments are used primarily to
maintaintheSystem’sstrategicassetallocation.TheseinstrumentsrequiretheSystemtodepositcash
or securities collateral with the broker or custodian. Collateral provided was $13,031 and $6,770 at
December31,2020and2019,respectively.Thenotionalvalueofthederivativesinlongpositionswas
$241,232 and $104,072 at December 31, 2020 and 2019, respectively. The notional value of the
derivatives in a short position was $(91,862) and $(58,527) at December 31, 2020 and 2019,
respectively.
Byusingderivativefinancialinstruments,theSystemexposesitselftocreditriskandmarketrisk.Credit
riskisthefailureofthecounterpartytoperformunderthetermsofthederivativecontracts.Whenthe
fairvalueofaderivativecontractispositive,thecounterpartyowestheSystem,whichcreatescredit
risk for the System. When the fair value of a derivative contract is negative, the System owes the
counterparty and, therefore, it does not possess credit risk. The System minimizes the credit risk in
derivative instruments by entering into transactions that may require the counterparty to post
collateralforthebenefitoftheSystembasedonthecreditratingofthecounterpartyandthefairvalue
ofthederivativecontract.Marketriskistheadverseeffectonthevalueofafinancialinstrumentthat
results from a change in the underlying reference security. The market risk associated with market
changes is managed by establishing and monitoring parameters that limit the types and degree of
marketriskthatmaybeundertaken.
Receivablesandpayablesforinvestmenttradesnotsettledarepresentedwithothercurrentassetsand
accounts payable and other accrued liabilities in the accompanying consolidated balance sheets.
Unsettledsalesresultedinreceivablesduefrombrokersof$49,512and$38,355atDecember31,2020
and 2019, respectively. Unsettled purchases resulted in payables of $88,890 and $41,977 at
December31,2020and2019,respectively.
Investment returns for assets limited as to use and cash and cash equivalents are composed of the
following:
YearEnded
December31,2020
YearEnded
December31,2019
Interestincomeanddividends $ 83,232 $ 84,684
Incomefromalternativeinvestments 51,675 333,212
Netrealizedgains 41,293 150,422
Netunrealizedgains 476,794 553,287
Total $ 652,994 $ 1,121,605
20
Investment returns are included in the accompanying consolidated statements of operations and
changesinnetassetsasfollows:
YearEnded
December31,2020
YearEnded
December31,2019
Otherrevenue $ 49,763 $ 53,307
Investmentincome,net 593,283 1,053,898
Netassetswithdonorrestrictions 9,948 14,400
Total $ 652,994 $ 1,121,605
The cash and cash equivalents and assets limited as to use presented within the accompanying
consolidatedbalancesheetsarecomprisedofthefollowing:
December31,2020 December31,2019
Internallydesignatedforcapitalandother $ 10,291,819 $ 8,345,172
Heldforself-insurance 658,466 645,697
Donorrestricted 137,980 132,024
Investmentsundersecuritieslendingprogram 18,945 17,672
Totalnoncurrentassetslimitedastouse 11,107,210 9,140,565
Cashandcashequivalents 959,878 449,712
Currentassetslimitedastouse 125,053 106,529
Totalcashandcashequivalentsandassetslimitedastouse $ 12,192,141 $ 9,696,806
Aspartofthemanagementoftheinvestmentportfolio,theSystemhasenteredintoanarrangement
wherebysecuritiesowned by theSystemare loaned primarily to brokers and investmentbanks. The
loansarearrangedthroughabank.Borrowersarerequiredtopostcollateralforsecuritiesborrowed
equal to no less than102% of thevalue of the security on a dailybasis, at a minimum. Thebank is
responsibleforreviewingthecreditworthinessoftheborrowers.TheSystemhasalsoenteredintoan
arrangement whereby the bank is responsible for the risk of borrower bankruptcy and default. At
December31,2020and2019,theSystemloaned$18,945and$17,672,respectively,insecuritiesand
acceptedcollateralfortheseloansintheamount$19,789and$18,284,respectively,whichrepresents
cashandgovernmentalsecurities,andareincludedincurrentliabilitiesandcurrentassets,respectively,
intheaccompanyingconsolidatedbalancesheets.
7. FAIRVALUE
TheSystemaccountsforcertainassetsandliabilitiesatfairvalueandcategorizesassetsandliabilities
measuredatfairvalueintheaccompanyingconsolidatedfinancialstatementsbaseduponwhetherthe
inputsusedtodeterminetheirfairvaluesareobservableorunobservable.Observableinputsareinputs
that are based on market data obtained from sources independent of the reporting entity.
Unobservableinputs are inputsthatreflectthe reporting entity’sownassumptionsabout pricingthe
assetorliability,basedonthebestinformationavailableunderthecircumstances.
Thefairvalueofallassetsandliabilitiesrecognizedordisclosedatfairvalueareclassifiedbasedonthe
lowestlevelofsignificantinputs.Assetsandliabilitiesthataremeasuredatfairvaluearedisclosedand
classifiedinoneofthethreecategories.Categoryinputsaredefinedasfollows:
Level1—Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilitiesonthereporting
date.
Level2—InputsotherthanquotedmarketpricesincludedinLevel1thatareobservablefortheasset
or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a
Level2inputmustbeobservableforsubstantiallythefulltermoftheassetorliability.
21
Level3—Inputsthatareunobservablefortheassetorliabilityforwhichthereislittleornomarket
data.
ThefollowingsectiondescribesthevaluationmethodologiesusedbytheSystemtomeasurefinancial
assetsandliabilitiesatfairvalue.Ingeneral,whereapplicable,theSystemusesquotedpricesinactive
marketsforidenticalassetsandliabilitiestodeterminefairvalue.Thispricingmethodologyappliesto
Level1 investments, such asdomestic andinternationalequities, exchange-traded funds and agency
securities.
Ifquotedpricesinactivemarketsforidenticalassetsandliabilitiesarenotavailabletodeterminethe
fairvalue,thenquotedpricesforsimilarassetsandliabilitiesorinputsotherthanquotedpricesthat
are observable either directly or indirectly are used. These investments are included in Level 2 and
consist primarily of corporate notes and bonds, foreign government bonds, mortgage-backed
securities,fixed-incomesecurities,includingfixed-incomegovernmentobligations,commercialpaper
and certain agency, United States and international equities, which are not traded on an active
exchange.The fair value for theobligations underswapagreementsincluded in Level 2 isestimated
using industry-standard valuation models. These models project future cash flows and discount the
futureamountstoapresentvalueusingmarket-basedobservableinputs,includinginterestratecurves.
ThefairvaluesoftheobligationunderswapagreementsincludeadjustmentsrelatedtotheSystem’s
creditrisk.
InvestmentsownedbytheSystemareexposedtovariouskindsandlevelsofrisk.Equitysecuritiesand
equityfundsexposetheentitytomarketrisk,performanceriskandliquidityriskforbothdomesticand
international investments. Market risk is the risk associated with major movements of the equity
markets. Performance risk is the risk associated with a company’s operating performance. Fixed-
incomesecuritiesandfixed-incomemutualfundsexposetheSystemtointerestraterisk,creditriskand
liquidityrisk.Asinterestrateschange,thevalueofmanyfixed-incomesecuritiesisaffected,including
thosewithfixed interest rates.Creditriskisthe risk thattheobligorofthe security willnotfulfillits
obligations.Liquidityriskisaffectedbythewillingnessofmarketparticipantstobuyandsellparticular
securities.Liquidity risk tends to be higherfor equitiesrelated tosmall capitalizationcompaniesand
certain alternative investments. Due to the volatility in the capital markets, there is a reasonable
possibilityofsubsequentchangesinfairvalue,resultinginadditionalgainsandlossesinthenearterm.
Thecarryingvaluesofcashandcashequivalents,accountsreceivableandpayable,othercurrentassets
and accrued liabilities are reasonable estimates of their fair values, due to the short-term nature of
thesefinancialinstruments.
22
Thefairvaluesoffinancialassetsandliabilitiesthataremeasuredatfairvalueonarecurringbasisare
asfollows:
December31,2020
QuotedPrices
inActive
Marketsfor
IdenticalAssets
(Level1)
Other
Significant
Observable
Inputs
(Level2)
Significant
Unobservable
Inputs
(Level3)
Assets
Investments
Cashandshort-terminvestments $ 1,861,490 $ 1,296,986 $ 564,504 $ —
Corporatebondsandotherdebtsecurities 705,552 — 705,552 —
UnitedStatesgovernmentbonds 615,723 — 615,723 —
Bondandotherdebtsecurityfunds 1,325,705 73,668 1,252,037 —
Non-governmentfixed-incomeobligations 18,944 — 18,944 —
Equitysecurities 826,194 826,194 — —
Equityfunds 2,307,912 143,521 2,164,391 —
7,661,520 $ 2,340,369 $ 5,321,151 $ —
Investmentsatnetassetvalue
Alternativeinvestments 4,530,621
Totalinvestments $ 12,192,141
Collateralproceedsreceivedundersecuritieslending
program $ 19,789 $ 19,789
Liabilities
Obligationsunderswapagreements $ (118,620) $ (118,620)
Obligationstoreturncapitalundersecuritieslending
program $ (19,789) $ (19,789)
23
December31,2019
QuotedPrices
inActive
Marketsfor
IdenticalAssets
(Level1)
Other
Significant
Observable
Inputs
(Level2)
Significant
Unobservable
Inputs
(Level3)
Assets
Investments
Cashandshort-terminvestments $ 909,297 $ 872,262 $ 37,035 $ —
Corporatebondsandotherdebtsecurities 582,327 — 582,327 —
UnitedStatesgovernmentbonds 583,429 — 583,429 —
Bondandotherdebtsecurityfunds 688,728 102,555 586,173 —
Non-governmentfixed-incomeobligations 26,176 — 26,176 —
Equitysecurities 782,581 782,581 — —
Equityfunds 1,976,779 134,951 1,841,828 —
5,549,317 $ 1,892,349 $ 3,656,968 —
Investmentsatnetassetvalue
Alternativeinvestments 4,147,489
Totalinvestments $ 9,696,806
Collateralproceedsreceivedundersecuritieslending
program $ 18,284 $ 18,284
Liabilities
Obligationsunderswapagreements $ (91,340) $ (91,340)
Obligationstoreturncapitalundersecuritieslending
program $ (18,284) $ (18,284)
8. PROPERTYANDEQUIPMENT,NET
Thecomponentsofpropertyandequipment,netaresummarizedasfollows:
December31,2020 December31,2019
Landandimprovements $ 461,831 $ 497,363
Buildingsandfixedequipment 7,536,013 7,519,607
Movableequipmentandcomputersoftware 2,520,502 2,496,988
Construction-in-progress 478,335 355,733
10,996,681 10,869,691
Accumulateddepreciationandamortization (5,144,704) (4,967,768)
Propertyandequipment,net $ 5,851,977 $ 5,901,923
During2020,theSystemwroteofffullydepreciatedpropertyandequipmenttotaling$233,800.
Property and equipment, net include assets recorded as finance leases and under other financing
arrangements.SeeadditionaldisclosureinNote9.LEASES.
Depreciationexpensewas$553,634and$560,221fortheyearsendedDecember31,2020and2019,
respectively.
24
9. LEASES
The System leases office and clinical space, land and equipment. Leases with an initial term of 12
monthsor less are not recordedontheconsolidated balance sheets. Forleaseagreementsentered
intoaftertheadoptionofASU2016-02onJanuary1,2019,theSystemcombinesleaseandnon-lease
components,exceptformedicalequipmentleases.
Thedepreciablelivesofassetsarelimitedbytheexpectedleaseterms.Mostleasesincludeoptionsto
renew.Themajorityofleasesdonotprovideanimplicitrate;therefore,theSystemhaselectedtouse
itsincrementalborrowingrate,whichistheinterestratetheSystemwouldborrowonacollateralized
basis over a similar term, as the discount rate. The System used its incremental borrowing rate on
January1,2019foroperatingleasesthatcommencedpriortothatdate.
Operating and finance leasesare classified asfollows within the accompanyingconsolidated balance
sheets:
Leases Classification December31,2020 December31,2019
Assets
Operating Operatingleaseright-of-useassets $ 309,678 $ 352,295
Finance Propertyandequipment,net 149,961 161,970
Totalleaseassets $ 459,639 $ 514,265
Liabilities
Current
Operating Operatingleaseliabilities,currentportion $ 79,934 $ 77,957
Finance Long-termdebtandcommercialpaper,currentportion 9,182 8,445
Noncurrent
Operating Operatingleaseliabilities,lesscurrentportion 268,575 314,106
Finance Long-termdebt,lesscurrentportion 165,507 176,811
Totalleaseliabilities $ 523,198 $ 577,319
Financeleaseassetsarerecordednetofaccumulatedamortizationof$57,873and$49,743asofDecember31,2020and2019,respectively.
Lease costs are classified asfollows within the accompanying consolidatedstatements of operations
andchangesinnetassets:
Leasecost Classification December31,2020 December31,2019
Operatingleasecost Supplies,purchasedservicesandother $ 85,253 $ 85,037
Shorttermleasecost Supplies,purchasedservicesandother 13,407 10,686
Variableleasecost Supplies,purchasedservicesandother 36,740 29,099
Financeleasecost
Amortizationofleaseassets Depreciationandamortization 11,629 10,719
Interestonleaseliabilities Interest 12,093 10,053
Subleaseincome Otherrevenue (2,434) (2,593)
Netleasecost $ 156,688 $ 143,001
25
Leaseterms,discountratesandothersupplementalinformationareasfollows:
December31,2020 December31,2019
Weightedaverageremainingleaseterm(inyears)
Operating
5.5
6.0
Finance
11.6
12.9
Weightedaveragediscountrate
Operating
2.24%
2.34%
Finance
7.54%
7.44%
Cashpaidforamountsincludedinthemeasurementofleaseliabilities
Operatingcashflowsfromoperatingleases
$ 88,387
$ 86,504
Operatingcashflowsfromfinanceleases 11,500 10,563
Financingcashflowsfromfinanceleases 8,184 7,605
FuturematuritiesofleaseliabilitiesatDecember31,2020areasfollows:

OperatingLeases FinanceLeases Total
2021 $ 86,817 $ 19,498 $ 106,315
2022 75,933 21,094 97,027
2023 65,018 21,031 86,049
2024 48,089 21,532 69,621
2025 33,948 21,025 54,973
Thereafter 61,813 169,777 231,590
Futureminimumleasepayments 371,618 273,957 645,575
Lessremainingimputedinterest 23,109 99,268 122,377
Total $ 348,509 $ 174,689 $ 523,198
10. INVESTMENTSINUNCONSOLIDATEDENTITIES
The System contributed $25,000 to an independent foundation in conjunction with the BAMC
transaction.See the additional discussionofthistransactioninNote 21.ACQUISITIONOFBAYAREA
MEDICALCENTER.Underthe terms of the definitive agreement betweenthe Systemand BAMC, the
$25,000contributionisdesignatedtosupporttheoperationsandcapitalneedsofBAMCand/orAurora
Bay Area Medical Group ("ABAMG"). The interest in that foundation is reflected in investments in
unconsolidatedentitiesintheaccompanyingconsolidatedbalancesheets,whichamountedto$18,668
and $21,186 at December 31, 2020 and 2019, respectively. Cash distributions of $2,518 and $3,814
werereceivedbyBAMCfromthisFoundationundertermsofthedefinitiveagreementduringtheyears
endedDecember31,2020and2019,respectively.
The System has an interest in thenet assets ofthe Masonic FamilyHealth Foundation ("MFHF"), an
independent organization, under the terms of an asset purchase agreement (the "Agreement").
SubstantiallyallofMFHF’snetassetsaredesignatedtosupporttheoperationsand/orcapitalneedsof
oneoftheSystem’smedicalfacilities.Additionally,90%ofMFHF’sinvestmentyield,netofexpenses,
onsubstantiallyallofMFHF’sinvestmentsisdesignatedforthesupportofoneoftheSystem’smedical
facilities. MFHF must pay the System, annually, 90% of the investment yield or an agreed-upon
percentageofthebeginningoftheyearnetassets.
TheinterestinthenetassetsofMFHFamountedto$109,017and$95,307atDecember31,2020and
2019,respectively,andispresentedwithininvestmentsinunconsolidatedentitiesintheaccompanying
consolidated balance sheets. The System’s interest in the investment income is reflected in the
26
accompanying consolidated statements of operations and changes in net assets and amounted to
$17,287and$17,433fortheyearsendedDecember31,2020and2019,respectively.Cashdistributions
of$3,978and$3,347werereceivedbytheSystemfromMFHFundertermsoftheAgreementduring
theyearsendedDecember31,2020and2019,respectively.Inaddition,MFHFmade$537and$333in
contributionstotheSystemforprogramsupportduringtheyearsendedDecember31,2020and2019,
respectively.
At December 31, 2020, the System had a 49.5% ownership interest in RML Health Providers, L.P.
("RML")thatisaccountedforonanequitybasis.RMLisanIllinois,not-for-profitlimitedpartnership
that operates a 115-bed licensed long-term acute care hospital in Hinsdale, Illinois, and an 86-bed
licensedlong-termacutecarehospitalinChicago,Illinois.TheSystem’sinvestmentinRMLwas$35,235
and $33,462 at December 31, 2020 and 2019, respectively, and is presented within investments in
unconsolidatedentitiesintheaccompanyingconsolidatedbalancesheets.

RMLleasestheChicago,Illinois,facilityfromtheSystem.TheleasehasafixedtermthroughJune30,
2025. The System recorded rentalincome of$1,192 and $1,157 for the years ended December 31,
2020and2019,respectively.
Thesummarizedfinancialpositionandresultsofoperationsforsignificantentitiesaccountedforunder
theequitymethodasofandfortheperiodsendedisoutlinedbelow:
RML MFHF
AsofDecember31,2020
Totalassets $ 131,256 $ 112,993
Totalliabilities 58,482 3,661
Partners'equity/netassets 72,774 109,332
YearEndedDecember31,2020
Totalrevenue 123,067 18,613
Revenueinexcessofexpenses 16,677 13,697
AsofDecember31,2019
Totalassets 123,345 99,827
Totalliabilities 55,118 4,192
Partners'equity/netassets 68,227 95,635
YearEndedDecember31,2019
Totalrevenue 111,745 19,160
Revenueinexcessofexpenses 12,170 13,542
27
11. LONG-TERMDEBT
Long-termdebt,netofunamortizedoriginalissuediscountorpremiumandunamortizeddeferred
bondissuancecosts,consistedofthefollowing:
December31,2020 December31,2019
Revenuebondsandrevenuerefundingbonds
Series2003A(weightedaveragerateof1.38%during2020and2019),principalpayablein
varyingannualinstallmentsthroughNovember2022;interestbasedonprevailingmarket
conditionsattimeofremarketing $ 5,194 $ 7,700
Series2003C(weightedaveragerateof1.60%during2020and2019),principalpayablein
varyingannualinstallmentsthroughNovember2022;interestbasedonprevailingmarket
conditionsattimeofremarketing 5,200 7,708
Series2008A(weightedaveragerateof4.41%and5.00%during2020and2019,respectively),
principalpayableinvaryingannualinstallmentsthroughNovember2030;interestbasedon
prevailingmarketconditionsattimeofremarketing 116,719 119,569
Series2008C(weightedaveragerateof0.58%and1.50%during2020and2019,respectively),
principalpayableinvaryingannualinstallmentsthroughNovember2038;interestbasedon
prevailingmarketconditionsattimeofremarketing 271,640 271,608
Series2011A,4.00%,principalpayableinannualinstallmentsthroughApril2022 440 652
Series2011B(weightedaveragerateof0.86%and1.76%during2020and2019,respectively),
principalpayableinvaryingannualinstallmentsthroughApril2051,subjecttoaputprovision
thatprovidesforacumulativeseven-monthnoticeandremarketingperiod;interesttiedtoa
marketindexplusaspread 68,983 69,297
Series2011C(weightedaveragerateof1.11%and2.52%during2020and2019,respectively),
principalpayableinvaryingannualinstallmentsthroughApril2049,subjecttoaputprovision
onSeptember3,2024;interesttiedtoamarketindexplusaspread 49,540 49,753
Series2011D(weightedaveragerateof1.11%and2.52%during2020and2019,respectively),
principalpayableinvaryingannualinstallmentsthroughApril2049,subjecttoaputprovision
onSeptember3,2024;interesttiedtoamarketindexplusaspread 49,540 49,753
Series2012,4.00%,principalpayableinvaryingannualinstallmentsthroughJune2044 39,048 40,507
Series2013A,5.00%,principalpayableinvaryingannualinstallmentsthroughJune2027 43,918 52,486
Series2014,4.00%to5.00%,principalpayableinvaryingannualinstallmentsthroughAugust
2038 149,629 160,080
Series2015,4.13%to5.00%,principalpayableinvaryingannualinstallmentsthroughMay
2045 88,283 102,590
Series2015B,4.00%to5.00%,principalpayableinvaryingannualinstallmentsthroughMay
2044 15,990 72,386
Series2018A,4.00%to5.00%,principalpayableinvaryingannualinstallmentsthroughAugust
2044 105,184 105,764
Series2018B(weightedaveragerateof5.00%during2020and2019),principalpayablein
varyingannualinstallmentsthroughAugust2054;interestbasedonprevailingmarket
conditionsattimeofremarketing 201,762 206,479
Series2018C(weightedaveragerateof1.06%and1.96%during2020and2019,respectively),
principalpayableinvaryingannualinstallmentsthroughAugust2054,interesttiedtoa
marketindexplusaspread 198,256 198,219
1,409,326 1,514,551
Taxablebonds
TaxableBondSeries2018,3.83%to4.27%,principalpayableinvaryingannualinstallments
throughAugust2048 709,865 709,628
TaxableBondSeries2019,3.39%,principalpayableinOctober2049 354,813 354,703
TaxableBondSeries2020A,2.21%to3.01%,principalpayableinvaryingannualinstallments
throughJune2050 695,822 —
1,760,500 1,064,331
Financeleaseobligationsandfinancingarrangements 214,360 235,249
Commercialpaper,weightedaverageinterestrateof1.06%fortheyearendedDecember31,
2020and2.15%fortheperiodMarch5,2019toDecember31,2019 50,000 132,000
TaxableTermLoan,(weightedaveragerateof2.68%during2020and2019),principalpayable
invaryingannualinstallmentsthroughSeptember2024 97,871 114,868
3,532,057 3,060,999
28
December31,2020 December31,2019
Lessamountsclassifiedascurrent
Long-termdebt,currentportion (51,996) (52,098)
Commercialpaper (50,000) (132,000)
Long-termdebtandcommercialpaper,currentportion (101,996) (184,098)
Long-termdebtsubjecttoshort-termfinancingarrangements (119,660) (147,535)
(221,656) (331,633)
$ 3,310,401 $ 2,729,366
Maturitiesoflong-termdebt,financingleases,andsinkingfundrequirements,assumingremarketingof
thevariableratedemandrevenuerefundingbonds,forthefiveyearsendingDecember31,2025,areas
follows:2021-$51,996;2022-$48,255;2023-$52,964;2024-$121,479;and2025-$45,783.
The System's outstanding bonds are secured by obligations issued under the Second Amended and
RestatedMasterTrustIndenturedatedasofAugust1,2018,asthesamemaybeamendedfromtime
totime,betweenAdvocateAuroraHealth,Inc.,theotheraffiliatesidentifiedthereinastheMembersof
the Obligated Group and U.S. Bank National Association, as master trustee ("the System Master
Indenture").Underthetermsofthebondindenturesandotherarrangements,variousamountsareto
be on deposit with trustees, and certain specified payments are required for bond redemption and
interest payments. The System Master Indenture and other debt agreements, including bank
agreements,alsoplacerestrictionsontheSystemandrequiretheSystemtomaintaincertainfinancial
ratios.
TheSystem'sunsecured variableraterevenuebonds, Series2011Bof$69,660and Series2018C-1of
$50,000,whilesubjecttoalong-termamortizationperiod,maybeputtotheSystemattheoptionof
the bondholders in connectionwith certain remarketing dates.To the extent thatbondholders may,
underthetermsofthedebt,puttheirbondswithin12monthsafterDecember31,2020,theprincipal
amountof suchbondshas beenclassifiedas acurrentobligationaslong-termdebtsubjecttoshort-
termfinancingarrangementsintheaccompanyingconsolidatedbalancesheets.Managementbelieves
thelikelihoodofamaterialamountofbondsbeingputtotheSystemisremote.However,toaddress
thispossibility,theSystemhastakenstepstoprovidevarioussourcesofliquidity,includingassessing
alternatesourcesoffinancing,includinglinesofcreditand/ornetassetswithoutdonorrestrictionsasa
sourceofself-liquidity.
The System has standby bond purchase agreements with banks to provide liquidity support for the
Series2008CBonds.IntheeventofafailedremarketingofaSeries2008CBonduponitstenderbyan
existingholderandsubjecttocompliancewiththetermsofthestandbybondpurchaseagreement,the
standbybankwouldprovidethefundsforthepurchaseofsuchtenderedbonds,andtheSystemwould
beobligatedtorepay thebankforthefundsitprovidedforsuchbondpurchase(if suchbondisnot
subsequentlyremarketed),withthefirstinstallmentofsuchrepaymentcommencingonthedateone
yearandonedayafterthebankpurchasesthebond.AsofDecember31,2020,therewerenobank-
purchased bonds outstanding. To the extent that the standby bond purchase agreement expiration
date is within 12 months after December 31, 2020, the principal amount of such bonds would be
classifiedasacurrentobligationintheaccompanyingconsolidatedbalancesheets.Thestandbybond
purchase agreements expire as follows: $129,456 in January 2024, $87,694 in September 2024 and
$58,225inSeptember2025.
InMarch2019,the System issued commercial paper in the amount of$50,000. The proceedsof the
commercialpaperwere used toredeemtheSeries2008C-2A bonds of$49,230plusaccruedinterest
andcertaincostsrelatedtotheissuanceofthecommercialpaper.Theremainingproceedswereused
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forgeneralcorporatepurposes.ThestandbybondpurchaseagreementrelatedtotheSeries2008C-2A
bondswascanceledeffectiveMarch5,2019.
In connection with the BAMC acquisition, the System assumed $81,465 of outstanding tax-exempt
bonds originally issued for the benefit of BAMC, which were redeemed in November 2019 with a
portion of the proceeds of $82,000 of the System's commercial paper. Also in connection with the
BAMCacquisition,theSystemacquiredan interestrateswap.Asthedebtrelatedtotheswapisno
longeroutstanding,itisbeingheldasaswapportfolio.ThisswapissecuredundertheSystemMaster
Indenture.
InNovember2019,theSystemissueditsSeries2019TaxableBondsintheamountof$357,970.The
proceeds of the Series 2019 Taxable Bonds were used to refinance all or a portion of the Series
2011A-2, Series 2012, Series 2013A and Series 2014 Bonds and to pay certain financing costs. In
connectionwiththisissuance,theSystemrecognizedalossonrefinancingintheamountof$21,103.
InMay2020,theSystemissueditsSeries2020ATaxableBonds intheaggregateprincipalamountof
$700,000.TheproceedsoftheSeries2020ATaxableBondswereusedforgeneralcorporatepurposes,
to refinance a portion of the Series 2011B, Series 2011C, Series 2011D, Series 2012, Series 2013A,
Series 2015 and Series 2015B Bonds, to repay $82,000 of commercial paper and to pay certain
financingcosts.Inconnectionwiththistransaction,theSystemrecognizedalossonrefinancinginthe
amountof$12,231.
AsofDecember31,2020,theSystemauthorizedtheissuanceofupto$1,000,000incommercialpaper
aggregateprincipaloutstanding.AsofDecember31,2020,$50,000ofcommercialpapernoteswere
outstanding, with maturities ranging from 119 to 122 days. As of December 31, 2019, $132,000 of
commercialpaperwasoutstanding,withmaturitiesrangingfrom27to62days.
AtDecember31,2020,theSystemhadlinesofcreditwithbanksaggregatingto$1,425,000inavailable
commitments. These lines ofcredit provide for various interestrates and payment terms and as of
December31,2020expireasfollows:$1,225,000inApril2021,$100,000inAugust2021and$100,000
in December 2022. Theselines of creditmay be used toredeem bonded indebtedness,to pay costs
related to such redemptions, for capital expenditures for general working capital purposes or to
provide for certain letters of credit. At December 31, 2020, letters of credit issued totaling $58,365
havebeenissuedunder oneoftheselines.AtDecember31,2020,noamountswereoutstandingon
theselinesorlettersofcredit.
TheSystemmaintainsaninterestrateswapprogramoncertainofitsvariableratedebt,asdescribedin
Note12.INTERESTRATESWAPPROGRAM.
TheSystem’sinterestpaidamountincludesalldebtagreementsincludingrevenuebondsandrevenue
refunding bonds, taxable bonds, finance lease obligations, financing arrangements and interest rate
swaps.TheSystem'sinterestpaid,netofcapitalizedinterest,amountedto$116,953and$119,870for
theyearsendedDecember31,2020and2019,respectively.TheSystemcapitalizedinterestof$8,198
and$4,087fortheyearsendedDecember31,2020and2019,respectively.
12. INTERESTRATESWAPPROGRAM
TheSystemhasinterestrate-relatedderivativeinstrumentstomanagetheexposureofitsvariablerate
debtinstruments.Byusingderivativefinancial instruments to manage the risk of changes in interest
rates, the System exposes itself to credit risk and market risk. Credit risk is the failure of the
counterparty to perform under the terms of the derivative contracts. When the fair value of a
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derivative contract is positive, the counterparty owes the System, which creates credit risk for the
System.Whenthefairvalueofaderivativecontractisnegative,theSystemowesthecounterpartyand,
therefore,itdoesnotpossesscreditrisk.TheSystemminimizesthecreditriskinderivativeinstruments
byenteringintotransactionsthatmayrequirethecounterpartytopostcollateralforthebenefitofthe
System based on the credit rating of the counterparty and the fair value of the derivative contract.
Marketrisk istheadverseeffect onthevalueofafinancialinstrument thatresultsfroma changein
interest rates. The market risk associated withinterest rate changes is managed by establishingand
monitoring parameters that limit the types and degree of market risk that may be undertaken. The
Systemalsomitigatesriskthroughperiodicreviewsofitsderivativepositionsinthecontextofitstotal
blendedcostofcapital.
At December 31, 2020, the System maintains an interest rate swap program on its Series 2008C
variable rate demand revenue bonds. These bonds expose the System to variability in interest
paymentsduetochangesininterestrates.TheSystembelievesthatitisprudenttolimitthevariability
ofitsinterestpayments.Tomeetthisobjectiveandtotakeadvantageoflowinterestrates,theSystem
enteredintovariousinterestrateswapagreementstomanagefluctuationsincashflowsresultingfrom
interest rate risk. These swaps convert the variable rate cash flow exposure on the variable rate
demandrevenuebondstosyntheticallyfixedcashflows.Thenotionalamountundereachinterestrate
swapagreementisreducedoverthetermoftherespectiveagreementtocorrespondwithreductions
intheprincipaloutstandingundervariousbondseries.AstheSeries2008C-2Abondswereredeemed
onMarch5,2019,theportionoftheswaprelatedtothesebondsisnowheldasaswapportfolio.
In connection with the BAMC acquisition, the System acquired an interest rate swap. As the debt
relatedtotheswapisnolongeroutstanding,itisbeingheldasaswapportfolio.
Thefollowingisasummaryoftheoutstandingpositionsundertheseinterestrateswapagreementsat
December31,2020:
BondSeries NotionalAmount MaturityDate RateReceived RatePaid
2008C-1 $ 129,900 November1,2038 61.7%ofLIBOR+26bps 3.605%
2008C-2B 58,425 November1,2038 61.7%ofLIBOR+26bps 3.605%
2008C-3A 88,000 November1,2038 61.7%ofLIBOR+26bps 3.605%
Swapportfolio 50,000 November1,2038 61.7%ofLIBOR+26bps 3.605%
Swapportfolio 26,170 February1,2038 70.0%ofLIBOR 3.314%
Theswapsarenotdesignatedashedginginstrumentsand,therefore,hedgeaccountinghasnotbeen
applied.Assuch,unrealizedchangesinfairvalueoftheswapsareclassifiedaschangesinfairvalueof
interest rate swaps in the accompanying consolidated statements of operations and changes in net
assets.Thenetcashsettlementpayments,representingtherealizedchangesinfairvalueoftheswaps,
are included as interest expense in the accompanying consolidated statements of operations and
changesinnetassets.
The fair value of the interest rate swap agreements was a liability of $118,620 and $91,340 as of
December31,2020and2019,respectively.Nocollateralwaspostedundertheseswapagreementsas
ofDecember31,2020and2019.
31
Amountsrecordedintheaccompanyingconsolidatedstatementsofoperationsandchangesinnet
assetsareasfollows:
YearEnded
December31,2020
YearEnded
December31,2019
Netcashpaymentsoninterestrateswapagreements(interestexpense) $ 10,241 $ 6,711
Changeinfairvalueofinterestrateswaps $ (27,280) $ (21,079)
The interest rate swap instruments contain provisions that require the System to maintain an
investmentgradecreditratingonitsbondsfrom certainmajorcreditratingagencies.IftheSystem's
bonds were to fall below investment grade, it would be in violation of these provisions and the
counterpartiestotheswapinstrumentscouldrequestimmediatepaymentordemandimmediateand
ongoingfullovernightcollateralizationoninterestrateswapinstrumentsinnetliabilitypositions.
13. RETIREMENTPLANS
TheSystemmaintainsvariousemployeeretirementbenefitplansavailabletoqualifyingemployeesand
retirees.
TheCondellHealthNetworkRetirementPlan("CondellPlan")wasfrozeneffectiveJanuary1,2008to
newparticipantsandparticipantsceasedtoaccrueadditionalpensionbenefits.Duringtheyearsended
December 31, 2020 and 2019, $3,000 and no contributions, respectively, were made to the Condell
Plan.
TheAuroraHealthCare,Inc.PensionPlan("AuroraPlan")wasfrozenonDecember31,2012.During
theyearsendedDecember31,2020 and2019,nocontributionsweremadetotheAuroraPlan.
In June 2019, the System approved a plan to freeze the Advocate defined benefit pension plan
("AdvocatePlan")thatcoveredsubstantiallyallofAdvocate'semployees.EffectiveDecember31,2019,
theAdvocatePlanwasclosedtonewparticipantsandparticipantsceasedaccruingadditionalpension
benefits.TheAdvocatePlanwas remeasuredasofJune30,2019andacurtailment gainof$72was
recorded in nonoperating income (loss), net in the accompanying consolidated statements of
operations and changes in net assets as of December 31, 2019. In addition, $86,396 of previously
unrecognizednetactuariallosswasrecognizedinnetassetswithoutdonorrestrictionsasacomponent
of pension-related changes other than net periodic pension cost at December 31, 2019. The
accompanying consolidated balance sheets contain an other noncurrent liability related to the
AdvocatePlantotaling$134,325and$173,939atDecember31,2020and2019,respectively.During
theyearsendedDecember31,2020and2019,$40,000and$22,000,respectively,incashcontributions
weremadetotheAdvocatePlan.
InSeptember2020,theSystemtransferredbenefitobligationsforcertainparticipantsoftheAdvocate
Plan, Condell Plan and Aurora Plan through the purchase of annuity contracts. As a result of this
transaction,allthreePlanswereremeasuredasofSeptember30,2020andacombinedsettlementloss
of$119,658wasrecordedinthenonoperatingincome(loss)sectionintheaccompanyingconsolidated
statementsofoperationsandchangesinnetassetsasofDecember31,2020.
OnDecember31,2020,theCondellPlanliabilitiesandassetsweremergedintotheAuroraPlan.There
wasanothernoncurrentliabilityrelatedtotheAuroraPlanof$66,494and$83,321atDecember31,
2020 and 2019, respectively. There was an other noncurrent liability related to the Condell Plan of
$1,824atDecember31,2019.
32
Asummaryofchangesintheplanassets,projectedbenefitobligationandtheresultingfundedstatus
fortheyearendedDecember31,2020isasfollows:
Advocate Condell Aurora Total
Changeinplanassets:
Planassetsatfairvalueatbeginningofperiod $ 1,011,800 $ 64,211 $ 1,588,504 $ 2,664,515
Actualreturnonplanassets 28,898 10,975 212,412 252,285
Employercontributions 40,000 3,000 — 43,000
Benefitspaid (128,110) (16,950) (412,564) (557,624)
EffectofPlanmerger — (61,236) 61,236 —
Planassetsatfairvalueatendofperiod $ 952,588 $ — $ 1,449,588 $ 2,402,176
Changeinprojectedbenefitobligation:
Projectedbenefitobligationatbeginningofperiod $ 1,185,739 $ 66,035 $ 1,671,825 $ 2,923,599
Interestcost 34,835 1,995 51,860 88,690
Actuarialloss (5,551) 8,543 145,338 148,330
Benefitspaid (128,110) (16,950) (412,564) (557,624)
EffectofPlanmerger — (59,623) 59,623 —
Projectedbenefitobligationatendofperiod $ 1,086,913 $ — $ 1,516,082 $ 2,602,995
Planassetslessthanprojectedbenefitobligation $ (134,325) $ — $ (66,494) $ (200,819)
Accumulatedbenefitobligationatendofperiod $ 1,086,913 $ — $ 1,516,082 $ 2,602,995
Asummaryofchangesintheplanassets,projectedbenefitobligationandtheresultingfundedstatus
fortheyearendedDecember31,2019isasfollows:
Advocate Condell Aurora Total
Changeinplanassets:
Planassetsatfairvalueatbeginningofperiod $ 929,365 $ 58,230 $ 1,327,366 $ 2,314,961
Actualreturnonplanassets 117,288 10,604 308,509 436,401
Employercontributions 22,000 — 10,000 32,000
Benefitspaid (56,853) (4,623) (57,371) (118,847)
Planassetsatfairvalueatendofperiod $ 1,011,800 $ 64,211 $ 1,588,504 $ 2,664,515
Changeinprojectedbenefitobligation:
Projectedbenefitobligationatbeginningofperiod $ 974,935 $ 56,806 $ 1,432,345 $ 2,464,086
Servicecost 57,645 — — 57,645
Interestcost 38,384 2,327 62,649 103,360
Actuarialloss 258,024 11,525 234,202 503,751
Gainduetocurtailment (86,396) — — (86,396)
Benefitspaid (56,853) (4,623) (57,371) (118,847)
Projectedbenefitobligationatendofperiod $ 1,185,739 $ 66,035 $ 1,671,825 $ 2,923,599
Planassetslessthanprojectedbenefitobligation $ (173,939) $ (1,824) $ (83,321) $ (259,084)
Accumulatedbenefitobligationatendofperiod $ 1,185,739 $ 66,035 $ 1,671,825 $ 2,923,599
33
TheAdvocatePlanpaidlumpsumstotaling$75,349in2020.Theamountin2020wasgreaterthanthe
sum of the Advocate Plan’s service cost and interest cost, resulting in a settlement charge in the
amount of $5,455. The Condell Plan paid lump sums totaling $4,235 and $2,989 in 2020 and 2019,
respectively.Theamountin2020and2019wasgreaterthanthesumoftheCondellPlan’sservicecost
andinterestcost,resultinginasettlementchargeintheamountof$104and$642,respectively.The
AuroraPlanpaidlumpsumstotaling$5,400in2020.Theamountin2020wasgreaterthanthesumof
theAuroraPlan’sservicecostandinterestcost,resultinginasettlementchargeintheamountof$452.
Pension plan expense included in the accompanying consolidated statements of operations and
changesinnetassetsisasfollowsfortheyearendedDecember31,2020:
Advocate Condell Aurora Total
Interestcost $ 34,835 $ 1,995 $ 51,860 $ 88,690
Expectedreturnonplanassets (43,456) (1,473) (61,085) (106,014)
Amortizationof:
Actuarialloss 4,897 323 11,475 16,695
Priorservicecost — — 3 3
Settlement 33,561 1,932 90,175 125,668
Netpensionexpense $ 29,837 $ 2,777 $ 92,428 $ 125,042
Pensionplan expense (income) includedinthe accompanyingconsolidatedstatements of operations
andchangesinnetassetsisasfollowsfortheyearendedDecember31,2019:
Advocate Condell Aurora Total
Servicecost $ 57,645 $ — $ — $ 57,645
Interestcost 38,384 2,327 62,649 103,360
Expectedreturnonplanassets (55,543) (2,413) (76,183) (134,139)
Amortizationof:
Actuarialloss 3,634 108 7,631 11,373
Priorservicecost (72) — 3 (69)
Settlement/curtailment (72) 642 — 570
Netpensionexpense(income) $ 43,976 $ 664 $ (5,900) $ 38,740
Thecomponentsofnetperiodicbenefitcosts,otherthantheservicecostcomponent,areincludedin
othernonoperating(loss)income,netintheaccompanyingconsolidatedstatementsofoperationsand
changesinnetassets.
Thenetchangerecognizedinnetassetswithoutdonorrestrictionsasacomponentofpension-related
changesotherthannetperiodicpensioncostwasasfollowsfortheyearendedDecember31,2020:
Advocate Condell Aurora Total
Netchangerecognized $ 29,450 $ 3,214 $ 107,641 $ 140,305
Thenetchangerecognizedinnetassetswithoutdonorrestrictionsasacomponentofpension-related
changesotherthannetperiodicpensioncostwasasfollowsfortheyearendedDecember31,2019:
Advocate Condell Aurora Total
Netchangerecognized $ 106,393 $ 2,584 $ (5,758) $ 103,219
34
IncludedinnetassetswithoutdonorrestrictionsatDecember31,2020arethefollowingamountsthat
havenotyetbeenrecognizedinnetpensionexpense:
Advocate Aurora Total
Unrecognizedpriorcredit $ — $ 99 $ 99
Unrecognizedactuarialloss 275,718 357,902 633,620
$ 275,718 $ 358,001 $ 633,719
Theexpectedamortizationamounttobeincludedinthenetperiodicpensioncostin2021isasfollows:
Advocate Aurora Total
Netactuarialloss $ 4,593 $ 10,410 $ 15,003
Priorservice(credit)/cost — 3 3
$ 4,593 $ 10,413 $ 15,006
Expectedemployeebenefitpaymentstobepaidfromthepensionplansareasfollows:
Advocate Aurora Total
2021 $ 60,586 $ 46,832 $ 107,418
2022 61,578 52,219 113,797
2023 62,241 55,154 117,395
2024 61,506 58,191 119,697
2025 61,336 61,722 123,058
2026-2030 294,108 345,472 639,580
Total $ 601,355 $ 619,590 $ 1,220,945
Expectedcontributionstothepensionplansareasfollows:
Advocate Aurora Total
2021 $ 30,000 $ — $ 30,000
Employercontributionswerepaidfromemployerassets.Noplanassetsareexpectedtobereturnedto
theemployer.AllbenefitspaidundertheAdvocatePlan,CondellPlanandAuroraPlan(collectively
referredtoasthe"Plans")werepaidfromthePlans’assets.
The System's asset allocation and investment strategies are designed to earn returns on plan assets
consistent with a reasonable and prudent level of risk. Investments are diversified across classes,
economic sectors and manager style to minimize the risk of loss. The System utilizes investment
managersspecializingineachassetcategoryand,whereappropriate,providestheinvestmentmanager
with specific guidelines that include allowable and/or prohibited investment types. The System
regularlymonitorsmanagerperformanceandcompliancewithinvestmentguidelines.

35
TheSystem'stargetandactualpensionassetallocationsforthePlansareasfollows:
December31,2020 December31,2019
AssetCategory-AdvocatePlan Target Actual Target Actual
De-riskingportfolio 75% 67% 75% 58%
Domesticandinternationalequitysecurities 21 22 21 20
Alternativeinvestments 2 7 2 13
Cashandfixed-incomesecurities 2 4 2 9
100% 100% 100% 100%
December31,2020 December31,2019
AssetCategory-CondellPlan Target Actual Target Actual
De-riskingportfolio 90% 90% 75% 85%
Domesticandinternationalequitysecurities 4 4 11 6
Cashandfixed-incomesecurities 6 6 14 9
100% 100% 100% 100%
December31,2020 December31,2019
AssetCategory-AuroraPlan Target Actual Target Actual
De-riskingportfolio 85% 82% 75% 73%
Domesticandinternationalequitysecurities 12 15 21 22
Realestate 1 1 2 2
Cashandfixed-incomesecurities 2 2 2 3
100% 100% 100% 100%
The de-risking portfolio is comprised of cash and fixed-income instruments designed to hedge Plan
liabilities.
AtDecember31,2020,theAdvocatePlanhadcommitmentstofundalternativeinvestments,including
recallabledistributionsof$22,369overthenextfiveyears.
Inthenormalcourseofoperationsandwithinestablishedinvestmentpolicyguidelines,thePlansmay
enter into various exchange-traded and over-the-counter derivative contracts for trading purposes,
includingfutures,optionsandforwardcontracts.Theseinstrumentsareusedprimarilytomaintainthe
Plans'strategicassetallocation.TheseinstrumentsrequirethePlanstodepositcashcollateralwiththe
brokerorcustodian.
DerivativecontractinformationatDecember31,2020areasfollows:
Advocate Aurora Total
Cashandsecuritycollateralprovided $ 16,922 $ 10,455 $ 27,377
Notionalvalue-longposition $ — $ 339,520 $ 339,520
Notionalvalue-shortposition $ (527,126) $ (31,680) $ (558,806)
Byusingderivativefinancialinstruments,theSystemexposesitselftocreditriskandmarketrisk.Credit
riskisthefailureofthecounterpartytoperformunderthetermsofthederivativecontracts.Whenthe
fairvalueofaderivativecontractispositive,thecounterpartyowestheSystem,whichcreatescreditrisk
for the System. When the fair value of a derivative contract is negative, the System owes the
counterparty and, therefore, it does not possess credit risk. The System minimizes the credit risk in
derivativeinstrumentsbyenteringintotransactionsthatmayrequirethecounterpartytopostcollateral
forthebenefit of the Systembasedonthecreditrating of thecounterpartyandthefairvalue of the
derivativecontract.Marketriskistheadverseeffectonthevalueofafinancialinstrumentthatresults
fromachangeintheunderlyingreferencesecurity.Themarketriskassociatedwithmarketchangesis
36
managedbyestablishingandmonitoringparametersthatlimitthetypesanddegreeofmarketriskthat
maybeundertaken.
ReceivablesandpayablesforinvestmenttradesnotsettledarepresentedwithinAdvocatePlanassets.
Unsettledsalesresultedinreceivablesduefrombrokersof$3,313and$45,871atDecember31,2020
and 2019, respectively. Unsettled purchases resulted in payables of $10,846 and $45,351 at
December31,2020and2019,respectively.
Receivables and payables for investment trades not settled are presented within Aurora Plan assets.
Unsettledsalesresultedinreceivablesduefrombrokersof$10,108and$12atDecember31,2020and
2019, respectively. Unsettled purchases resulted in payables of $19,198 and $2,987 at December 31,
2020and2019,respectively.
FairvaluemethodologiesforLevel1andLevel2areconsistentwiththeinputsdescribedinNote7.FAIR
VALUE. Real estate commingled funds for which an active market exists are included in Level 2. The
Systemoptedtousethenetassetvaluepershare,oritsequivalent,asapracticalexpedientforthefair
value of the Plans’ interest in hedge funds, private equity limited partnerships and real estate
commingledfunds.Thereisinherentuncertaintyinsuchvaluationsandtheestimatedfairvaluesmay
differ from the values that would havebeen used hada ready marketfor these investments existed.
Privateequitylimitedpartnershipsandrealestatecommingledfundstypicallyhavefinitelivesranging
fromfivetotenyears,attheendofwhichallinvestedcapitalisreturned.Forhedgefunds,thetypical
lockup period is one year, after whichinvested capital can be redeemed on a quarterly basiswith at
least30days’butnomorethan90days’notice.ThePlans’investmentassetsareexposedtothesame
kindsandlevelsofriskasdescribedinNote7.FAIRVALUE.
Thefollowingare the Plans’ financial instruments at December 31, 2020, measured at fair value ona
recurringbasisbythevaluationhierarchydefinedinNote7.FAIRVALUE:
Description
December31,
2020
QuotedPrices
inActive
Marketsfor
IdenticalAssets
(Level1)
Other
Significant
Observable
Inputs
(Level2)
Significant
Unobservable
Inputs
(Level3)
Cashandshort-terminvestments $ 58,006 $ 32,876 $ 25,130 $ —
Corporatebondsandotherdebtsecurities 985,564 — 985,564 —
UnitedStatesgovernmentobligations 646,797 — 646,797 —
Bondandotherdebtsecurityfunds 128,142 — 128,142 —
Equitysecurities 22,280 22,280 — —
Equityfunds 473,728 11,648 462,080 —
Realestatefunds 17,855 — 17,855 —
2,332,372 $ 66,804 $ 2,265,568 $—
Investmentsatnetassetvalue
Alternativeinvestments 69,804
Totalinvestments $ 2,402,176
37
ThefollowingarethePlans’financialinstrumentsatDecember31,2019,measuredatfairvalueona
recurringbasisbythevaluationhierarchydefinedinNote7.FAIRVALUE:
Description
December31,
2019
QuotedPrices
inActive
Marketsfor
IdenticalAssets
(Level1)
Other
Significant
Observable
Inputs
(Level2)
Significant
Unobservable
Inputs
(Level3)
Cashandshort-terminvestments $ 137,453 $ 32,415 $ 105,038 $ —
Corporatebondsandotherdebtsecurities 1,045,015 — 1,045,015 —
UnitedStatesgovernmentobligations 644,077 — 644,077 —
Bondandotherdebtsecurityfunds 126,516 — 126,516 —
Equitysecurities 67,724 67,724 — —
Equityfunds 482,682 11,841 470,841 —
Realestatefunds 17,604 — 17,604 —
2,521,071 $ 111,980 $ 2,409,091 $ —
Investmentsatnetassetvalue
Alternativeinvestments 143,444
Total $ 2,664,515
Assumptionsusedtodeterminebenefitobligationsareasfollows:
December31,2020 December31,2019
Discountrate-AdvocatePlan 2.49% 3.23%
Discountrate-CondellPlan —% 3.37%
Discountrate-AuroraPlan 2.79% 3.37%
Assumedrateofreturnonassets-AdvocatePlan 4.40% 4.50%
Assumedrateofreturnonassets-CondellPlan —% 2.50%
Assumedrateofreturnonassets-AuroraPlan 3.40% 4.50%
Assumptionsusedtodeterminenetpensionexpenseareasfollows:
December31,2020 December31,2019
Discountrate-AdvocateandCondellPlans 3.23% 4.38%
Discountrate-CondellPlans 3.37% 4.38%
Discountrate-AuroraPlan 3.37% 4.48%
Assumedrateofreturnonassets-AdvocatePlan 4.50% 7.00%
Assumedrateofreturnonassets-CondellPlan 2.50% 4.25%
Assumedrateofreturnonassets-AuroraPlan 4.50% 5.50%
The assumed rateof return oneach of thePlan's assets isbased on historicaland projected ratesof
returnforassetclassesinwhichtheportfolioisinvested.AstheAdvocatePlanwasfrozenonDecember
31, 2019, the assumed rate of return and the target asset allocations were adjusted and actual
allocationsarebeingadjustedtomorecloselyalignwiththenewtargetallocations.
The 2020 mortality assumption for the Plans was the amounts-weighted aggregate rates from the
Pri-2012mortality study,withwhite-collaradjustments projected generationallyfrom2012 with Scale
MP-2020.The2019mortalityassumptionforthePlanswastheamounts-weightedaggregateratesfrom
the Pri-2012 mortality study, with white-collar adjustments projected generationally from 2012 with
ScaleMP-2019.
38
In addition to these Plans, the System sponsors defined contribution plans for its employees. As of
January1,2020,threeplansmergedintooneexistingplan,theAdvocateHealthCareNetwork401(k)
plan.AtthistimetheAdvocateHealthCareNetwork401(k)planwasrestatedandbecameknownas
the Advocate Aurora Health 401(k) plan ("AAH 401(k)"). Effective January 1, 2020, the AAH 401(k)
contribution plan was enhanced to add an annual contribution component to the employer match.
Expense related to these plans, which are included in salaries, wages and benefits expense in the
consolidatedstatementsofoperationsandchangesinnetassets,were$300,971and$207,194forthe
yearsendedDecember31,2020and2019,respectively.
14. NETASSETSWITHDONORRESTRICTIONS
Netassetswithdonorrestrictionsareavailableforthefollowingpurposes:
December31,2020 December31,2019
Purchasesofpropertyandequipment $ 17,504 $ 22,763
Medicaleducationandotherhealthcareprograms 215,176 219,342
$ 232,680 $ 242,105
15. FUNCTIONALOPERATINGEXPENSES
Operating expenses directly attributable to a specific functional area of the System are reported as
expenses of those functional areas. Expenses other than interest expense are directly allocated to
functionaldepartmentsatthetimetheyareincurred.Interestexpensethatrelatestodebtfinancingis
allocatedbasedontheuseoftherelatedfunds.Generalandadministrativeexpensesprimarilyinclude
legal,finance, purchasing and humanresources. Health care servicesrequirethe benefit of andthe
expenseofgeneralandadministrativeservices;therefore, thesecostsarefurtherallocated tohealth
careservices.Amajorityoffundraisingcostsarereportedasothernonoperating(loss)income,netin
theaccompanyingconsolidatedstatementsofoperationsandchangesinnetassets.
FunctionaloperatingexpensesfortheyearendedDecember31,2020areasfollows:
Healthcareservices
Generaland
administrative Consolidated
Salaries,wagesandbenefits $ 6,789,955 $ 659,016 $ 7,448,971
Supplies,purchasedservicesandother 3,701,429 675,846 4,377,275
Contractedmedicalservices 420,587 — 420,587
Depreciationandamortization 467,340 92,923 560,263
Interest 112,126 — 112,126
Totaloperatingexpenses 11,491,437 1,427,785 12,919,222
Allocationofgeneralandadministrative 1,427,785 (1,427,785) —
Totaloperatingexpensesafterallocation $ 12,919,222 $ — $ 12,919,222
39
FunctionaloperatingexpensesfortheyearendedDecember31,2019areasfollows:
Healthcareservices
Generaland
administrative Consolidated
Salaries,wagesandbenefits $ 6,437,864 $ 619,726 $ 7,057,590
Supplies,purchasedservicesandother 3,526,902 519,823 4,046,725
Contractedmedicalservices 543,716 — 543,716
Depreciationandamortization 478,765 91,243 570,008
Interest 106,314 — 106,314
Totaloperatingexpenses 11,093,561 1,230,792 12,324,353
Allocationofgeneralandadministrative 1,230,792 (1,230,792) —
Totaloperatingexpensesafterallocation $ 12,324,353 $ — $ 12,324,353
16. LIQUIDITY
The System’s financial assets available within one year of the consolidated balance sheets date for
generalexpendituresareasfollows:
December31,2020 December31,2019
Currentassets
Cashandcashequivalents $ 959,878 $ 449,712
Assetslimitedastouse 125,053 106,529
Patientaccountsreceivable 1,570,738 1,605,607
Third-partypayorsreceivables 16,933 15,331
Collateralproceedsundersecuritieslendingprogram 19,789 18,284
Totalcurrentassets 2,692,391 2,195,463
Assetslimitedastouse
Internallydesignatedforcapitalandother 10,291,819 8,345,172
Heldforself-insurance 658,466 645,697
Donorrestricted 137,980 132,024
Investmentsundersecuritieslendingprogram 18,945 17,672
Totalassetslimitedastouse 11,107,210 9,140,565
Totalfinancialassets $ 13,799,601 $ 11,336,028
Less
Amountsunavailableforgeneralexpenditures
Alternativeinvestments (2,110,330) (1,791,717)
Totalamountsunavailableforgeneralexpenditure (2,110,330) (1,791,717)
Amountsunavailabletomanagementwithoutapproval
Heldforself-insurance (783,519) (752,226)
Donorrestricted (137,980) (132,024)
Investmentsundersecuritieslendingprogram (18,945) (17,672)
Totalamountsunavailabletomanagementwithoutapproval (940,444) (901,922)
Totalfinancialassetsavailabletomanagementforgeneralexpenditurewithinoneyear $ 10,748,827 $ 8,642,389
17. COMMITMENTSANDCONTINGENCIES
Aurora West Allis Medical Center has the right to operate the hospital under the terms of a lease
agreementwiththeCityofWestAllis(the"City").Inaccordancewiththeleaseagreement,theCityhas
title to all assets and any subsequent additions (with the exception of certain equipment used by
Auroraforlaboratoryservices).AuroraWestAllisMedicalCenterhasanexclusiverighttotheuseof
40
theassetsandtheobligationtomaintain and replace them. The historical cost to theSystemofthe
leasedfacilitiesisincludedwithintheSystem’spropertyandequipment,net.Theagreementprovides
for annual payments of less than $100 in lieu of annual lease payments and includes payment
escalationseachsubsequentyear.Theleaseexpiresin2063.
The System is committed to constructing additions and renovations to its medical facilities that are
expectedtobe completed in futureyears.Theestimatedcostof these commitments is$783,071,of
which$565,517hasbeenincurredasofDecember31,2020.
TheSystementeredintoagreementsforinformationtechnologyservicesprovidedbythirdparties.The
maximum amount of future payments that the System could be required to make under these
agreementsisapproximately$200,000overthenexttenyearsandapproximately$30,376isincluded
inaccounts payableandother accruedliabilitiesintheaccompanyingconsolidatedbalancesheetsat
December 31, 2020. The System has also entered into various other agreements. The future
commitmentsundertheseagreementsare$26,109overthenextfiveyears.
18. GENERALANDPROFESSIONALLIABILITYRISKS
TheSystemisself-insuredforsubstantiallyallgeneralandprofessionalliabilityrisks.Theself-insurance
programscombinevariouslevelsofself-insuredretentionwithexcesscommercialinsurancecoverage.
Inaddition,variousumbrellainsurancepolicieshavebeenpurchasedtoprovidecoverageinexcessof
the self-insured limits. Revocable trust funds, administered by a trustee and captive insurance
companies, have been established for the self-insurance programs. Actuarial consultants have been
retainedtodeterminetheestimatedcostofclaims,aswellastodeterminetheamounttofundintothe
irrevocabletrustandcaptiveinsurancecompanies.
The System's hospitals, clinics, surgery centers, physicians and certified registered nurse anesthetist
providers that provide health care in Wisconsin are qualified health care providers that are fully
covered for losses in excess of statutory limits through mandatory participation in the State of
WisconsinInjuredPatientsandFamiliesCompensationFund.
The estimated cost of claims is actuarially determined based on past experience, as well as other
considerations, including the nature of each claim or incident and relevant trend factors. Accrued
insuranceliabilitiesandcontributionstothetrustweredeterminedusingadiscountrateof3.00%asof
December31,2020and2019.Totalaccruedinsuranceliabilitieswouldhavebeen$77,007and$71,439
greateratDecember31,2020and2019,respectively,hadtheseliabilitiesnotbeendiscounted.
TheSystementitiesaredefendantsincertainlitigationrelatedtoprofessionalandgeneralliabilityrisks,
and other matters. Although the outcome of the litigations cannot be determined with certainty,
management believes, after consultation with legal counsel, that the ultimate resolution of the
litigationswillnothaveamaterialadverseeffectontheSystem’soperationsorfinancialcondition.
19. LEGAL,REGULATORYANDOTHERCONTINGENCIES
Laws and regulations governing the Medicare and Medicaid programs are extremely complex and
subjecttointerpretation.Duringthelastfewyears,duetonationwideinvestigationsbygovernmental
agencies, various health care organizations have received requests for information and notices
regarding alleged noncompliance with those laws and regulations, which, in some instances, have
resultedinorganizations entering intosignificantsettlementagreements. 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, exclusion from the Medicare and Medicaid
41
programsandrevocationoffederalorstatetax-exemptstatus.Moreover,theSystemexpectsthatthe
levelofreviewandaudittowhichitandotherhealthcareprovidersaresubjectwillincrease.
Various federal and state agencies have initiated investigations, which are in various stages of
discovery,relatingtoreimbursement,billingpracticesandothermattersoftheSystem.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ontheSystem.Tofostercompliancewithapplicablelawsandregulations,theSystemmaintainsa
complianceprogramdesignedtodetectandcorrectpotentialviolationsoflawsandregulationsrelated
toitsprograms.
20. INCOMETAXESANDTAXSTATUS
The subsidiaries of the System are primarily tax-exempt organizations under Internal Revenue Code
Section501(c)(3)andtheirrelatedincomeisexemptfromfederalincometax.Accordingly,noincome
taxes are recorded for the majority of the income in the accompanying consolidated financial
statements for these entities. Unrelated business income is generated by certain of these entities
throughtheprovisionofservicesorotheractivitiesnotdirectlyrelatedtotheprovisionofpatientcare.
At December 31, 2020, the System had $87,382 of federal and $111,826 of state net operating loss
carryforwardswithunutilizedamountsofstatenetoperatinglosscarryforwardsexpiringbetween2020
and2037.AtDecember31,2019,theSystemhad$52,133offederaland$74,412ofstatenetoperating
losscarryforwards,withunutilizedamountsofstatenetoperatinglosscarryforwardsexpiringbetween
2019and2037.AsaresultoftheTaxCutsandJobsActof2017,netoperatinglossesgeneratedafter
2017donotexpireforfederalpurposes.Ofthe$87,382offederalnetoperatinglosscarryforwardsat
December31,2020,$76,777wasgeneratedafter2017.
The System calculated income taxes for its taxable subsidiaries. Taxable income differs from pretax
book income primarily due to certain income and deductions for tax purposes being recorded in the
consolidated financial statements in different periods. Deferred income tax assets and liabilities are
recorded for the tax effect of these differences using enacted tax rates for the years in which the
differencesareexpectedtoreverse.
Inassessingtherealizabilityofdeferredtaxassets,managementconsiderswhetheritismorelikelythan
notthatsomeportionorallofthedeferredtaxassetswillnotberealized.Theultimaterealizationof
deferredtaxassetsisdependentonthegenerationoffuturetaxableincomeduringtheperiodsinwhich
thosetemporarydifferencesbecomedeductible.
TheSystemhaddeferredtaxassetsof$46,711and$31,692,including$27,161and$16,708relatedto
netoperatinglosscarryforwards,asofDecember31,2020and2019,respectively.Thesedeferredtax
assetswerepartiallyoffset by valuation allowancesof$21,620and$16,328,respectively,which were
recordedduetotheuncertaintyregardingtheuseofthedeferredtaxassets.
Provisions (credits) for federal, state and deferred income taxes are included in other nonoperating
income,netintheconsolidatedstatementsofoperationsandchangesinnetassetsasfollows:
YearEnded
December31,2020
YearEnded
December31,2019
Federal $ 5,677 $ (891)
State 2,100 (328)
Deferred (9,311) 10,273
$ (1,534) $ 9,054
42
21.ACQUISITIONOFBAYAREAMEDICALCENTER
TheSystemhada49%interestinBAMCthatwasaccountedforundertheequitymethodofaccounting
untiltheremainingequity interest was purchased on April 1, 2019. BAMCisa99-bedgeneralacute
carehospitallocatedinMarinette,Wisconsin.
Atthetimeoftheacquisition,BAMCandtheSystemowneda73%and27%interest,respectively,in
ABAMG.ABAMGprovidesinpatient,outpatientandotherprofessionalmedicalservicesinMarinette,
Wisconsinanditssurroundingcommunities.AspartoftheacquisitionofBAMC,theSystemnowowns
100%ofABAMGanditsfinancialresultsareincludedintheconsolidatedfinancialstatementsofthe
System.
Theacquisitionwillimprovetheavailability,scopeandaccesstohealthcareinthecommunitiesserved
by BAMC. As of April 1, 2019, BAMC and ABAMG are fully consolidated within the accompanying
consolidatedfinancialstatementsoftheSystem.
In conjunction with the BAMC transaction, the System contributed $25,000 to a newly formed
independentfoundation.Thisinterestinthatfoundationisreflectedininvestmentsinunconsolidated
entitiesintheaccompanyingconsolidatedbalancesheets.Underthetermsofthedefinitiveagreement
between the System and BAMC, the use of the $25,000 contribution is designated to support the
operationsandcapitalneedsofBAMCand/orABAMG.
AstheSystempreviouslyhadaninterestinBAMC,thistransactionwasaccountedforasanacquisition
achievedinstages.TheSystemremeasureditspreviouslyheldequityinterestinBAMCtofairmarket
valueresultinginagainof$44,000,whichwasrecordedwithinnonoperating(loss)income,netinthe
consolidatedstatementsofoperationsandchangesinnetassetsasofDecember31,2019.TheSystem
thenrecordedits100%interestinBAMCatfairmarketvalue,resultinginaninherentcontributionof
$37,736,whichwasrecordedwithinnonoperating(loss)income,netintheconsolidatedstatementsof
operationsandchangesinnetassetsasofDecember31,2019.
ThefairvalueofassetsandliabilitiesofBAMCacquisitionatApril1,2019consistedofthefollowing:
Currentassets $ 37,239
Assetslimitedastouse 18,795
Propertyandequipment 157,206
Othernoncurrentassets 7,879
Otherintangibleassets 460
Totalassets $ 221,579
Currentliabilities 19,812
Long-termdebt,lesscurrentportion 78,959
Othernoncurrentliabilities 12,080
Totalliabilities 110,851
Netassetswithdonorrestrictions 792
Netassetswithoutdonorrestrictions 109,936
Totalliabilitiesandnetassets $ 221,579
Total2019revenueandoperatinglossfromthedateofacquisitionforBAMCof$109,309and$(9,599),
respectively were included in the consolidated statements of operations and changes in net assets.
The2019BAMCrelatedchangesinnetassetswithoutdonorrestrictionsof$(13,074)fromthedateof
acquisitionisincludedintheconsolidatedbalancesheets.
43
The proforma financial informationpresented below were preparedon a consolidated basisutilizing
theaccountingrecordsoftheSystemandBAMCasiftheacquisitionhadoccurredfortheentiretyof
theperiod presented. The proforma informationpresentedhavebeen adjusted to eliminate activity
between the System and BAMC. Management believes the assumptions underlying the proforma
financialinformationpresented,includingtheassumptionsregardingtheeliminationofintercompany
activity are reasonable. Nevertheless, the proforma information may not reflect the results of
operationshadBAMCbeenacombinedcompanyduringtheperiodspresentedandisnotintendedto
projecttheSystem'sresultsofoperationsforanyfutureperiods.
YearEnded
December31,2019
Totalrevenue $ 12,833,303
Operatingincome 480,701
Revenuesinexcessofexpenses 1,546,032
22. SUBSEQUENTEVENTS
TheSystemevaluatedeventsandtransactions subsequenttoDecember31, 2020throughMarch22,
2021,thedateofconsolidatedfinancialstatementissuance.
****
44
SupplementaryInformation
45
A member firm of Ernst & Young Global Limited
Ernst & Young LLP
155 North Wacker Drive
Chicago, IL 60606-1787
Tel: +1 312 879 2000
Fax: +1 312 879 4000
ey.com
Report of Independent Auditors on Supplementary Information
The Board of Directors
Advocate Aurora Health, Inc.
Our audits were conducted for the purpose of forming an opinion on the consolidated financial
statements as a whole. The accompanying details of consolidated balance sheets and details of
consolidated statements of operations and changes in net assets are presented for purposes of
additional analysis and are 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 consolidated 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.
ey
March 22, 2021
46
ADVOCATEAURORAHEALTH,INC.
CONSOLIDATINGBALANCESHEET
December31,2020
(inthousands)
CreditGroup
Noncredit
Group Eliminations Consolidated
Assets
Currentassets
Cashandcashequivalents $ 1,376,822 $ (416,944) $ — $ 959,878
Assetslimitedastouse 114,886 10,167 — 125,053
Patientaccountsreceivable 1,383,745 186,993 — 1,570,738
Othercurrentassets 606,441 116,821 (36,576) 686,686
Third-partypayorsreceivables 15,969 964 — 16,933
Receivablefromsubsidiaries 296,800 358,734 (655,534) —
Collateralproceedsundersecuritieslendingprogram 19,789 — — 19,789
Totalcurrentassets 3,814,452 256,735 (692,110) 3,379,077
Assetslimitedastouse 11,017,677 89,533 — 11,107,210
Notereceivablefromsubsidiaries 137,772 — (137,772) —
Propertyandequipment,net 5,410,542 453,001 (11,566) 5,851,977
Otherassets
Reinsurancereceivable 50,514 — — 50,514
Goodwillandintangibleassets,net 45,833 38,072 (1,153) 82,752
Investmentinsubsidiaries (87,424) — 87,424 —
Investmentsinunconsolidatedentities 508,864 (7,915) (290,646) 210,303
Operatingleaseright-of-useassets 272,655 37,023 — 309,678
Othernoncurrentassets 745,834 37,095 (324,797) 458,132
Totalotherassets 1,536,276 104,275 (529,172) 1,111,379
Totalassets $ 21,916,719 $ 903,544 $ (1,370,620) $ 21,449,643
47
ADVOCATEAURORAHEALTH,INC.
CONSOLIDATINGBALANCESHEET
December31,2020
(inthousands)
CreditGroup
Noncredit
Group Eliminations Consolidated
Currentliabilities
Long-termdebtandcommercialpaper,currentportion $ 100,573 $ 21,640 $ (20,217) $ 101,996
Long-termdebtsubjecttoshort-termfinancingarrangements 119,660 — — 119,660
Operatingleaseliabilities,currentportion 70,720 9,214 — 79,934
Accruedsalariesandemployeebenefits 1,101,630 106,042 — 1,207,672
Accountspayableandaccruedliabilities 1,213,268 148,927 (20,576) 1,341,619
Third-partypayorspayables 316,220 2,581 — 318,801
Accruedinsuranceandclaimscosts,currentportion 119,334 11,057 — 130,391
Accountspayabletosubsidiaries 383,985 270,786 (654,771) —
Collateralundersecuritieslendingprogram 19,789 — — 19,789
Totalcurrentliabilities 3,445,179 570,247 (695,564) 3,319,862
Noncurrentliabilities
Long-termdebt,lesscurrentportion 3,305,614 86,035 (81,248) 3,310,401
Operatingleaseliabilities,lesscurrentportion 238,269 30,306 — 268,575
Accruedinsuranceandclaimscost,lesscurrentportion 558,237 35,502 — 593,739
Accruedlossessubjecttoinsurancerecovery 50,514 — — 50,514
Obligationsunderswapagreements 118,620 — — 118,620
Duetosubsidiaries 287,566 (149,794) (137,772) —
Othernoncurrentliabilities 1,344,466 44,373 (951) 1,387,888
Totalnoncurrentliabilities 5,903,286 46,422 (219,971) 5,729,737
Totalliabilities 9,348,465 616,669 (915,535) 9,049,599
Netassets
Withoutdonorrestrictions
Controllinginterest 12,031,276 276,012 (294,569) 12,012,719
Noncontrollinginterestinsubsidiaries 152,922 1,846 (123) 154,645
Totalnetassetswithoutdonorrestrictions 12,184,198 277,858 (294,692) 12,167,364
Withdonorrestrictions 384,056 96,564 (247,940) 232,680
Commonstock — 1,862 (1,862) —
Additionalpaid-incapital — 43,581 (43,581) —
Retained(deficit)earnings/partnershiplosses — (132,990) 132,990 —
Totalnetassets 12,568,254 286,875 (455,085) 12,400,044
Totalliabilitiesandnetassets $ 21,916,719 $ 903,544 $ (1,370,620) $ 21,449,643
48
ADVOCATEAURORAHEALTH,INC.
CONSOLIDATINGSTATEMENTOFOPERATIONS
YearEndedDecember31,2020
(inthousands)
CreditGroup
Noncredit
Group Eliminations Consolidated
Revenue
Patientservicerevenue $ 9,186,603 $ 1,343,867 $ (314,084) $ 10,216,386
Capitationrevenue 510,941 620,662 (10,175) 1,121,428
Otherrevenue 1,374,734 799,173 (379,532) 1,794,375
Totalrevenue 11,072,278 2,763,702 (703,791) 13,132,189
Expenses
Salaries,wagesandbenefits 6,494,245 971,195 (37,537) 7,427,903
Supplies,purchasedservicesandother 3,427,287 982,348 (209,432) 4,200,203
Contractedmedicalservices 288,186 599,375 (385,141) 502,420
Depreciationandamortization 513,718 48,794 (2,297) 560,215
Interest 107,343 12,455 (7,672) 112,126
Totalexpenses 10,830,779 2,614,167 (642,079) 12,802,867
Operatingincome(loss)beforenonrecurringexpenses 241,499 149,535 (61,712) 329,322
Nonrecurringexpenses 116,355 — — 116,355
Operatingincome(loss) 125,144 149,535 (61,712) 212,967
Nonoperatingincome(loss)
Investmentincome,net 568,663 24,620 — 593,283
Lossondebtrefinancing (12,244) — — (12,244)
Changeinfairvalueofinterestrateswaps (27,280) — — (27,280)
Pensionsettlementloss (119,658) — — (119,658)
Othernonoperating(loss)income,net (38,567) 2,793 (3,169) (38,943)
Totalnonoperatingincome(loss),net 370,914 27,413 (3,169) 395,158
Revenueinexcessof(lessthan)expenses 496,058 176,948 (64,881) 608,125
Lessnoncontrollinginterest — (607) (49,486) (50,093)
Revenueinexcessof(lessthan)expenses-attributabletocontrollinginterest $ 496,058 $ 176,341 $ (114,367) $ 558,032
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NotestoSupplementaryInformation
1.CreditGroup
Thesupplementaryfinancialinformation for the Credit Group is in accordance withtheSecondAmended
andRestatedMasterTrustIndenturedatedasofAugust1,2018betweenAdvocateAuroraHealth,Inc,the
otheraffiliatesidentifiedthereinastheMembersoftheObligatedGroup,theRestrictedAffiliates,andU.S.
BankNationalAssociation,asmastertrustee("theSystemMasterIndenture").
2.CreditGroupMembers
The Credit Group is comprised of the Obligated Group in combination with the Restricted Affiliates. The
Obligated Group includes Advocate Aurora Health, Inc.; Advocate Health Care Network; Advocate Health
and Hospitals Corporation; Advocate North Side Health Network; Advocate Condell Medical Center;
AdvocateSherman Hospital; AuroraHealthCare,Inc.; Aurora HealthCareMetro,Inc.; Aurora HealthCare
Southern Lakes, Inc.; AuroraHealth Care Central,Inc. d/b/a Aurora SheboyganMemorial Medical Center;
Aurora Medical Center of Washington County, Inc.; Aurora Health Care North, Inc. d/b/a Aurora Medical
Center Manitowoc County; Aurora Medical Center of Oshkosh, Inc.; Aurora Medical Group, Inc.; Aurora
Medical Center Grafton LLC; and Aurora Medical Center Bay Area, Inc. The Restricted Affiliates include
AdvocateCharitableFoundation;AdvocateInsuranceSPC;AdvocateHomeCare Products, Inc.; EHS Home
Health Care Services, Inc.; Evangelical Services Corporation, d/b/a Advocate Network Services, Inc.; High
Technology,Inc.;MeridianHospice;andWestAllisMemorialHospitalInc.d/b/aAuroraWestAllisMedical
Center. The Credit Group is with U.S. Bank National Association, as master trustee ("the System Master
Indenture").
50