Cleveland Clinic Health System Obligated Group - FMSbonds.com

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OFFERING CIRCULARRelating to$452,340,000STATE OF OHIO HOSPITAL REVENUE BONDS, SERIES 2008A(CLEVELAND CLINIC HEALTH SYSTEM OBLIGATED GROUP)INTRODUCTORY STATEMENTThe descriptions and summaries of various documents hereinafter set forth do not purport to becomprehensive or definitive, and reference is made to each document for the complete details of all terms andconditions. All statements herein regarding any such documents are qualified in their entirety by reference to suchdocuments. This Introductory Statement is intended only to serve as a brief description of the Offering Circular andis expressly qualified by reference to the Offering Circular as a whole, as well as the documents summarized ordescribed herein (all references to this Offering Circular include the cover page and appendices). All capitalizedterms used in this Offering Circular and not otherwise defined herein have the meanings set forth in “APPENDIXC — SUMMARY OF BASIC DOCUMENTS — Definitions of Certain Terms.” For more detailed descriptions ofthe matters summarized below, see the information set forth in the specific sections of the Offering Circular notedbelow.Purpose of this Offering CircularThe purpose of this Offering Circular is to set forth certain information in connection with the offering bythe State of Ohio (the “State”), acting by and through the Ohio Higher Educational Facility Commission, a bodyboth corporate and politic and an agency or instrumentality of the State (the “Commission”), of $452,340,000aggregate principal amount of the State’s Hospital Revenue Bonds, Series 2008A (Cleveland Clinic Health SystemObligated Group) (the “Series 2008A Bonds”), to finance, fund and refinance costs of acquiring, constructing,equipping and otherwise improving hospital facilities to be leased by the State, acting by and through theCommission (in such capacity, the “Lessor”), to The Cleveland Clinic Foundation, an Ohio nonprofit corporation(the “Cleveland Clinic”), as lessee (in such capacity, the “Lessee”), under a Lease dated as of September 1, 2008 (asamended and supplemented from time to time, the “State Financing Lease”), between the Lessor and the Lessee.The Series 2008A Bonds will be issued in accordance with the laws of the State, particularly Chapter 140,Ohio Revised Code (the “Act”), and a resolution duly adopted by the Commission. The Series 2008A Bonds will beissued pursuant to and in accordance with the provisions of the Bond Indenture dated as of September 1, 2008 (asamended and supplemented from time to time, the “Bond Indenture”), between the State, acting by and through theCommission, and The Huntington National Bank, Columbus, Ohio, as bond trustee (in such capacity, the “BondTrustee”). The Series 2008A Bonds will be special obligations of the State and will be payable solely from amountspayable by the Cleveland Clinic pursuant to the State Financing Lease, certain amounts held by the Bond Trusteefrom time to time in the Special Funds created under the Bond Indenture, and amounts payable by members of thecombined financing group (each an “Obligated Issuer” and, together, the “Obligated Group”) established under theAmended and Restated Master Trust Indenture dated as of April 1, 2003, as amended and supplemented from timeto time (the “Master Trust Indenture”), between the Obligated Group and The Huntington National Bank, as mastertrustee (in such capacity, the “Master Trustee”).The Obligated Issuers; Related EntitiesWhen the Series 2008A Bonds are issued, the Cleveland Clinic, Cleveland Clinic Health System – EastRegion (“CCHS-East Region”), Fairview Hospital (“Fairview”), Lutheran Hospital (“Lutheran”) and MarymountHospital, Inc. (“Marymount”), each an Ohio nonprofit corporation, and Cleveland Clinic Florida (a nonprofitcorporation) (“Florida Clinic”), a Florida nonprofit corporation, will be the only Obligated Issuers under the MasterTrust Indenture and, as such, each Obligated Issuer will be obligated, jointly and severally, to perform all obligationsof the Obligated Group or any member thereof under the Master Trust Indenture and to pay all amounts payable onpromissory notes issued under the Master Trust Indenture from time to time (collectively, “Master Notes”). AnObligated Issuer may withdraw from the Obligated Group and be relieved of its obligations under the Master Trust1
Page 1 and 2: NEW ISSUEBOOK ENTRY ONLYSee “RATI
Page 3: TABLE OF CONTENTSINTRODUCTORY STATE
Page 7 and 8: Security and Sources of Payment for
Page 9 and 10: Upon issuance of the Series 2008A B
Page 11 and 12: (ii) acquisition of magnetic resona
Page 13 and 14: $147,200,000 Term Bonds Due January
Page 15 and 16: that the redemption is conditional
Page 17 and 18: Use of Certain Terms in Other Secti
Page 19 and 20: County BondsThe Cleveland Clinic an
Page 21 and 22: The Cleveland Clinic regularly revi
Page 23 and 24: ESTIMATED SOURCES AND USES OF FUNDS
Page 25 and 26: DEBT SERVICE COVERAGEThe following
Page 27 and 28: MedicareGeneralApproximately 29% of
Page 29 and 30: there is no assurance that the Obli
Page 31 and 32: Medicare Conditions of Participatio
Page 33 and 34: fiscal year’s budget that are in
Page 35 and 36: Federal Regulatory and Contractual
Page 37 and 38: Stark-type statutes have fewer exce
Page 39 and 40: party or for any services rendered
Page 41 and 42: typically in a position to refer pa
Page 43 and 44: OhioOhio Certificate of Need Progra
Page 45 and 46: performance demonstration programs
Page 47 and 48: manifest injustice would otherwise
Page 49 and 50: and properties owned or operated by
Page 51 and 52: plan of reorganization, with one ex
Page 53 and 54: percentage may be composed wholly o
Page 55 and 56:
The Internal Revenue Service Form 9
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Charity Care, Underinsured and Unin
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• Proposals to eliminate the tax-
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acting in the capacity of underwrit
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Frederick R. Nance, Regional Managi
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FINANCIAL POSITION — D. BALANCE S
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The CommissionBecause the Series 20
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APPENDIX ACLEVELAND CLINIC HEALTH S
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TABLE OF CONTENTSPageINTRODUCTION .
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This Appendix to the Offering Circu
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A. ORIGINS AND FUNDAMENTAL MISSIONT
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C. GOVERNANCE OF THE CLEVELAND CLIN
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Voting Members of theBoard of Trust
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Voting Members of theBoard of Trust
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Principal Operating Officers. The d
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In addition to the broad range of o
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The main campus also includes a com
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GovernanceThe Cleveland Clinic is t
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E. UTILIZATIONThe following tables
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Statistical Information. The follow
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I. COLLABORATIVE PROGRAMSIn additio
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Clinic’s charity care policy, see
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statements filed with Digital Assur
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CLEVELAND CLINIC HEALTH SYSTEMConso
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OBLIGATED GROUPConsolidated Stateme
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PART IV.MANAGEMENT’S DISCUSSION A
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increase in minor equipment purchas
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The following table sets forth the
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pension plans’ funded status in t
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of funding to the pension plan offs
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portfolio. Offsetting the decrease
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• Clinic Care, Inc. (“Clinic Ca
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APPENDIX BCERTAIN FINANCIAL STATEME
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A UDITED C ONSOLIDATED F INANCIAL S
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• Ernst & Young LLPSuite 1300925
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Liabilities and net assetsCurrent l
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Changes in Net AssetsNet AssetsTemp
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Cleveland Clinic Health SystemNotes
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Other Financial Information
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• Ernst & Young LLPSuite 1300925
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Cleveland Clinic Health SystemConso
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Cleveland Clinic Health SystemConso
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APPENDIX CSUMMARY OF BASIC DOCUMENT
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APPENDIX CSUMMARY OF BASIC DOCUMENT
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“Bond Indenture” means the Bond
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period of three months from the com
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PROPERTY”, and all improvements,
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direct, express or charitable trust
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Rate Hedge” for purposes of this
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Debt according to a fixed schedule
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“Officer’s Certificate” means
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provided, however, that Series 2008
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(t) liens on money or obligations d
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Project Administrator. In the event
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“Stated Maturity” means, when u
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(b) the Cleveland Clinic, or if the
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(d) the Master Trustee receives an
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(g) the loan of cash or other non-O
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under this caption shall be deemed
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Supplemental Indenture to which suc
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emedy thereunder, unless the Noteho
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purchase or other acquisition or re
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limitation, (A) the Special Funds a
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(b) Default in the payment of the p
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Fund Requirements, in the order of
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(g) to evidence the appointment of
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THE LEASEThe Lease contains various
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(a) Failure by the Cleveland Clinic
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APPENDIX DPROPOSED FORM OF OPINION
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PROPOSED TEXT OF LEGAL OPINION OFSQ
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October __, 2008Page 32008A Bonds c
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