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Ernst & Young LLPSuite 600171 Monroe Avenue, NWGrand Rapids, MI 49503Tel: 1 616 774 0710Fax: 1 616 774 0190ey.comReport of Independent AuditorsThe Board of DirectorsSpectrum Health System and AffiliatesOpinionWe have audited the consolidated financial statements of Spectrum Health and subsidiaries(collectively, the System), which comprise the consolidated balances sheets as of December 31, 2021and 2020, and the related consolidated statements of operations and changes in net assets and cashflows for the years then ended, and the related notes (collectively referred to as the “financialstatements”).In our opinion, the accompanying financial statements present fairly, in all material respects, thefinancial position of the System at December 31, 2021 and 2020, and the results of its operations andchanges in its net assets and its cash flows for the years then ended in accordance with accountingprinciples generally accepted in the United States of America.Basis for OpinionWe conducted our audit in accordance with auditing standards generally accepted in the United Statesof America (GAAS). Our responsibilities under those standards are further described in the Auditor’sResponsibilities for the Audit of the Financial Statements section of our report. We are required to beindependent of the System and to meet our other ethical responsibilities in accordance with the relevantethical requirements relating to our audits. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion.Responsibilities of Management for the Financial StatementsManagement is responsible for the preparation and fair presentation of the financial statements inaccordance with accounting principles generally accepted in the United States of America, and for thedesign, implementation, and maintenance of internal control relevant to the preparation and fairpresentation of financial statements that are free of material misstatement, whether due to fraud orerror.In preparing the financial statements, management is required to evaluate whether there are conditionsor events, considered in the aggregate, that raise substantial doubt about the System’s ability tocontinue as a going concern for one year after the date that the financial statements are issued.2109-3873886A member firm of Ernst & Young Global Limited1

Auditor’s Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statements as a wholeare free of material misstatement, whether due to fraud or error, and to issue an auditor’s report thatincludes our opinion. Reasonable assurance is a high level of assurance but is not absolute assuranceand therefore is not a guarantee that an audit conducted in accordance with GAAS will always detecta material misstatement when it exists. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control. Misstatements are consideredmaterial if there is a substantial likelihood that, individually or in the aggregate, they would influencethe judgment made by a reasonable user based on the financial statements.In performing an audit in accordance with GAAS, we: Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether dueto fraud or error, and design and perform audit procedures responsive to those risks. Suchprocedures include examining, on a test basis, evidence regarding the amounts and disclosuresin the financial statements. Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the System’s internal control. Accordingly, no such opinion isexpressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significantaccounting estimates made by management, as well as evaluate the overall presentation of thefinancial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,that raise substantial doubt about the System’s ability to continue as a going concern for areasonable period of time.We are required to communicate with those charged with governance regarding, among other matters,the planned scope and timing of the audit, significant audit findings, and certain internal control-relatedmatters that we identified during the audit.Required Supplementary InformationAccounting principles generally accepted in the United States require that the incurred and paid claimsdevelopment prior to the most recent year and the average annual percentage payout of incurred claimsdisclosed in Note 6 to the consolidated financial statements be presented to supplement the financialstatements. Such information, although not part of the consolidated financial statements, is required by2109-3873886A member firm of Ernst & Young Global Limited2

the Financial Accounting Standards Board (FASB) who considers it to be an essential part of financialreporting for placing the consolidated financial statements in an appropriate operational, economic,and historic context. We have applied certain limited procedures to the required supplementaryinformation in accordance with auditing standards generally accepted in the United States, whichconsisted of inquiries of management about the methods of preparing the information and comparingthe information for consistency with management’s responses to our inquiries, the consolidatedfinancial statements, and other knowledge we obtained during our audit of the consolidated financialstatements. We do not express an opinion or provide any assurance on the information, because thelimited procedures do not provide us with sufficient evidence to express an opinion or provide anyassurance.Supplementary Consolidating InformationOur audit was conducted for the purpose of forming an opinion on the consolidated financial statementsas a whole. The supplementary consolidating information listed in the table of contents on pages 5764 is presented for purposes of additional analysis and is not a required part of the consolidatedfinancial statements. Such information is the responsibility of management and was derived from andrelates directly to the underlying accounting and other records used to prepare the consolidatedfinancial statements. The information has been subjected to the auditing procedures applied in our auditof the financial statements and certain additional procedures, including comparing and reconciling suchinformation directly to the underlying accounting and other records used to prepare the consolidatedfinancial statements or to the consolidated financial statements themselves, and other additionalprocedures in accordance with auditing standards generally accepted in the United States of America.In our opinion, such information is fairly stated, in all material respects, in relation to the financialstatements as a whole.Other InformationManagement is responsible for the other information. The other information comprises the ChiefFinancial Officer Report and the Other Financial Information but does not include the financialstatements and our auditor’s report thereon. Our opinion on the financial statements does not cover theother information, and we do not express an opinion or any form of assurance thereon.In connection with our audit of the financial statements, our responsibility is to read the otherinformation and consider whether a material inconsistency exists between the other information andthe financial statements, or the other information otherwise appears to be materially misstated. If, basedon the work performed, we conclude that an uncorrected material misstatement of the other informationexists, we are required to describe it in our report.March 11, 20222109-3873886A member firm of Ernst & Young Global Limited 3

Spectrum Health System and AffiliatesConsolidated Balance Sheets(In Thousands)AssetsCurrent assets:Cash and cash equivalentsShort-term investmentsAccounts receivable:PatientsOtherPledges receivableInventoriesPrepaid expenses and other current assetsTotal current assetsDecember 3120212020 InvestmentsProperty and equipment – netRight of use assets – netOther assets:Investments in joint venturesGoodwillPledges receivable, less current portionOtherTotal assets 1,080,264422,535 ,678424,7079,666,962 8,992,593Continued on next page.42109-3873886

Spectrum Health System and AffiliatesConsolidated Balance Sheets (continued)(In Thousands)Liabilities and net assetsCurrent liabilities:Accounts payable and accrued expensesSalaries, wages, and related withholdingsHealth plan claims payableCurrent maturities of long-term debtShort-term debtCurrent portion of lease obligationsTotal current liabilitiesDecember 3120212020 688,995341,102494,52320,39878,40023,4811,646,899 ird-party settlement liabilitiesLong-term debt, less current maturitiesLease obligations, less current portionProfessional liability accrualInterest rate swapsOther long-term liabilitiesTotal 3,192,991Net assets:Controlling interest in net assets withoutdonor restrictionsNoncontrolling interest in subsidiariesNet assets without donor restrictionsNet assets with donor restrictionsTotal net assetsTotal liabilities and net ,593 See accompanying notes.2109-38738865

Spectrum Health System and AffiliatesConsolidated Statements of Operations and Changes in Net Assets(In Thousands)Operating revenuePremium revenueNet patient service revenueOtherTotal operating revenueYear Ended December 3120212020 Operating expensesSalaries, wages, and employee benefitsSupplies and otherHealth care claims expenseDepreciation and amortizationInterestTotal operating expensesNet operating incomeOther nonoperating revenue (expenses)Investment income, netGain (loss) on interest rate swaps, netOther expenses, netTotal other nonoperating revenue, netExcess of revenue over expensesLess excess of revenue over expensesattributable to noncontrolling interestExcess of revenue over expenses 5,483,762 4,009 17,395714,198Continued on next page.2109-38738866

Spectrum Health System and AffiliatesConsolidated Statements of Operations and Changes in Net Assets (continued)(In Thousands)Net assets without donor restrictionsExcess of revenue over expensesContributionsExpenditures for donor sponsored programsNet assets released for capital acquisitionsPension-related changes other than netperiodic pension costsOtherIncrease (decrease) in net assets without donor restrictionsNet assets with donor restrictionsContributionsExpenditures for donor sponsored programsInvestment returnsNet assets released for capital acquisitionsOtherIncrease in net assets with donor restrictionsIncrease (decrease) in net assetsNet assets, beginning of yearNet assets, end of yearTotal Year Ended December 312021ControllingNoncontrolling599,211 1,653(1,971)6,038594,009 ,799,602 6,437,885 5,714,5456,357,946 5,202–––TotalYear Ended December 312020ControllingNoncontrolling731,593 311(535)8,408714,198 9 5,033,348 5,799,602 4,965,0245,714,545 68,32485,057See accompanying notes.72109-3873886

Spectrum Health System and AffiliatesConsolidated Statements of Cash Flows(In Thousands)Operating activities and other revenueIncrease in net assetsAdjustments to reconcile increase in net assets to net cashprovided by operating activities and other revenue:Contributions and other net asset activityUnrealized (gain) loss in market value of interest rate swapsPension-related changes other than net periodic pension costsDepreciation and amortizationChanges in operating assets and liabilities:Trading securitiesChanges in patients accounts receivable; other accounts receivableinventories; prepaid expenses; and other operating assetsChanges in accounts payable and accrued expenses; accrued salaries,wages, and related withholdings; health plan claims payable;third-party settlement liabilities; and other operating liabilitiesOtherNet cash provided by operating activitiesYear Ended December 3120212020 638,283 )75,773365117,273392,870(4,950)757,886Investing activitiesAdditions to property and equipmentNet cash acquired in acquisitionOtherNet cash used in investing ,918(11,666)(300,151)Financing activitiesContributions and other net asset activityPayments on long-term debtPayments on financing lease obligationsNet cash used in financing activities(Decrease) increase in cash and cash ,554(23,430)(5,270)(25,146)432,589Cash, cash equivalents, and restricted cash at beginning of yearCash, cash equivalents, and restricted cash at end of year 1,260,7821,093,958 Noncash activitiesRight of use assets obtained (terminated) in exchange for lease liabilities, net 22,943 828,1931,260,782(46,383)See accompanying notes.2109-38738868

Spectrum Health System and AffiliatesNotes to Consolidated Financial Statements(In Thousands)December 31, 20211. Significant Accounting PoliciesThe Reporting Entity and Principles of ConsolidationSpectrum Health System is a nonprofit Michigan corporation formed as a holding company todirect the activities of an integrated health care delivery system. The consolidated financialstatements include the accounts of Spectrum Health System and its wholly owned or controlledaffiliates (collectively, the System). The controlled affiliates include Spectrum Health WestMichigan’s acute care campuses located in western Michigan; Spectrum Health Lakeland’s(Lakeland) acute-care campuses located in southwest Michigan; Priority Health, a managed carehealth plan; Spectrum Health Medical Group, a physician organization; and various other affiliatesand subsidiaries providing acute care, long-term care, home health care, physician, and otherservices in their respective markets in Michigan. All intercompany accounts and transactions havebeen eliminated in consolidation.Use of EstimatesThe preparation of financial statements in accordance with U.S. generally accepted accountingprinciples (GAAP) requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets and liabilities at thedate of the consolidated financial statements. Although actual results could differ from theseestimates, management believes estimated amounts recorded are reasonable and appropriate.Mission Statement and Other Nonoperating Revenue and ExpensesThe System’s mission is to improve health, inspire hope, and save lives. Only those activitiesdirectly related to this mission are considered operating activities. Other activities that result inrevenue or expenses unrelated to the primary mission are considered to be other nonoperatingrevenue and expenses.Cash and Cash EquivalentsCash and cash equivalents include short-term, highly liquid investments with a maturity of threemonths or less when purchased.2109-38738869

Spectrum Health System and AffiliatesNotes to Consolidated Financial Statements (continued)(In Thousands)1. Significant Accounting Policies (continued)Restricted CashAmounts included in restricted cash represent those required to be set aside by a contractualagreement or for donor restricted purposes. Restricted cash is classified within cash and cashequivalents and investments on the consolidated balance sheets.Short-Term InvestmentsShort-term investments primarily consist of debt securities and are internally design

Matthew E. Cox Chief Financial Officer (matthew.cox@spectrumhealth.org) 252.1 17.7 30.5 291.7 172.5 22.8 113.4 276.2 192.3 (12.7) 188.9 . Spectrum Health Physician Services Priority Health assigned lives: 136,409 N/A 129,042 Total Spectrum Health Primary Care assigned lives: 634,259 N/A 695,405 Spectrum Health Medical Group