MENNONITE GENERAL HOSPITAL ANNUAL REPORT SEPTEMBER 1, 2008 AS FILED WITH THE NATIONALLY RECOGNIZED MUNICIPAL SECURITIES INFORMATION REPOSITORIES

MENNONITE GENERAL HOSPITAL ANNUAL REPORT SEPTEMBER 1, 2008 AS FILED WITH THE NATIONALLY RECOGNIZED MUNICIPAL SECURITIES INFORMATION REPOSITORIES IN CONNECTION WITH THE PUERTO RICO INDUSTRIAL, TOURIST, EDUCATIONAL, MEDICAL AND ENVIRONMENTAL CONTROL FACILITIES FINANCING AUTHORITY S HOSPITAL REVENUE BONDS, 1996 SERIES A AND 1997 SERIES A (MENNONITE GENERAL HOSPITAL PROJECT), DATED APRIL 1, 1996 AND NOVEMBER 15, 1997, RESPECTIVELY

PART A FINANCIAL STATEMENTS [Submitted Separated]

PART B OPERATING INFORMATION

TABLE OF CONTENTS GENERAL DESCRIPTION... 1 THE AIBONITO HOSPITAL... 3 THE CAYEY HOSPITAL... 5 CONSTRUCTION OF THE NEW CAYEY HOSPITAL; ISSUANCE OF THE 1996 BONDS... 6 CONSTRUCTION OF THE CAYEY OFFICE BUILDING; ACQUISITION OF THE CDTS; ISSUANCE OF THE 1997 BONDS... 7 AMBULATORY SERVICES AND SATELITE CLINICS... 9 OTHER SERVICES... 9 THE HEALTH PLAN... 11 MANAGEMENT... 12 GOVERNANCE... 14 MEDICAL STAFF... 16 PERSONNEL... 23 COST MANAGEMENT... 23 LICENSES, ACCREDITATION AND APPROVALS... 24 SERVICE AREA AND COMPETITION... 24 UTILIZATION STATISTICS... 28 SUMMARY OF HISTORICAL REVENUES AND EXPENSES... 29 MANAGEMENT S DISCUSSION AND ANALYSIS OF UTILIZATION, FINANCIAL CONDITION AND RESULTS OF OPERATION... 32 HISTORICAL PRO FORMA COVERAGE OF DEBT SERVICE... 36 CASH INVESTMENT IN PLANT... 37 SOURCES OF PATIENT REVENUES... 38 PUERTO RICO HEALTH REFORM... 39 CONTRACTS WITH PHYSICIANS... 40 INSURANCE... 41 LITIGATION... 41 Page i

GENERAL DESCRIPTION Mennonite General Hospital, Inc. (the Corporation ) is a nonprofit corporation organized under the laws of the Commonwealth of Puerto Rico (the Commonwealth ). The Corporation presently operates or sponsors the following programs or facilities: Mennonite General Hospital - Aibonito (the Aibonito Hospital ). A general short-term acute care hospital with a 150-bed capacity located in Aibonito, a rural municipality in the central part of the Commonwealth. Mennonite General Hospital - Cayey (the New Cayey Hospital ). A general short-term acute care hospital with a 157-bed capacity located in Cayey, an urban municipality 12 miles northeast of Aibonito. The New Cayey Hospital, which commenced operations in February of 1999, replaced the Corporation s older 80-bed hospital, also located in Cayey (the Old Cayey Hospital ). Plan de Salud del Hospital Menonita, Inc. (the Health Plan ). A health service organization (HMO type), which presently provides coverage for approximately 14,479persons. Its offices are located in Aibonito. Casa Aibonito, Inc. ( Casa Aibonito ). A 100-unit residential apartment project for the elderly operated under section 202 of the National Housing Act and located adjacent to the Aibonito Hospital. It is operated as a separate subsidiary of the Corporation. Casa Barranquitas, Inc. ( Casa Barranquitas ). A 75-unit residential apartment project for the elderly operated under section 202 of the National Housing Act and located in the municipality of Barranquitas, which is located approximately nine miles northwest of Aibonito. It is operated as a separate subsidiary of the Corporation. Hogar Aurora. A 20-unit residential apartment project for persons with disabilities operated under Section 811 (Supportive Housing Program for Persons with Disabilities) of the National Affordable Housing Act of 1990. The project was inaugurated in September of 2003 and is located adjacent to the Aibonito Hospital. The project is administered by the Aibonito Hospital and operated as a separate subsidiary of the Corporation. Cidra Diagnostic and Treatment Center ( Cidra CDT ) - A primary care diagnostic treatment center acquired by the Corporation in 1998 and located in the Municipality of Cidra, which is immediately north of Cayey and northeast of Aibonito. The Corporation now provides emergency room services at the center and rents space in the center to a group of physicians. Aibonito Diagnostic and Treatment Center ( Aibonito CDT ) - Originally a primary care diagnostic treatment center acquired by the Corporation in 1998 and located approximately six blocks from the Aibonito Hospital. The Corporation now provides partial hospitalization and ambulatory services (psychiatric, psychological, among others.) consisting on evaluation and treatment. The facility has been granted the required Certificate of Need from the Department of Health of PR authorizing the addition of 37 beds (20 beds for acute patients and 17 beds for 23 hrs units as well as an Emergency 1

Room. The construction of these additional facilities is approximately 60% completed and is scheduled to be open during the first quarter of 2009. Coamo Diagnostic and Treatment Center ( Coamo CDT ) - A primary care diagnostics treatment center located in Coamo, Puerto Rico. The Corporation is in charge of the administration of emergency room services, laboratory and X-ray facilities under a contract with the Department of Health of PR. Aguas Buenas Diagnostic and Treatment Center ( Aguas Buenas CDT ) - A primary care diagnostic treatment center located in Aguas Buenas, Puerto Rico. The Corporation is in charge of the administration of the emergency room services under contract with the Department of Health of PR. Barranquitas Diagnostic and Treatment Center ( Barranquitas CDT ) - A primary care diagnostic treatment center located in Barranquitas, Puerto Rico and operated by the Corporation since March 1, 2007. The Corporation is in charge of the administration of the emergency room services under contract with the Department of Health of PR. Orocovis Diagnostic and Treatment Center ( Orocovis CDT ) - A primary care diagnostic treatment center located in Orocovis, Puerto Rico and operated by the Corporation since March 1, 2007. The Corporation is in charge of the administration of the emergency room services under contract with the Department of Health of PR. Cayey Office Building (the Cayey Office Building ) - A 52,000 square foot four-story building mainly providing for medical and administrative offices, located at the site of the New Cayey Hospital. 2

THE AIBONITO HOSPITAL The Aibonito Hospital was established in 1943 when a small group of Mennonite missionaries, concerned with the health and welfare of the people in the Aibonito community where they had settled, opened a dispensary. The Mennonite missionaries initially offered ambulatory services at the dispensary, and their efforts were directed at fighting disease such as malaria, tuberculosis, intestinal parasites and malnutrition that were pervasive in that area. The Commonwealth government donated an abandoned tobacco warehouse to the Mennonite missionaries in 1944 and the dispensary s facilities were moved to that warehouse. In 1957, with the help of the community, the Board of Missions of the Mennonite Church and certain federal government programs, the dispensary was replaced by a modern 34-bed hospital. During the following years the Aibonito Hospital grew in size and in the number of services offered to meet the health care needs of the community. The number of licensed beds of the facility was increased to 50 beds in 1965, to 80 beds in 1977, to 131 beds in 1985 and to its present-day capacity of 150 in 1998. In 1976 the Board of Missions of the Mennonite Church transferred the properties of the Aibonito Hospital to the Corporation, a nonprofit corporation governed by a Board of Directors made up of members of the community, persons nominated by the Convention of Mennonite Churches of Puerto Rico and persons nominated by the Board of Missions of the Mennonite Church in Elkhart, Indiana. The facilities and services offered at the Aibonito Hospital consist of the following: 1. An acute care hospital unit with a 150-licensed bed capacity, including a 31 bed intermediate care unit and a 6 bed Intensive Care Unit. 2. Ambulatory services, clinical and pathological laboratory, imaging services general clinics, wound care services and Doctor s office building; 3. Elderly housing and disability housing apartment projects (Corporation is a sponsor); Satellite emergency room at Coamo, Barranquitas and Orocovis; satellite psychiatric services at Aibonito CDT. The table below provides a breakdown for the Aibonito Hospital s acute care beds presently in use by major type of medical service: Medical Service Beds in Service Medicine 49 Intermediate Care Unit 31 Pediatrics 19 Surgical and Obstetrics/Gynecology 45 Intensive Care Unit 6 Total 150 3

The Aibonito Hospital offers comprehensive inpatient and outpatient diagnostic and treatment services. The diagnostic and treatment services currently offered include: Surgery Anesthesiology Internal Medicine Psychiatry Pediatric Surgery Physical Therapy Rheumatology Pulmonary Medicine Social Services Medical and Durable Equipment Mental Health Program Osteoporosis Center Cancer Center Wound Care Center Obstetrics/Gynecology Urology & Endo-urology Ophthalmology Neurology Cardiology Orthopedics Nuclear Medicine Respiratory Therapy Ambulatory Services Chaplaincy Nephrology Hospice Program Emergency Medicine The Aibonito Hospital s main facilities are located in Puerto Rico State Road Number 726 (Km. 0.4) in the outskirts of the center of the municipality of Aibonito and cover approximately 125,500 square feet. They include the four-story main hospital building, a three-story professional building, a one-story building to house certain outpatient facilities and the cafeteria, and four additional one-story buildings where other outpatient services are located, including doctors offices. In addition, the Corporation is presently leasing some space near the hospital s facilities to house the physical therapy department and optic center. The services offered in the main hospital building are as following: First Floor- Ancillary Services- Includes the imaging department (which provides densitometry, X-ray, CT- Scan, sonography, magnetic resonance imaging, and mammography services), a laboratory, surgery services, an intensive care unit with state of the art equipment and a sixbed capacity, and a modern emergency room, built in 1989 and covering approximately 78,505 square feet, which includes two trauma rooms, a cardiac room, and an examination and observation area and pediatric emergency room. Second Floor- Houses the general medicine department with 49 acute care beds. Third Floor- Houses the surgery and obstetrics gynecology patients and the nursery. It has a 45-bed capacity with an additional 16 bassinets. Fourth Floor- Houses the pediatric department, with 19 beds, and an intermediate care unit, with 31 beds. 4

New Improvements: A new air conditioner system was acquired and installed to service the 150 bed facility. General remodeling of the main Hospital s building was conducted, the admissions department was expanded and a new electric generator was installed. These new improvements resulted in an investment of approximately $2.5 million dollars. Additional investments on medical equipment were also made, including the purchase of new High Field Open Magnetic Resonance Imaging, a CT Scan Multi-slide system for the Imaging Center, Omnicell project (a system for dispensing medicines thru a computerized device for more control of costs and a more efficient use of medicines). These equipment investments resulted in an approximate cost of $4 million dollars. Facilities such as the recovery area for the Operating Room and a new warehouse for Central Supply are undergoing a remodeling process. THE CAYEY HOSPITAL The New Cayey Hospital began operating in 1999, when it replaced an older 80-bed facility acquired by the Corporation in 1989 (the Old Cayey Hospital ). The facilities and services offered at the New Cayey Hospital consist of the following: 1. An acute care hospital with a licensed bed capacity of 157 (153 currently in use) 2. Ambulatory services; 3. Doctor s office building; 4. Satellite outpatient dispensary services provided at the Cidra CDT and Aguas Buenas CDT; 5. Dialysis center; 6. Magnetic resonance imaging units; 7. Diabetes center 8. Acute Hemodialisis Unit (2 station for In-patient) The table below provides a breakdown of the New Cayey Hospital s acute care beds presently in use per major type of medical service: Medical Service Beds in Service Medical/Surgical 108 Obstetrics/Gynecology 12 Pediatrics 25 Intensive Care Unit 8 Total beds 153 The New Cayey Hospital also has observation beds in the emergency room and 6 bassinets in the nursery. The New Cayey Hospital offers comprehensive inpatient and outpatient diagnostic and 5

treatment services. The diagnostic and treatment services currently offered include: Surgery Anesthesiology ENT (Ear-Nose & Throat) Internal Medicine Psychiatry Nephrology Cardiology Hematology Rheumatology Respiratory Therapy Social Services Endocrinology Orthopedics Obstetrics/Gynecology Urology Dermatology Ophthalmology Neurology Pulmonary Medicine Pediatric Ambulatory Services Proctology Gastroenterology Emergency Medicine Chaplaincy The New Cayey Hospital s building facilities consist of: First Floor - Houses the laboratory, record room, pharmacy, cafeteria, diet department, housekeeping, engineering department, storage room and dialysis department. Second Floor - Houses the admissions department, image department, respiratory therapy department, and emergency room. Third Floor - Houses the surgical area, hospitalization beds and telemetry rooms. Fourth Floor - Houses the labor room, nursery room, and intensive care unit. CONSTRUCTION OF THE NEW CAYEY HOSPITAL; ISSUANCE OF THE 1996 BONDS In April of 1996, the Corporation borrowed $39,330,000 from the Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority (the Authority ), which represented the aggregate principal amount of the Authority s Hospital Revenue Bonds, 1996 Series A (Mennonite General Hospital Project) (the 1996 Bonds ). These funds were used by the Corporation to finance the following: (i) the construction of the New Cayey Hospital to replace the Old Cayey Hospital; (ii) the acquisition of certain equipment for the New Cayey Hospital; (iii) certain improvements to the Aibonito Hospital; (iv) the refinancing of certain indebtedness of the Corporation; (v) the financing of a portion of the Corporation s capital expenditure budget for its 1997 and 1998 fiscal years; (vi) the construction and equipping of a magnetic resonance imaging unit for the Aibonito Hospital; and (vii) the construction of a new parking facility for the Aibonito Hospital. The New Cayey Hospital s construction was completed by November of 1998, and fully occupied by February of 1999. The total construction cost amounted to approximately $25,000,000. 6

The New Cayey Hospital is located on the Rincón Ward of the Municipality of Cayey, in a 30-acre lot approximately two miles from the site of the Old Cayey Hospital. The New Cayey Hospital consists of a four-story building covering approximately 118,000 square feet with parking space for approximately 275 vehicles. In addition, approximately $3,725,000 from the proceeds of the 1996 Bonds was used to finance the acquisition of equipment for the New Cayey Hospital. Approximately $3,000,000 of existing equipment was moved from the Old Cayey Hospital to the New Cayey Hospital. During the years 2004 and 2005, the Corporation added three new surgery rooms at a cost of $984,340, funded primarily with the remaining proceeds of the 1996 Bonds. Management of the Corporation, as well as the Cayey Hospital s medical staff, believes that the construction of the New Cayey Hospital was essential to the continued growth of the Corporation in the Cayey area. The Old Cayey Hospital, located in a relatively old building in the crowded center of town, had insufficient space to accommodate the growing needs of the community and the hospital s medical staff and was difficult to access due to its location. The New Cayey Hospital, with state of the art equipment, more operating rooms, more office space, and convenient parking for patients, visitors and staff has, in the view of management and the hospital s medical staff, attracted more patients and more doctors. The Corporation sold Old Cayey Hospital s facilities, including the sale of said facilities to the Municipality of Cayey on October 2005. A portion of the proceeds of the 1996 Bonds were also used to refinance approximately $7.8 million of the Corporation s debt, which had been incurred to finance or refinance the acquisition of the Old Cayey Hospital, as well as other capital improvements. Finally, a portion of the proceeds of the 1996 Bonds were used to finance several additional capital improvement projects, including the acquisition and equipping of a magnetic resonance imaging unit for the Aibonito Hospital at a cost of approximately $1,275,000, and the construction of a new parking facility for the Aibonito Hospital at a cost of approximately $889,000. New Improvements: On July 19, 2007, the Corporation expanded the Cayey Hospital facilities to add 39 new acute care beds and create new facilities for the Hospital s laboratory and admission s office. In order to achieve full integration, the Hospital acquired new equipment at a cost of $1,863,083 including a Medicine Dispenser through a computerized system (Omnicell) in order to control costs and monitor inventories, as well as a CT Scan which acquired for $1,032,000. The new Catheterization Unit began offering services with an investment of $713,000 in equipment, exceeding expectations 100% during its first year of operations. The hospital has started a new expansion of the Dialysis Department and a new Warehouse with a Pathology department, Nuclear Medicine Lab and additional storage space. The expansion added 13,200 square feet to the Hospital at a cost of approximately $2 million dollars.. 7

CONSTRUCTION OF THE CAYEY OFFICE BUILDING; ACQUISITION OF THE CDTs; ISSUANCE OF THE 1997 BONDS In November of 1997, the Corporation borrowed $11,200,000 from the Authority, which represented the aggregate principal amount of the Authority s Hospital Revenue Bonds, 1997 Series A (Mennonite General Hospital Project) (the 1997 Bonds ). Those funds were used by the Corporation to finance the following: (a) the construction of a portion of the Cayey Office Building; (b) the acquisition from the Government of Puerto Rico of an existing diagnostic and treatment center located in Aibonito (the Aibonito CDT ), and of an existing diagnostic and treatment center located in Cidra, Puerto Rico (the Cidra CDT ), both of which were consummated in 1998; (c) the reconstruction of a portion of the Aibonito Hospital to add 19 beds for intermediate care; (d) the acquisition and installation of a computer information system at the New Cayey Hospital and the Aibonito Hospital, (e) the acquisition of approximately 26 cuerdas of undeveloped land located near the Aibonito Hospital, to be used initially as additional parking space and for eventual expansion of the Corporation s facilities, and of the parcel of land where the Corporation s former Coamo outpatient clinic was formerly located; and (f) other capital improvements to and the acquisition of equipment to be used at the Aibonito Hospital. Cayey Office Building: The construction of the Cayey Office Building was completed on March of 2000 at a cost of approximately $8,100,000, of which $2,784,000 was funded from the proceeds of the 1997 Bonds. The Cayey Office Building is an approximately 68,000 square foot multi-story building located at the site of the New Cayey Hospital. Its construction allows the Corporation to provide more office space for the hospital s medical staff and therefore helps the Corporation to attract and retain medical staff for the hospital operation. Also, the use of a portion of the Cayey Office Building as administrative offices allows the New Cayey Hospital to dedicate more space to providing services to patients. The Cayey Office Building facilities consist of the following: First Floor- Houses the magnetic resonance imaging unit, dialysis treatment center, conference room and Health Plan office. Second and Third Floors- House 26 medical offices. Fourth Floor- Houses corporate, administrative and finance offices. Acquisition and Operation of CDTs: The Corporation acquired the Aibonito CDT and the Cidra CDT from the Government of Puerto Rico in 1998 for an aggregate purchase price of $2,400,000 ($1,200,000 each). The Aibonito CDT, which had been in operation since 1993, was a primary care facility. It is located approximately six blocks (within walking distance) form the Aibonito Hospital and occupies an approximately 29,000 square foot one-story building in a 18,000 square meter lot. The Cidra CDT, which had been in 8

operation since 1994, is also a primary care facility. It is located in the town of Cidra, which is immediately north of Cayey and northeast of Aibonito and is part of the Corporation s primary health service area. The Cidra CDT occupies an approximately 33,000 square foot one-story building in a 18,700 square meter lot. The Government of Puerto Rico sold these facilities to the Corporation as part of the Health Reform. See Puerto Rico Health Reform below. Although the Corporation originally planned to provide emergency room services at the Aibonito CDT, it has abandoned this plan and rented office space in the Aibonito CDT s facility to a group of primary and specialist physicians that provide services primarily to Health Reform beneficiaries. The Corporation also provides psychiatric services at the Aibonito CDT under the name of CIMA ( Centro Integral Multidisciplinario de Aibonito ). In addition, the Corporation offers laboratory services at the Aibonito CDT. As in the case of the Aibonito DCT, the Corporation rented office space at the Cidra CDT to a group of physicians that provide services primarily to Health Reform beneficiaries. In addition, the Cidra CDT is currently providing emergency room services. In connection with the acquisition of the Cidra CDT, the Corporation closed its former Cidra outpatient clinic. Approximately $4,000,000 of the proceeds of the 1997 Bonds were used to reconstruct a portion of the Aibonito Hospital to add 19-beds for intermediate care, and to make several other capital improvements to the Corporation s facilities, that would allow the Corporation to meet future needs for additional space. AMBULATORY SERVICES AND SATELLITE CLINICS The following are the various ambulatory services offered by the Corporation at the Aibonito and Cayey Hospitals (collectively, the Hospitals ): Physician Services - Family Medicine, Internal Medicine, Surgery, Pediatrics, and Obstetrics-Gynecology Emergency Room Services Pediatrics Emergency Room Services Ambulatory Surgery Diagnostic Ambulatory Services Clinical Laboratory, Blood Bank Imaging Department, including: Diagnostic X-Ray Tomography 4 Multislice CT Scan Mammography Sonography New Magnetic Resonance Imaging Nuclear Medicine - only at Aibonito Hospital Physical Therapy - only at Aibonito Hospital Respiratory Therapy Prenatal Care Ambulatory Wound Care Unit Cardiology 9

Surgery Non-Invasive Cardiovascular Laboratory Pulmonary Medicine Weight Control Program Endoscopies Outpatient Pharmacy Mental Health Program Densitometry Durable Medical Equipment Unit Home Health Services: OTHER SERVICES The Corporation presently serves more than 1,000 patients under its Home Health Services Division. Such Division manages and is composed of the following services and programs: Hospice Program. The program was established in 1993 to serve terminally ill patients. The program provides at the patient s home most of the hospital services needed by the patient. The program provides both homecare and inpatient care. The services provided include, among others, nursing services, doctor, social worker, chaplain visits, and nutritional guidance. Durable Medical Equipment. The program was established in 1994 and provides patients with durable medical equipment that must be able to withstand repeated use and be appropriate for home use. The equipment includes, among others, position beds, wheel chairs, and oxygen tanks. The devices offered include prosthetics devices needed to replace an internal body organ or orthotics devices to correct or prevent physical deformities. Parenteral Nutrition. This service offers at the patients homes a complex form of intravenous therapy that supplies nutritional requirements to a patient while bypassing the gastrointestinal tract. The service is offered in cases where the gastrointestinal tract is either nonfunctional or functionally unable to achieve sufficient nutrient absorption and in which adequate nutrition cannot be achieved through dietary adjustment, oral supplements or tube enteral nutrition. Enteral Nutrition. This service offers tube enteral nutrition at the patient s homes. Tube enteral nutrition is the provision of nutritional requirements to the stomach or small bowel via a tube that may be inserted nasally or percutaneously through the neck or abdomen. CIMA The Corporation implemented this program in May, 1998 at the Aibonito CDT. It provides ambulatory services to mentally ill patients. A multidisciplinary team that includes psychiatrists, psychologists, nurses, occupational therapists and case managers provide these services. The Corporation is in the process of constructing in order to add space to provide inpatient services. 10

Elderly and Disability Housing Projects The Corporation presently serves as sponsor of two elderly housing projects and one disability housing projects operated under section 202 of the National Housing Act and the National Affordable Housing Act of 1990. These projects are owned through the following three corporations: Casa Aibonito, Inc. Oversees the management of the Casa Aibonito project, a 100-unit apartment project located in the municipality of Aibonito adjacent to the Aibonito Hospital. The Corporation manages Casa Aibonito under a contract approved by the United States Department of Housing and Urban Development. Casa Barranquitas, Inc. Overseas the management of the Casa Barranquitas project, a 75- unit apartment project located in the municipality of Barranquitas, which is located approximately nine miles northwest of Aibonito. Combined Building Corp. manages Casa Barranquitas under a contract approved by the United States Department of Housing and Urban Development. Hogar Aurora Inc. A 20-unit residential apartment project for persons with disabilities operated under Section 811 (Supportive Housing Program for Persons with Disabilities) of National Affordable Housing Act of 1990. The project was inaugurated in September of 2003 and is located adjacent to the Aibonito Hospital. The project is administered by the Aibonito Hospital and operated as a separate subsidiary of the Corporation. The boards of directors of Casa Aibonito, Inc., Casa Barranquitas, Inc. and Hogar Aurora, Inc. (which are identical in composition), have seven members appointed from among the members of the Corporation s Board of Directors. These boards of directors meet on a quarterly basis and report to the Corporation s Board of Directors regarding the operation of the CIMA projects. THE HEALTH PLAN The Health Plan was established by the Corporation in 1979 and was initially developed to provide access to subscribers of all services furnished by the Aibonito Hospital and its medical staff. The Health Plan now provides services to its subscribers through a network of over 700 providers in the Corporation s primary and secondary areas of service. The Health Plan provides medical service coverage for approximately 14,479 individuals and is licensed by the Commonwealth s Commissioner of Insurance. The Health Plan s offices are located in Aibonito. On December of 2000, a non-for-profit corporation under the name of Plan de Salud del Hospital Menonita, Inc. was organized under the laws of the Commonwealth of Puerto Rico to eventually run the operations of the Health Plan. The Hospital is currently in the process of transferring the Health Plan s activities to the Plan de Salud del Hospital Menonita, Inc. The Health Plan will continue to provide to subscribers a full range of health care services. Coverage for subscribers and covered individuals can include: a basic plan which covers hospital services, doctor 11

services, emergency services and outpatient care; and optional coverage including drugs and medicines (for outpatient care), cancer, dental and major medical services. The present make-up of the Health Plan s subscribers is the following: Government employees 53% Private industry and business 20% Direct payment (Individuals) 5% HGM Employees 22% Health Plan obtained the approval for the Medicare Advantage on July 19, 2007. The service began in January 2008. Such authorization will expire on December 2008. MANAGEMENT The Corporation s management team consists of: Domingo Torres Zayas (age 62) - Executive Director of the Corporation and previous entities since 1975. As the Corporate Executive Director Mr. Torres is responsible for the Corporation s development and advancement and serves as liaison between the board, the Medical and Nursing staff of the two hospitals and the Corporation various programs. Mr. Torres retired in 2004 and stayed as counselor to the Corporation until the death of Mr. Ramón Alvarado, when he returned to occupy this position. Mr. Torres received a B.A. in education with a major in mathematics from the University of Puerto Rico in 1972, and a Master Degree in Health Services Administration in 1979 from the school of Public Health of the University of PR. José E. Soliván Rivera (age 31) Chief Financial Officer (CFO) of the Corporation since November 2007. As the Corporate Chief Financial Officer Mr. Soliván is responsible for the Corporation s Accounting & Finance processes, which includes Financial Planning, Treasury, Statutory & Federal Compliance and Accounting and Tax Processes, Mr. Soliván received a BBA in Business Administration with a major in Accounting from the University of Puerto Rico in 1999 and is a Certified Public Accountant since 2004. Marta Rosa Mercado (age 62) - Chief Operating Officer (COO) of the Corporation since 2006 Rosa Mercado also acts as assistant to the executive director in all operational tasks including information system and Home Health Care administration matters. She has been working in the System since 1992, implementing and directing Home Health Care Programs and Mental Health Division. She received a Bachelor Degree in RN from University of Puerto Rico in 1970 and a Master Degree in Health Services Administration in 1987 from the school of Public Health of the University of Puerto Rico Medical Science Campus. Rubén Norat Roig (age 43) - Administrator of the Aibonito Hospital since 2006. As administrator of the Aibonito Hospital, Mr. Norat is responsible for the day-to-day management and development of 12

the Aibonito Hospital. He received his Bachelors Degree in Business Administration with a major in accounting from the University of PR in 1986 and master Degree in Business Administration with mayor in Health Administration from Phoenix University of PR, 2006. Pedro L. Meléndez Rosario (age 51) - Administrator of the Cayey Hospital since 1998. As administrator, Mr. Meléndez is responsible for the day-to-day management and development of the Cayey Hospital. He has 15 years of experience in the health care field and has a B.A. (Chemistry) and Master in Health Care Administration from the University of Puerto Rico. Rene Rivera (age 62) Associate Administrator for the Cayey Hospital, Cidra CDT s and Aguas Buenas CDT s. He has 30 years of experience in the health care field and has a B.A. in Business Administration, B.A. in Nutrition and a Masters Degree in Health Service Administration from the University of Puerto Rico in 1970. Norma I. Torres Delgado (age 47) Associate Administrator for the Aibonito Hospital and Administrator of the Emergency Room Orocovis CDT s, Emergency Room Barranquitas CDT s and is responsible for the Quality Program of the Aibonito Hospital. She has 30 years of experience in the health care field and has a Bachelor Degree in Science a 2006. nd a Masters Degree in Health Service Administration from University of Puerto Rico in May Delia Figueroa (age 48) Administrator of Health Plan since January, 2007. Miss Figueroa has 20 years of experience in the health care field. She is responsible for the day-to-day management and development of health plan. She has a Bachelor Degree in Science in 1982 and a Master Degree in Health Service Administration from University of PR in 1987. Ana B. Torres (age 38) Administrator of the Home Health Care Division since January 2008. Mrs. Torres is responsible for the day to day management and development for the CIMA, Durable Medical Equipment and Hospice Programs. She has a Master Degree in Health Care Administration from the University of Puerto Rico Dr. Luis Rodríguez Saenz (age 48) - Medical Director of the Cayey Hospital since 2003. As Medical Director of the Cayey, Dr. Rodríguez Saenz is responsible for all clinical aspects of the Hospital s services and coordinates the planning and development of medical programs. Dr. Saenz is also the liaison between the Hospital administration and medical staff. He received his medical degree from the University of Puerto Rico in 1993 and made his internship in Family Practice in the School of Medicine of the University of Puerto Rico from 1994-1997. Dr. Lumen Vera (age 53) - Medical Director of the Aibonito Hospital since 1994. As Medical Director of the Aibonito Hospital, Dr. Vera is responsible for all clinical aspects of hospital services and for coordinating the planning and development of medical programs. He also serves as liaison between the hospital administration and the Medical Staff. Dr. Vera received his medical degree in 1987 from the University of Santo Domingo. Dr. Roberto Alvarez (age 53) - Utilization Program Consultant at Aibonito s Hospital. As Utilization Program Consultant, Mr. Alvarez is in charge of supervising the services provided to the patients during their stay at the Hospital s facilities to assure cost efficiency without sacrificing the quality of 13

the services provided. Mr. Alvarez is also in charge of establishing a program to review unnecessary admissions, long stays at the Hospital s facilities, consultation delays and inadequate use of ancillary services. He is also responsible for analyzing the days not covered by the health plans and educating the Medical Faculty to avoid said uncovered days. María del Mar Torres (age 36) Billing and Collection Director. Mrs. Torres is responsible for all corporate billing and collection process. She has a Bachelors Degree in Accounting of the University of PR. Anna E. Rolón (age 40) - Chief Accounting Director. Ms. Rolón is responsible for all accounting matters related to the operation of the Corporation. She received her BS in accounting from the University of Puerto Rico (Cayey Campus). Armando Rolón (age 65) - Material and Purchasing Manager for the Corporation since 1985. As Material and Purchasing Manager for the Corporation, Mr. Rolón is responsible for managing the purchase of all materials for the Corporation. Mr. Rolón has been part of the Corporation and preceding entities for over 30 years. He received an R.N. from the University of Puerto Rico in 1976. Dániza Morales (age 31) - Information Systems Operation Manager for the Corporation since 2004. As Operations Manager, Ms. Morales is responsible for the day-to-day operations of the Information Systems. Ms. Morales has a B.A. in Science with a major in Mathematics and a Master Degree in Information Systems from the University of Puerto Rico, Mayagüez Campus. 14

GOVERNANCE The Corporation is governed by a 14 member Board of Directors (the Board ). The Board is vested with powers to control and manage the Corporation s properties, affairs and business policies and to direct the use of its funds. The Board meets once every month with the exception of July and December. The Board also celebrates an annual meeting in which elections of its officers are held. It presently oversees five standing committees and two special committees, which meet in accordance with their respective by-laws. The by-laws of the Corporation provide that the Board of Directors shall be composed of six members of the community, three members appointed from those persons nominated by the Convention of Mennonite Churches of Puerto Rico, three members appointed from those persons nominated by the Board of Missions of the Mennonite Church in Elkhart, Indiana, and two members appointed from those nominated by the active medical staff of the health facilities operated by the Corporation. The Board is presently composed of the following members: Name Term Director since Occupation Rubén Santos - President 2006 2009 1976 Merchant José Veguilla Vice President 2006 2009 1994 Accountant (CPA) Dr. Víctor Ortiz - Treasurer 2006 2009 2004 Dentist José L. Vargas - Secretary 2005 2008 2002 Merchant Manuel Pagán 2004-2007 1989 Retired Carlos Camacho 2007 2010 2007 Dr. Víctor Hernández 2004 2007 2004 Emergenciology Angel F. Rivera 2004 2007 2004 Pastor Aixa Rivera Vocal 2004 2007 2001 Accountant Dra. Kermel Ocasio 2006 2009 2005 Medical Doctor Raúl Rivera López 2005-2008 2005 Engineer Dr. Daniel A. Oliveras 2005-2008 2005 Veterinary Herman Bauer Mieses 2006-2009 2006 Engineer José E. Rivera Lupiañez 2006-2009 2006 Merchant 15

The five standing committees of the Board are the following: The Executive Committee. This committee acts on behalf of the Board during the period of time between meetings of the Board, except with respect to those matters of major importance in which case a full Board meeting is convened. The Finance Committee. This committee reviews the budget and financial statements of the Corporation and informs the Board about the financial condition of the Corporation. The Finance Committee is responsible for ensuring the fiscal integrity of the Corporation. The Medical Committee. This committee measures the quality of health care services offered at the hospitals and ensures that the services that are provided by the Corporation are in compliance with the standards set forth by local and national accrediting agencies. The committee gives recommendations to the Board about the choice of heads for the various departments of the two Hospitals and it studies recommendations received from the medical staffs of the two Hospitals. The Joint Conference Committee. This committee formalizes the recommendations, which have been studied and approved by the Medical Committee of the Board, before presenting them to the Board for final consideration. Responsibilities include, among others, the appointment of physicians to the Medical Staff of the two Hospitals, the delineation of privileges of each Medical Staff member, and the choice of the department heads for the two Hospitals. Cayey Hospital Committee. This committee reviews the Cayey Hospital s general operations and affairs. It meets every month in order to provide information and recommendations regarding the Cayey Hospital on a quarterly basis to the Board for its final approval. The three existing special committees of the Board are the following: Planning Committee. This committee has 10 members selected among members of the Board, Medical Staff and the Corporation s executive team. Its work involves planning the Corporation s future development as well as designing specific plans to achieve the Corporation s long-term goals. By-laws Committee. This committee has the responsibility of updating and amending the Board s by-laws. It also reviews changes to the Medical Staff s by-laws and submits recommendations in this respect for Board approval. Quality Assurance Committee. assurance at the Hospitals. This committee has three members who oversee quality 16

MEDICAL STAFF Aibonito Hospital As of March 31, 2008, there were 124 physicians on the Aibonito Hospital s medical staff, of whom 43 are Board Certified. The membership of the medical staff is grouped into the following categories: active (42), associate (4), courtesy (13), consultants (27), emergency (36) and temporary (2). Thirty three of the physicians on the Aibonito Hospital s medical staff are also part of the Cayey Hospital s medical staff. The Aibonito Hospital s management actively recruits physicians to: (1) apply for privileges and admit patients to the Aibonito Hospital, (2) add new services or specialties, and (3) replace those physicians who retire. The Aibonito Hospital s management is also involved in promoting the hospital among potential physician recruits. All recruiting activities are reported to the Medical Staff in order to ascertain timing and strategy issues when recruiting in particular specialty areas. The committees of the Aibonito Hospital Medical Staff are the following: Executive Committee. Represents and acts on behalf of the Medical Staff in the period of time between medical staff meetings. The committee makes recommendations to the Board regarding all matters relating to appointments, reappointments, staff category, department assignments, clinical privileges and corrective actions. Credential Committee. Reviews and evaluates the qualifications of each applicant for initial appointment, reappointment or modification of appointment and clinical privileges. Pharmacy and Therapeutics Committee. Assists in the formulation of broad professional policies regarding the evaluation, appraisal, selection, procurement, storage, distribution, use, safety procedures and all other matters relating to drugs at the Aibonito Hospital. Utilization Review and Medical Records Committee. Develops a utilization review plan that is appropriate to the Aibonito Hospital and that meets the requirements of law. Such a plan must include a provision for at least: (a) review of the appropriateness and medical necessity of admissions, continued hospital stays and supportive services, (b) discharge planning and (c) data collection and reporting. Blood Usage Review Committee. Develops criteria for adequate usage of blood and blood components and identifies problems in blood usage for a more in depth evaluation. Intensive Care Unit Committee. Oversees the activities of this multipurpose special care unit and approves policies and procedures concerning the scope and provision of care. The committee supervises the implementation of the monitoring and evaluation process at the intensive care unit. Bioethics Committee. Participates in the development of guidelines for consideration of cases having bioethical implications, and develops and implements procedures for the review of such cases. 17

AIBONITO HOSPITAL MEDICAL STAFF COMPOSITION AS OF MARCH 31, 2008 Specialties Total number of physicians Average Age Board Certified Anesthesiology 3 42 1 Anesthesiology/Pain Management Cardiology 2 2 52 40 2 2 Dermatology 1 59 1 Emergency Medicine 4 38 2 Family Medicine 6 45 3 Gastroentorology 1 48 1 General Surgery 6 42 1 General Surgery/Pediatric Surgery 1 54 1 General Medicine 34 41 0 Hematology/Oncology 2 48 1 Infectious Diseases 1 40 0 Internal Medicine 9 55 0 Nephrology 2 52 2 Neurology 0 0 0 Nuclear Medicine 1 51 1 Obstetrics/Gynecology 5 58 2 Ophthalmology 2 47 1 Orthopedics Assistant 1 50 0 Orthopedics 3 46 2 Pathology 1 42 1 Pediatrics 8 47 0 Physical Medicine and Rehabilitation 1 41 0 Podiatrics Medicine 2 40 2 Psychiatry 4 47 1 Pulmonary Medicine 3 41 2 Radiology 6 45 3 Rheumatology 1 53 1 Teleradiology 9 43 9 Urology 2 58 1 Total 116 41 38 Source: Hospital Records The table shows that % of the Aibonito Hospital s Medical Staff is Board Certified. Management believes this percentage is comparable to that of other private hospitals in Puerto Rico. 18

TOP TEN ADMITTING PHYSICIANS DURING TWELVE MONTHS ENDED MARCH 31, 2008 AIBONITO HOSPITAL Specialty No. of Admissions Age Internal Medicine 1,159 52 Family Medicine 772 40 Internal Medicine 657 60 Internal Medicine 654 61 Family Medicine 647 46 Internal Medicine 624 53 Internal Medicine 556 39 Family Medicine 530 34 OB/GYN 407 74 Internal Medicine 367 44 Total 6,373 50 ADMISSIONS BY DEPARTMENT AIBONITO HOSPITAL FISCAL YEARS ENDED MARCH 31, 2008 Department 2005 % 2006 % 2007 % 2008 % Medicine 5,263 56 5,622 61 5,877 66 6503 69 Surgery 1,702 18 1,448 16 1,117 12 999 11 Obstetrics/Gym. 1,441 15 1,392 15 1,159 13 967 10 Pediatrics 992 11 786 8 819 9 981 10 Total 9,398 100% 9,250 100% 8,972 100% 9,450 100% 19

Cayey Hospital As of March 31, 2008, there were 137 physicians on the Cayey Hospital s Medical Staff, of whom 45 have admitting privileges. The membership of the medical staff is grouped into the following categories: active (45), associate (17), courtesy (18), consultants (17), provisional (9) and hospital base (31). Thirty of the physicians on the Cayey Hospital s medical staff are also in the Aibonito Hospital s medical staff. The Cayey Hospital s management actively recruits physicians to: (1) apply for privileges and admit patients to the Cayey Hospital, (2) add new services or specialties, and (3) replace those physicians who retire. All recruiting activities are reported to the Medical Executive Committee, which is then responsible for evaluating and making recommendations to the Board of Directors. The Cayey Hospital s Medical Staff is classified in five departments: Medicine, Pediatrics, Obstetrics/Gynecology, Surgery and Emergency Room, and five sub-departments: Radiology, Anesthesiology, Intensive Care, Operating Room and Respiratory Therapy. The Medical Staff s faculty oversees 12 committees: Medical Executive Committee. Coordinates and implements the professional and organizational activities and policies of the Medical Staff. This committee represents and acts on behalf of the Medical Staff in the period of time between Medical Staff meetings, subject to such limitations as may be imposed by the Medical Staff s By-laws. The committee also reviews and reevaluates the qualifications of each practitioner applying for initial appointment, reappointment, or modifications of and for clinical privileges. Joint Conference Committee. Constitutes a forum for the discussion of matters of the hospital and Medical Staff policy, practice, and planning, and a forum for interaction between the Board and the Medical Staff on such matters as may be referred by the Medical Executive Committee or the Board. Utilization Review Committee. This committee is responsible of developing a utilization plan in order to evaluate the appropriateness of admissions to the Cayey Hospital, lengths of stay, discharge practices, use of medical and hospital services and related factors which may contribute to the effective utilization of services. Management of Information Committee. Reviews and evaluates medical records, or a representative sample, to determine whether these properly describe the condition, diagnosis and progress of the patient, the treatment and tests provided, the results thereof and adequate identification of individuals responsible for orders given and treatment rendered. Pharmacy and Therapeutics Committee. Assists in the formulation of professional practices and policies regarding the evaluation, appraisal, selection, procurement, storage, distribution, use, safety procedures, and all other matters relating to drugs in the Cayey Hospital, including antibiotic usage. 20

Infection Control Committee. Develops a hospital wide infection control program and maintains surveillance over the program. The committee coordinates action on findings from the Medical Staff s review of the clinical use of antibiotics, and develops and implements a preventive and corrective program designed to minimize infection hazards, including the establishment, review and evaluation of aseptic, isolation and sanitation techniques. Security Committee. Participates with the hospital administration in maintaining security and develop a written plan to maintain a safe environment of care for patients, families and personnel at the hospital s facilities. By Laws Committee. Conducts an annual review of the Medical Staff By Laws, as well as the rules and regulations and forms promulgated by the Medical Staff, its departments and divisions. Quality of Care Committee. Establishes systems to identify potential problems in patient care, and refers priority problems for assessment and corrective action to appropriate departments or committees. The committee also monitors the result of quality care throughout the Cayey Hospital. Surgical Care Review Committee. Reviews surgical cases in which a specimen (tissue or nontissue) is removed in the Cayey Hospital. Blood and Components Usage Review Committee. Evaluates adequate usage of blood products in patients at the Cayey Hospital. Bioethics Committee. Participate in development of guidelines for consideration of cases having bioethical implications, development and implementation of procedures for the review of such cases. 21

Specialties CAYEY HOSPITAL MEDICAL STAFF COMPOSITION AS OF MARCH 31, 2008 Total number of physicians Average Age Board Certified Anesthesiology 4 45 21 Cardiology 11 41 8 Colorectal Surgery 1 52 - Gastroenterology 3 50 3 Hematology-Oncology 4 51 1 Infectious Diseases 6 44 4 Emergency Medicine 5 52 1 General Medicine 12 41 N/A Family Medicine 4 47 3 Internal Medicine 19 47 4 Nephrology 4 45 3 Neurology 1 47 - Obstetrics/Gynecology 6 42 - Ophthalmology 3 42 1 Orthopedics 3 42 3 Othorinolaryngology 1 57 - Pain Management 1 63 1 Pathology 2 40 1 Pediatrics 11 46 - Pediatrics Endocrinology 1 68 1 Physiatrist 2 51 1 Plastic Surgery 1 41 1 Podiatrics 1 40 1 Pulmonary Medicine 3 43 2 Radiology 6 46 3 Teleradiology 11 44 11 Surgery (General) 4 40 3 Urology 5 45 4 Rheumatology 1 51 1 Psychiatry 1 32 1 TOTAL 137 47 64 Source: Hospital Records The table shows that 47% of the Cayey Hospital s Medical Staff is Board Certified. Management believes this percentage is comparable to that of other private hospitals in Puerto Rico. 22