Public Information

 From the June 6 Board Packet:

• Acquisition of one or more large community based skilled nursing facilities within the District.

We have had two recent promising meetings with local nursing home operators outlining
our proposal to sublease their operation and assume their licenses as additions to our
distinct part skilled nursing bed complement. We have submitted a term sheet to one of
the facilities, outlining a proposal which is subject to Board approval. This acquisition
could have as much as a $2.0-2.5 million impact on our bottom line as a result of
allowing us to recoup more of our overall infrastructure expenses. Worst case, this
impact would mitigate the reimbursement cuts outlined above. In the best case, if the rate
reduction is not approved, this impact could mark the most significant improvement in
our operating performance that we have on the strategic horizon.

We are awaiting an indication, expected within a couple of weeks, of whether the second
facility with whom we are talking has a serious interest in similar discussions. Again, the
positive financial impact on the Hospital is estimated to be in the $2-2.5 million range.

We are heartened for the first time in a couple of years about the level of receptivity we
are experiencing and attribute it to the fact that our proposal would relieve these operators
of assuming their own risk of declining operating margins under AB 97. While not built
into our base budget for FY 2012, this strategic initiative would have a major favorable
impact on our operating margin