Variety Children's Hospital, Inc. (A Florida Not-for-Profit Organization) d/b/a Miami Children's Hospital Consolidated Financial Report December 31, 2013

!I McGladrey

Assurance • Tax • Consulting

Contents

Independent Auditor's Report on the Financial Statements

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Consolidated Financial Statements Consolidated balance sheets

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Consolidated statements of operations and changes in net assets

5-6

Consolidated statements of cash flows Notes to consolidated financial statements

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IMcGladrey Independent Auditor's Report

To Board of Directors Variety Children's Hospital, Inc. d/b/a Miami Children's Hospital Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Variety Children's Hospital, Inc. d/b/a Miami Children's Hospital and its subsidiaries (the Hospital) which comprise the consolidated balance sheet as of December 31, 2013 and the related consolidated statement of operations and changes in net assets and cash flows for the year then ended and the related notes to the consolidated financial statements. Management's Responsibility for the Consolidated Financial Statements

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Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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Auditor's Responslbillty

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the December 31, 2013 financial statements of Miami Children's Hospital Foundation, Inc., a foundation in which the Hospital maintains a beneficial interest. These statements reflect a beneficial interest of $81,811,997 in the net assets of Miami Children's Hospital Foundation, Inc. as of December 31, 2013, and an increase in the net assets of Miami Children's Hospital Foundation, Inc. of $692,769 for the year then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Miami Children's Hospital Foundation, Inc., is based solely on the report of the other auditors. We conducted our audit 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 consolidated financial statements are free from material misstatement. ili!llJ

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion

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Opinion In our opinion, based on our audit and the report of the other auditor, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Variety Children's Hospital, Inc. dJb/a Miami Children's Hospital and its subsidiaries as of December 31, 2013, and the results of its operations, changes in net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matter The consolidated financial statements of the Hospital as of and for the year ended December 31, 2012, were audited by other auditors whose report dated April 30, 2013 expressed an unmodified opinion on those statements, except their report indicated that the Foundation was audited by other auditors and their opinion as it relates to the Foundation, was based solely on the report of the Foundation's auditors.

Miami, Florida April 23, 2014

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Variety Children's Hospital, Inc. (A Florida Not-for-Profit Organization) d/b/a Miami Children's Hospital

Consolidated Balance Sheets December31, 2013 and 2012

Assets Current Assets Cash and cash equivalents Patient accounts receivable, net of allowances of $8, 183,000 and $6,526,000 in 2013 and 2012, respectively Current portion of assets limited as to use Other current receivables, including amounts due from Miami Children's Hospital Foundation of $3,392,000 and $2,227,000 in 2013 and 2012, respectively Inventories Prepaid expenses Total current assets Assets limited as to use: Self-insurance funding arrangement held by trustee Designated for funded depreciation Bond indenture agreements held by trustee Restricted investments Total assets limited as to use, net of current portion Investments Bond issue costs, net Beneficial interest in Miami Children's Hospital Foundation's net assets Property and equipment, net Other long-term assets Total assets See Notes to Consolidated Financial Statements.

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2013

2012

$ 46,917,559

$ 21,575,974

60,483,784 13,276,892

51,015,332 7,366,049

10,324,876 5,167,346 6,8031678 142,974,135

12,141,045 5,188,885 5,845,842 103, 133, 127

36,077,171 242,943,118 51,112,178 317451597 333,878,064

38,021,691 240,310,459 58,569,036 8,845,034 345,746,220

49,758,107 3,029,525

35,895,550 1,799,902

81,811,997 328,988,632 17,8371995 $ 958.278.455

81,119,228 293,745,151 16,140,939 $ 877,580,117

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2013

2012

$ 78,723,303 888,000 7,717,056 13,276,892 210501000 102,655,251

$ 73,690,696 888,000 7,126,209 7,366,049 33,625,000 122,695,954

Liability for self-insurance Fair value of swap agreements Long-term portion of notes payable Long-term portion of bonds payable Other long-term liabilities Total liablllties

49,251,486 25,418,099 1,776,000 234,925,193 4,0461816 418,0721845

53,714,674 48,129,032 2,664,000 205,623,505 4,777,403 437,604,568

Net assets: Unrestricted: Variety Children's Hospital and subsidiaries Noncontrolling interest in subsidiary Total unrestricted net assets

439,444,190 4051000 439,849,190

345,703, 186

70,190,635 3011651785 540,2051610

64,622,765 29,649,598 439,975,549

$ 958.278.455

$ 877,580,117

Liabllltles and Net Assets Current Liabilities Accounts payable and accrued expenses Current portion of notes payable Estimated third-party settlements payable Current portion of liability for self-insurance Current portion of bonds payable Total currant liabilities

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Temporarily restricted Permanently restricted Total net assets

345,703, 186

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Total liabilities and net assets 6.,

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Variety Children's Hospital, Inc. (A Florida Not-for-Profit Organization) d/b/a Miami Chlldren's Hospltal

Consolidated Statements of Operations and Changes In Net Assets Years Ended December 31, 2013 and 2012

Revenues, gains, and other support: Patient service revenue Provision for bad debts Net patient service revenue Grant and other revenue Investment income Net assets released from restrictions used for operations Total revenues, gains, and other support Expenses: Salaries and benefits Supplies Purchased services Depreciation and amortization Equipment rental and facility costs Malpractice and other insurance Interest Other Total expenses Income from operations before nonoperating activities Loss on conversion of debt Net unrealized gains on investments Net payments on swap agreements Gain on net change in fair value of swap agreements Revenues over expenses (Continued)

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2013

2012

$ 507,081,401 12,707,280 494,374,121 30,874,674 18,168,870 7,303,354 550,721,019

$ 456,791,712 9,659,424 447,132,288 26,954,301 21,949,184 9,221,163 505,256,936

287,904,191 53,987,485 50,390,513 29,974,083 25,651,557 20,953,204 6,025,555 15,543,419 490,430,007

273,811,953 54,674,592 46,490,410 25,414,007 24,405,235 16,187,007 6,435,360 7,182,356 454,600,920

60,291,012 (119,603) 14,124,290 (5,490,862) 22,710,933 91,515,770

50,656,016 4,336,445 (5,657, 126) 6,626,010 55,961,345

Variety Children's Hospital, Inc. (A Florida Not-for-Profit Organization) dlb/a Miami Children's Hospital

Consolidated Statements of Operations and Changes In Net Assets (Continued) Years Ended December 31, 2013 and 2012

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Unrestricted net assets: Revenues over expenses Net assets released from restrictions used for purchase of property and equipment Grant revenue used for purchase of property and equipment Capital contributions from noncontrolling interest in subsidiary Reclassification between funds Increase In unrestricted net assets

2013

2012

$ 91,515,770

$ 55,961,345

445,500

1,632,655 478,764

405,000 1,779z734 94,146,004

Temporarily restricted net assets: Contributions from the Foundation Contributions from others Change in value of charitable remainder trusts held by others Net assets released from restrictions used for operations Net assets released from restrictions used for property and equipment Change in beneficial interest in Miami Children's Hospital Foundation Reclassification between funds Increase In temporarily restricted net assets Permanently restricted net assets: Change in beneficial interest in Miami Children's Hospital Foundation Increase In permanently restricted net assets Increase In net assets Net assets at beginning of year Net assets at end of year

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See Notes to Consolidated Financial Statements.

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58,072,764

12,554,093 1,188,975 1,176,808 (7,303,354)

419,742 (9,221, 163)

(445,500)

(1,632,655)

176,582 (1,779,734! 5,567,870

12,036,652

516,187 516,187

452,272 452,272

100,230,061 439,975,549 5401205161 o

61,082,424 378,893, 125 ~ 439.9751549

954,812

2,557,388

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Variety Children's Hospital, Inc. (A Florida Not-for-Profit Organization) d/b/a Miami Children's Hospital

Consolidated Statements of Cash Flows Years Ended December 31, 2013 and 2012

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Cash Flows From Operating Activities Increase in net assets Adjustments to reconcile increase in net assets to net cash provided by operating activities: Change in net unrealized gain on investments Gain on fair value of swap agreements Depreciation and amortization Provision for doubtful accounts Change in beneficial interest in Miami Children's Hospital Foundation Change in value of charitable remainder trusts Loss (gain) on disposal of equipment Net realized gain on sales of unrestricted investments Loss on conversion of debt Amortization of bond (premium) discount Changes in operating assets and liabilities: Net increase in patient accounts receivable, other receivables, inventories, prepaid expenses, and other assets Net increase (decrease) in third-party settlements payable Net increase in accounts payable, accrued expenses, self-insurance, and other long-term liabilities Net cash provided by operating activities Cash Flows From Investing Activities Purchase of property and equipment Purchase of investments Proceeds from sales and maturities of investments Proceeds from sale of equipment Financing provided to affiliates Net cash used In Investing activities Cash Flows From Financing Activities Proceeds from restructure of bonds payable Repayment of bonds payable due to restructure Repayment and redemption of bond payable Bond conversion costs Repayment of bank loan Proceeds from sale of noncontrolling interest in subsidiary Transfers from Miami Children's Hospital Foundation Net cash provided by financing activities

$ 100,230,061

$ 61,082,424

(14,124,290) (22,710,933) 29,974,083 12,707,280 (692,769) (1, 176,808) 17,755 (18, 168,870) 119,603 (137,065)

(4,336,445) (6,626,010) 25,414,007 9,659,424 (12,488,924) 1,640,761 (2,669) (15,395,180)

(34,782,335) 590,847

(17,696,546) (1n,400)

5,805,998 57,652,557

16,761,395 57,877,800

(65,099,718) (16,220,729) 41,052,433

(75,422,308) (193,047,488) 192,381,333 12,438

42,963

{492,9nl {401760,9911

{76.076,025}

107,788,754 (106,300,000) (3,625,001) (1,484,827) (888,000) 405,000 12,554,093 8,450,019

(3,500,000) (888,000) 8,786,652 4,398,652

Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

25,341,585 211575,974 $ 46.917.559

(13,799,573) 35,375,547 $ 21,575,974

Supplemental Disclosures of Cash Flow Information Cash paid for interest, net of amounts capitalized

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2012

2013

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9.949.061

6,494.413

Variety Children's Hospital, Inc. (A Florida Not-for-Profit Organization) d/b/a Miami Children's Hospital Notes to Consolidated Financial Statements Note 1.

Organization

The accompanying consolidated financial statements include the consolidated accounts of Variety Children's Hospital, Inc. d/b/a Miami Children's Hospital (the Hospital) and its wholly owned subsidiaries, Miami Children's Hospital Research Institute, Inc. (Research Institute), MCH Pediatric Cardiology, LLC (Cardiology) and Miami Children's Insurance SPC (Limited). The Hospital also has a majority (62.5%) ownership in Canavan Partners, LLP (Canavan), with the remaining 37.5% interest owned by a minority partner. All profits in Canavan have been distributed to the partners annually since the inception of the partnership. The amount earned and paid to the minority partner during 2013 and 2012 was not material. In 2013, the Hospital created Miami Children's Hospital Ambulatory Surgery Center, LLC (MCH ASC). The Hospital plans to own 51% of the Corporation, which will operate an ambulatory surgery center located on the campus of Florida International University. Construction of MCH ASC will begin in early 2014. In December 2002, the Hospital fanned Miami Children's Insurance SPC Limited (Captive Insurance Company) in the Cayman Islands, a wholly owned subsidiary of the Hospital, to access professional liability insurance markets outside the United States of America. All significant intercompany balances and transactions have been eliminated in consolidation.

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On September 28, 2011, Miami Children's Health System, Inc. (the System) was incorporated as a holding company for the Hospital and future subsidiaries. In addition, the System will facilitate partnerships with private physicians and enter into joint ventures to access new markets and revenue opportunities. In 2012, the System's organizational framework was developed, and from inception through December 31, 2013, the System and its subsidiaries had minimal financial transactions. In 2012, the Hospital became a wholly owned subsidiary of the System. During 2012, Miami Children's Health Systems Foundation, Inc. (MCHSF) was formed. MCHSF was inactive during 2012 and 2013. Miami Children's Hospital Foundation, Inc. (the Foundation) is a separate tax-exempt organization whose sole purpose is to raise funds to support the activities of the Hospital. The Hospital does not control the activity of the Foundation and therefore it is not consolidated. The Hospital does recognize a beneficial interest in the net assets of the Foundation (see Note 9).

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The Hospital is a pediatric specialty hospital located in Miami-Dade County, Florida. The Hospital is licensed to operate a 289-bed facility consisting of 269 general acute-care beds and 20 psychiatry beds. The Hospital offers a comprehensive range of specialty and subspecialty services in treating pediatric patients. The Hospital owns and operates the Miami Children's Hospital Dan Marino Center in the West Broward County area and the MCH Palmetto Bay Center in Miami-Dade County. The Hospital also operates ambulatory centers in Doral, Miami Lakes, West Kendall, and Midtown Miami in Miami-Dade County, Miramar Center in Broward County and The Nicklaus Center in Palm Beach County. These centers extend pediatric specialty services throughout the South Florida area. The Research Institute perfonns comprehensive research in the cause, cure, and prevention of childhood diseases. Note2.

Summary of Significant Accounting Policies

Basis of presentation: The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Revenues, gains and other support are generally recognized when services are provided. Expenses are recognized when purchases of materials are made or services are rendered.

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Variety Children's Hospital, Inc. (A Florida Not-for-Profit Organization) d/b/a Miami Children's Hospital Notes to Consolidated Ff nancial Statements I

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Note2.

Summary of Significant Accounting Policies (Continued)

Use of estimates: The preparation of consolidated financial statements, in conformity with U.S. generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Hospital considers critical accounting policies to be those that require more significant judgments and estimates in the preparation of its consolidated financial statements, including the following: recognition of net patient revenues; valuation of accounts receivable, including contractual allowances and provision for doubtful accounts: reserves for losses and expenses related to health care, professional and general liabilities, and estimated third-party settlements. Management relies on historical experience and on other assumptions believed to be reasonable under the circumstances in making its judgments and estimates. Actual results could differ from these estimates. Cash and cash equivalents: Cash and cash equivalents include investments in highly liquid debt instruments with maturity of three months or less when purchased, excluding amounts whose use is limited. Accounts receivable for medical services: Accounts receivable for medical services are stated at net realizable value. The Hospital estimates the allowances for uncollectible accounts based on historical write-offs and the aging of the accounts. Accounts are written off when collection efforts have been exhausted. Concentration of credit risk: The hospital maintains its cash and cash equivalents with several large financial institutions. All accounts at these financial institutions are insured to the limits established by the Federal Deposit Insurance Corporation per bank. The hospital has cash deposits that exceed the federally insured deposited amounts. Management does not anticipate nonperformance by the financial institutions. The Hospital grants credit without collateral to its patients. The mix of net receivables from patients and third-party payers for the Hospital, which approximated $60,484,000 and $51,015,000 as of December 31, 2013 and 2012, respectively, is as follows: 2013 \iil;j

Medicare Medicaid and Medicaid HMO Managed care Self-pay and other

2012 1% 37% 53% 9% 100%

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1% 25% 68% 6% 100%

Inventories: Inventories, consisting primarily of medical supplies and drugs, are stated at the lower of cost (as determined by the average cost method) or market value.

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Variety Children's Hospital, Inc. (A Florida Not-for-Profit Organization) d/b/a Miami Children's Hospital Notes to Consolidated Financial Statements Note 2.

Summary of Significant Accounting Policies (Continued)

Investments (including assets limited as to use): Investments in equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the accompanying consolidated balance sheets. Investment income or loss (including realized gains and losses on investments, interest, and dividends) is included within revenues over expenses, unless the income or loss is restricted by donor or law. Unrealized gains and losses are recognized in income from operations for trading securities. The Hospital has elected to treat all of its investments, other than the alternative investments, as trading securities. Assets limited as to use include investments held by trustees under bond indenture agreements, selfinsurance trust arrangements, and assets designated for funded depreciation. The Hospital has elected the fair value option prescribed by ASC Topic 825-10, Financial InstrumentsOverall, for investments in investment funds which might otherwise qualify for the cost method or equity method of accounting and ASC Topic 958, Accounting for Certain Investments Held by Not-for-Profit Organizations. Management of the Hospital believes that presenting these investments at fair value provides for better indication of the Hospital's financial position as of each reporting date. As of December 31, 2013 and 2012, the Hospital recorded approximately $62,800,000 and $57,430,000, respectively, of alternative investment funds at fair value. Bond Issuance costs: Bond issuance costs relating to hospital revenue bonds are amortized to operations over the term of the related financing agreement using the effective-interest method. Amortization of bond issuance costs is included in amortization expense in the accompanying consolidated statements of operations and changes in net assets. Beneficial Interest in Miami Children's Hospital Foundation's net assets: The Hospital recognizes its interest in the net assets of the Foundation and adjusts its interest for its share of the change in net assets of the Foundation in accordance with Accounting Standards Codification (ASC) 958, Transfers of

Assets to a Not-for-Profit Organization or Charitable Trust that Raises or Holds Contributions for Others. The Hospital periodically requests funds from the Foundation for capital or other needs. Such requests are received by the Foundation and, if approved, funds are transferred to the Hospital. Such transfers of funds are reported in the accompanying consolidated statement of operations and change in net assets and included in operations or changes in net assets. The Hospital's beneficial interest in the unrestricted and temporarily restricted net assets of the Foundation and its share of the change in those net assets are reported in the accompanying consolidated financial statements in temporarily restricted net assets. The Hospital's beneficial interest in permanently restricted net assets of the Foundation and its share of changes therein are reported in the accompanying consolidated financial statements in permanently restricted net assets. Property and equipment: Property and equipment acquisitions are recorded at cost if purchased or fair value if donated. Expenditures that materially increase values, change capacities, or extend useful lives are capitalized. Depreciation is recorded over the estimated useful life of each class of depreciable asset (which ranges from approximately 1O years to 40 years for buildings and 3 years to 10 years for furniture, fixtures, and equipment), except works of art, which are not depreciated, and is computed using the straight-line method. I liOi;i

Interest cost incurred on borrowed funds during the period of construction of capital assets is capitalized as a c~mponent of the cost of acquiring those assets. During 2013 and 2012, the Hospital capitalized approximately $1,364,000 and $620,000 of interest expense, respectively. 10

Variety Children's Hospital, Inc. (A Florida Not-for-Profit Organization) d/b/a Miami Children's Hospital Notes to Consolidated Financial Statements Note 2.

Summary of Significant Accounting Policies (Continued)

Gifts of long-lived assets such as land, buildings, equipment, or works of art are reported at fair value at the date of donation as unrestricted support and are excluded from revenues over expenses, unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, expirations of donor restrictions are transferred from restricted to unrestricted when the donated or acquired long-lived assets are placed in service. Other long-term assets, temporarily restricted: The Hospital is the beneficiary of two irrevocable charitable remainder trusts. Assets, which consist of investment accounts held in the trust's name, are released from donor restrictions by the occurrence of time or events specified by the donor. The Hospital's interests in these charitable remainder trusts are included in other long-term assets recorded at the present value of the fair market value on the accompanying consolidated balance sheets. Changes in the fair value are recorded as changes in temporarily restricted net assets. Impairment of long-lived assets: The Hospital evaluates long-lived assets regularly for impairment whenever adverse events or changes in circumstances or business climate indicate that expected future cash flows may not be sufficient to support the recorded asset. If circumstances suggest that assets may be impaired, an assessment of recoverability is performed prior to any write-down of assets. An impairment charge is recorded on those assets for which the estimated fair value is below its carrying amount. The Hospital has concluded that no significant impairment existed as of December 31, 2013 and 2012. Self-Insurance programs: The Hospital is self-insured or retains a portion of the risk for certain employee health claims, workers' compensation claims, and professional liability claims. The provision for estimated health, professional liabilities, and workers' compensation claims includes estimates of the ultimate costs for both reported claims and claims incurred but not reported. Derivative financial Instruments: The Hospital accounts for derivative financial instruments in accordance with FASB ASC 954-815, Accounting for Derivative Instruments and Hedging Activities by Not-for-Profit Health Care Organizations, and Clarification of the Performance Indicator, which requires not-for-profit health care organizations to apply the provisions of ASC 815-10, Accounting for Derivative Instruments and Hedging Activities, as amended (including the provisions pertaining to cash flow hedge accounting), in the same manner as for-profit enterprises. As part of its investment strategy and capital financing plan, the Hospital has entered into interest rate and basis swap transactions. In accordance with ASC 815-10, the swap transactions have been recorded at fair value based on current termination values or quoted market prices of comparable agreements. In addition, the swap transactions involve the periodic exchange of payments between the Hospital and the swap counterparty pursuant to contract terms. The net payments made from these exchanges are reported as net payments on swap agreements in the accompanying consolidated statements of operations and changes in net assets for the years ended December 31, 2013 and 2012.

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Variety Children's Hospital, Inc. (A Florida Not-for-Profit Organization) d/b/a Miami Children's Hospital Notes to Consolidated Financial Statements Note2.

Summary of Significant Accounting Policies (Continued)

ASC 954-815 additionally requires the net change in the fair value of swap agreements not designated as hedging activities to be included within the performance indicator. The Hospital has recorded the change in fair value of the swap agreements within revenues over expenses. Unrestricted, temporarily restricted, and permanently restricted net assets: Unrestricted net assets represent resources generated from operations, proceeds of debt issuance, unrestricted donations, and lapse of temporary restrictions that are no longer subject to donor-imposed stipulations. Temporarily restricted net assets are those whose use by the Hospital has been limited by donors to a specific time period or purpose. Permanently restricted net assets have been restricted by donors to be maintained by the Hospital in perpetuity. Generally, the donor of these assets permits the Hospital to use all or part of the income earned on related investments for general or specific purposes. Net patient service revenue: The Hospital has agreements with third-party payors that provide for payments to the Hospital at amounts different from its established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, and per diem payments. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors, and others when the services are rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payers. Retroactive adjustments are accrued on an estimated basis in the period that the related services are rendered and adjusted in future periods as final settlements are determined. Management believes these final settlements will not materially impact the consolidated financial statements. Grants and contracts: Reciprocal grants and contracts revenue is recognized when the expenses have been incurred for the purpose specified by the granter or in accordance with the terms of the agreement. Payments received in advance are reported as temporarily restricted net assets. Grant and contract amounts due to the Hospital are included in other receivables.

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Charity care: The Hospital provides care to patients who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Such patients are identified based on financial information obtained from the patient and subsequent analysis. Because the Hospital does not pursue collection of amounts determined to qualify as charity care, they are not reported as net patient service revenue. The Hospital maintains records to identify and monitor the level of charity care it provides. These records include the charges for services and supplies furnished under its charity care policy. Adjustments for free care are recorded at the time services are provided. The cost of providing charity care is based on the ratio of cost to gross charges, and during the years ended December 31, 2013 and 2012 was approximately $605,000 and $2,244,000 respectively. '

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Variety Children's Hospital, Inc. (A Florida Not-for-Profit Organization) d/b/a Miami Children's Hospital Notes to Consolidated Financial Statements Note2.

Summary of Significant Accounting Policies (Continued)

Donor contributions: Unconditional promises to give cash and other assets to the Hospital are reported at fair value at the date the promise is received. Conditional promises to give and indications of intentions to give are reported at fair value at the date the condition is met. The contributions are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the accompanying consolidated statements of operations and changes in net assets as net assets released from restrictions. Donor-restricted contributions whose restrictions are met within the same year as received are reported as unrestricted contributions in the accompanying consolidated financial statements. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor.

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