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Merger Proc ess Upda teApril 29, 2011

Planning & Integration Phase

Content

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Merger Process Update is pub lished pe riodic ally to kee p m em bers of th

Northeast Hea lth, St. Peters, and Seton Health c om munities informed on

the progress to merge these three organizations and improve access to

and de livery of, health ca re in our region.

Affilia tion Summary

Ove rall, signific ant p rog ress c ontinues to be ma de in prepa ring the ope rat ion of the new hea lth system .

The Federa l Trad e Com mission (FTC) ha s c losed its extensive CiReview of the m erge r of Northea st Hea lth, St. Pete rs Health CaServices and Seton Health w ithout c hallenging the me rge r.

The FTC a c tion rep resents a signific ant m ilestone tow ard the finatransac tion to c om bine the th ree organizat ions.

Work has be gun to prepa re the lega l and financial doc umentsnec essary to c om plete the transac tion. It is expec ted that the filega l transac tion that w ill c rea te the new me rge d hea lth systemwill oc cur la te this summe r.

While c om p letion o f the FTC Civil Review is a signific antmilestone in the m erger process, it doe s not c om p lete the c rea tof the ne w he a lth system . The a c tua l merger will oc cur onc e keplanning a nd integration ac tivities have b een c onc luded .

The new no t-for-p rofit orga nizat ion tha t will bec om e the pa renc orpo ra tion for the Northeast Hea th, St. Pete rs and Seton Heasystems is expec ted to b e c omp leted be fore the end of thesumm er. The c rea tion and sta rt o f op erations of the new parent

c orporation will signify the ac tua l c om pletion of the m erger.

Regulato ry Proc ess

The FTC b eg an its review in June 2010, a fte r the forma l Affiliat ionAg ree me nt was signed. The FTC review w as rout ine andexpected.

Work rela ted to fulfilling reg ulato ry req uirem ents for the me rger be en a p rimary foc us of most me rge r-related a c tivity since m id -

2010.

Leadership

System Design Assessment3

System Iden tity Proc ess

Othe r Informat ion4

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To e nsure tha t the institutions fully me t the FTC s request fo r darela ted to the assessme nt, officia ls from Northea st Hea lth,St. Pete rs and Seton Hea lth retrieved and sea rc hed throughnea rly eight million p ap er and e lectronic do cume nts -- with anaverage length o f more than six pa ge s pe r do c ument.Eventua lly ab out 100,000 doc uments were submitted to the FTto m ee t their req uest.

The FTC d ec ision a lso means that the three orga nizations cannow b eg in a final Planning a nd Integ ration Process that willbring the Affiliation Ag reem ent and a conc ep tual design of th

new health system to a n op erational level.

Desp ite ha ving signed the b inding Affiliation Ag reem ent last yeareg ulatory ba rriers still prevented the organizations from sharingwith each other such sensitive information as pricing, salaries,be nefits, ma rket share, and othe r key operationa l data necessato c omp lete the merger.

Planning and Integra tion Phase

With the FTC a c tion, the Planning a nd Integra tion Process c an nowbe gin imm ed iately.

Planning and Integration Workgroups will be formulated in thenext few weeks. With g uida nce from senior ma nag eme nt,these w orkgroups will rec om me nd and prioritize w hat functionand servic es must be integ rat ed , and w hat c hang es must bemad e for the merger to b e c omp leted.

Exec utive Management will be working w ith Deloitte Consultinto prioritize the Planning a nd Integration ac tivities and the

supporting Planning and Integration workgroups. Workgrouppa rticipa nts will be chosen from all three entities by subjec tma tter expe rtise a nd ap p rop riate sta ff from a ll related entitieswill be rep resented.

Ac tion plans will be developed to co mp lete the highest prioritactivities.

Next steps will then be de termined ba sed on several fac tors.The full implem entation process is exp ec ted to take plac e ove

the next three years.

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Leadership

As previously anno unc ed there is no immed iate e ffec t on theop eration of any o f the three o rga nizat ions and it is not expe c ted thave any impa ct until all pre-merge r ac tivities have bee n c omp letHow eve r, som e informa tion reg a rding the lea de rship of the newparent organization is known.

Steven Boyle, the current Preside nt, CEO o f St. Peter s, will bCEO o f the new c om pany. Jame s Ree d, MD, cu rrent ly Pres& CEO o f Northeast Health, will be the President o f the ne wc om pany. Both w ill rep ort d irec tly to the new Boa rd of Trust

A p ermanent senior mana gem ent structure for the new heasystem will also soon be d evelop ed as part of the planning

integ ration phase.

System Design Assessment

The o verall goa l of the Planning a nd Integ ra tion Proc ess w ilto impleme nt a preliminary blueprint of the new health casystem that wa s deve loped in 2010. A key a spec t of the plathe estima ted investment of $55 million in fac ilities andinformation technology upgrades nearly $6 million ininformation tec hnology a nd nea rly $50 million in fa c ilityupg rad es at the two Troy hosp ita ls and Alba ny Mem orialHosp ital. Troy w ill also bene fit from the ava ilab ility of moresop histic ated ca rdiac service s and a new outpa tient c anctrea tment c enter.

The p ropo sed design of the new hea lth system includes therec onfigura tion and me rging of c ertain servic es, pa rticularlythe four ac ute c a re hospitals which will ma ke up the ne wsystem -- St. Ma rys and Samarita n hosp ita ls in Troy, and AlbMe mo rial and St. Pete r s hosp itals in Alba ny.

All four ac ute c are hospitals will continue to op erate und er p rop osed p lan, as w ill Sunnyview Reha b ilitation Hosp ital inSche nec tad y. While the new c orpo ration is expec ted to b eforma lly create d this summ er, it co uld ta ke a s ma ny as threyears for the new c orporation to ma ke many of the c hang eand t o fully integra te the three c urrent he a lth system s.

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System Identity Proc ess

A p roc ess to selec t a na me and identity for the neworganizat ion has bee n und erway for som e time. Significantp rog ress has bee n made in this p roc ess, but w ork co ntinues.These rec om me ndations will be p resented to the Boa rds of ththree organizations this summer.

An Imp leme nta tion Plan, along w ith a time line, is a lso b eingde veloped . The new ide ntity will not be ad op ted until the newcorpo ration is formed by the final me rge rtransaction.

This proc ess is muc h more tha n d ete rmining a new nam e andlog o fo r the new c orporation. It is ab out ho w w e represent thenew c orporation and its com po nents in thousand s ofinterac tions with the pub lic ea c h da y, and to ma ke it ea sier fothem to identify and find t he servic es they nee d .

Other Information Northea st Health w ill continue to be a sec ular organiza tion. Th

new orga nizat ion w ill abide by the Ethic a l and ReligiousDirec tives (ERDs) for Ca tho lic Hea lth Services. How ever,Northea st Health rem ains com mitted to ensuring tha trep rod uc tive services a re a va ilab le in Rensselae r Co unty.

In light o f that c om mitment, Northeast Health has c rea tedBurdett Ca re Center (BCC ), a sep arate ly licensed hospital thawill provide ma ternity and rep rod uc tive servic es on t heSama ritan c amp us. State ap prova ls and c onstruct ion for BCC

have b een c omp leted and it will becom e op erational at thesame time the merge r betw ee n St. Pete r s, Northea st Hea lthand Seto n Hea lth is finalized .

St. Ma rys maternity servic es will mo ve to BCC a fter the m ergehas be en c omp leted . A de c ision on the da te will be ma de aswe mo ve fo rwa rd with the Plann ing & Integration Phase, but inot expe c ted to oc cur soo ner than three mo nths po st-merge

If you have any questions, please direc t them to your

manager, direc tor or Vice President.