Getting To Great By Elevating The Patient Voice2017 National Health Council

Annual Report

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Contents

Letter From Our CEO and Board Chair p. 3

Amplifying the Voice of the Patient in Public Policy and Advocacy p. 4

Health Care Reform p. 4

User-Fee Agreements p. 4

Health Care Costs p. 4

Amplifying the Patient Voice p. 5

Recommended Language for FDA Guidance Documents p. 5

Multi-Stakeholder Roundtables p. 5

Value Workgroup p. 5

Quality Patient Advisory Committee p. 5

Increasing Member Benefits through Engagement p. 6

New Dues Structure p. 6

Engaging a Diverse Membership via Marquee Meetings p. 6

Standards of Excellence®: Leading the Way Through Transparency p. 7

Growth in NHC Membership Portfolio and High Retention of Existing Members p. 8

Steering NHC and Networking with Colleagues: Action Teams, Affinity Groups,

Committees & Task Forces p. 9

Delivering Our Messages Using Traditional and New Media p. 10

Representing the Patient Community via Speaking Engagements p. 10

NHC in the News p. 11

Engaging via Digital Media and the Web p. 12

A Strong Financial Base to Support Our Mission p. 12

2017 Audited Financial Report p. 13

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Jim Collins, in Good to Great, defines a great organization as one with superior performance that makes an impact over a long period of time. Over the past year, we excelled at providing a united voice for the more than 133 million Americans with chronic diseases and disabilities and their family caregivers.

We have done this through:

1. Superior Performance: The National Health Council, with our members, preserved patient protections in the Affordable Care Act for millions; inserted the voice of the patient in public policy debates and development; and defended the patient advocacy sector on credibility and transparency issues. You could say we are a small organization that punches well above our weight.

2. Distinctive Impact: The National Health Council is a patient-centered, multi-stakeholder group that addresses systemic health policy issues. No other organization brings together the entirety of the health care ecosystem to address these issues – all while elevating the voice of the patient in everything we do.

3. Lasting Endurance: The National Health Council is in the final year of a successful three-year, Board-designed strategic plan that fundamentally changed the way we operated. But it was only the beginning. As we develop our 2019-2021 Strategic Plan, we will build upon and accelerate the successes of the past three years. This momentum will allow us to address access and affordability issues for millions of people with chronic conditions within the context of an ever changing environment.

We encourage you to explore this report and to engage with us as we collectively elevate the voice of those with chronic diseases and disabilities and their family caregivers.

Cyndi Zagieboylo Marc Boutin, JDChair, 2017 NHC Board of Directors and Chief Executive OfficerPresident & CEO National Health CouncilNational Multiple Sclerosis Society

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In 2017, the NHC’s public policy and advocacy efforts brought the voice of the patient, and their family caregivers, into legislative debates on Capitol Hill and government agencies. Because of those efforts, tens of millions of people continue to have access to affordable health care, the patient is being more fully engaged in drug and device development, and rising health care costs are being addressed.

Health Care Reform

The NHC, its patient-advocacy members, and other partners worked tirelessly in the spring and summer to defend important patient protections provided by the Affordable Care Act. The NHC galvanized the patient community and hundreds of thousands of grass roots advocates to stop passage of harmful bills so that millions of Americans kept their access to affordable, quality health care.

User-Fee Agreements

The NHC ensured the voice of the patient was included in the negotiation of several user-fee agreements. The NHC was instrumental in Congressional passage of these transformative agreements, which included key patient-focused provisions such as patient engagement, Real-World Evidence, biomarkers and patient-reported outcomes, combination products, rare disease program, and FDA hiring. The President signed the user-fee agreements into law in August, and the NHC will work with the FDA to ensure implementation continues to be patient focused.

Health Care Costs

In April, the NHC launched several policy proposals in four key areas to help rein in the high cost of health care, including expediting the approval of generic applications and competitor products, promoting meaningful transparency around price and cost-sharing, encouraging outcomes-based contracting, and facilitating the implementation of value-based insurance design. NHC and several of our patient advocate members presented the proposals to the Secretary and staff of the Department of Health and Human Services during the first in a series of listening sessions. Many of the policy proposal have been included in legislative vehicles that have already passed and signed into law, are in process, or are being implemented by the administration such the FDA Reauthorization Act, Center for Medicare and Medicaid Services regulations, and legislation under consideration by Congress.

Amplifying the Voice of the Patient in Public Policy and Advocacy

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Amplifying the Patient VoiceThroughout the year, the NHC engaged with government officials, industry, and other organizations to amplify the voice of the patient throughout regulatory and medical product development processes.

Recommended Language for FDA Guidance Documents

The NHC, in partnership with the Genetic Alliance, developed recommended language for Food and Drug Administration consideration as it produces guidance documents on patient engagement. The process was informed by engaging NHC members and others in patient-led working groups.

Multi-Stakeholder Roundtables

The NHC also engaged our members and others in the health care community via a trio of multi-stakeholder roundtables, all designed to encourage more meaningful patient engagement. In May, the NHC held a half-day Representativeness Roundtable to develop a common understanding of representativeness and a roadmap and rubric on how to address challenges. In June, a roundtable focused on Sponsor-Patient Interactions During Drug Development assembled good-practice insights on interactions between product sponsors and patients. Patients’ views of Real-World Evidence (RWE) were gathered at a July roundtable. Findings were developed into a report and shared with government agencies and others exploring the topic of Real-World Evidence.

Value Workgroup

Partnering with the University of Maryland, Baltimore and the NHC Value Workgroup, the NHC developed and beta-tested a seven-module educational program that explores industry-level value assessment and health economics. Both educational programs will be launched to the public in 2018.

Quality Patient Advisory CommitteeThe NHC, with the expertise of our quality patient advisory committee, a multi-stakeholder group primarily consisting of patient organizations, developed and beta-tested a six-module educational program outlining the role patient advocates and advocacy organizations can have in quality measures and programs.

Photo from Roundtable on Real-World Evidence.

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Increasing Member Benefits through Engagement NHC member organizations were engaged, educated, and enthusiastic in 2017. NHC’s dedicated staff provided new opportunities for engagement as well as improved services and policies to serve the best interests of the health care community in general and patient advocates specifically.

New Dues Structure

In 2017, the NHC updated its dues structure for the first time since the 1960s. The new dues structure simplified the process and reduced dues for nonprofits by 20 percent. Approved by the NHC Board of Directors in 2017, the new dues structure has increased membership and overall dues revenue.

Engaging a Diverse Membership via Marquee Meetings

30th Annual Health Leadership Conference

Overall, the NHC’s marquee meetings have engaged a larger and more diverse cross-section of members than ever before. The 30th Annual Health Leadership Conference, themed The Power of Partnerships, brought more than 100 CEO and Board volunteers from patient advocacy organizations and non-profits to Tampa, FL, to network and discuss the unique issues impacting the patient-advocacy community.

Chief Medical/Scientific Officers Conference

The second annual Chief Medical/Scientific Officers Conference in September in Washington, DC, included leaders in research and other areas of NHC member organizations as well as non-members and government agencies, including the Food & Drug Administration and CMS. With a theme “Lessons Learned and Pathways Forward: Practical Experiences in Patient Engagement,” attendees shared their practical experiences and best practices on ways to better engagement patients. A white paper of those practices was released at the conference.

A panel at the NHC’s Chief Medical and Scientific Officers Conference.

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NHC Washington Representatives Retreat

In late November, member government relations professionals convened in Annapolis, MD, for the annual NHC Washington Representatives Retreat, where they discussed and debated the current landscape in health care policy and where it may be headed in 2018.

Annual Membership Meeting

Lastly, in December the entire NHC membership assembled for the Annual Membership Meeting in Washington, DC, where members of the U.S. Congress and Administration gave their perspectives on the current health care landscape and how the patient advocacy community could best engage with both Capitol Hill and various government agencies. Speakers included Eric Hargan Acting Secretary of Health and Human Services (HHS) at the time; Amy Bassano, Acting Deputy Administrator for Innovation and Quality of the Centers for Medicare and Medicaid Services and Director of the Center for Medicare and Medicaid Innovation; and Representative Tom Reed (R-NY) and Representative Josh Gottheimer (D-NJ), Co-Chairs of House Problem Solvers Caucus.

Standards of Excellence®: Leading the Way Through Transparency

This year we implemented changes to how the NHC and its patient-advocate member organizations provide transparent financial and governance information to the public. Each of the NHC’s patient advocacy organization members must meet the NHC Standards of Excellence® to retain good membership standing. Updates were made to 13 Standards related to public accountability and transparency, with an emphasis on corporate relations and transparency. The NHC follows the Standards of Excellence and discloses the financial support it receives from all sponsors. The NHC provided key resources and spoke-out publicly on the importance of independence from undue influence – taking it from a hot topic in early 2017 to a non-issue by summer.

This was my first retreat, as we only recently became members of the NHC. My boss and I were very impressed with not only the quality of the speakers and their presentations but also impressed with the diversity and knowledge of the other attendees.”

“

Rep. Reed (R-NY) and Rep. Schrader (D-OR) at NHC’s 2018 Annual Meeting.

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Growth in NHC Membership Portfolio and High Retention of Existing Members

In 2017, 11 new organizations joined the National Health Council, increasing the diversity of our member base. In addition, the NHC retained more than 90% of it’s existing membership. The NHC is pleased the following organization joined as members in 2017:

Patient Advocacy Organizations

Professional & Membership Associations

Business & Industry

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Steering NHC and Networking with Colleagues: Action Teams, Affinity Groups, Committees & Task Forces

Nearly 700 individuals working at NHC member organizations provided guidance and direction for the NHC and networked with each other through the various NHC Action Teams, Affinity Groups, Committees, and Task Forces. These groups meet throughout the year to help shape NHC policy positions, provide governance oversight to the NHC, and shared best practices with fellow members. We thank the volunteers who dedicate their time to the work of these committees.

• Audit Committee• Board Policy Committee• Brand/Value Task Force*• Chief Development Officers Affinity Group• Chief Financial Officer Affinity Group• Chief Medical/Scientific Officers and Research Directors Affinity Group• Communications Affinity Group• Executive Committee• Finance Committee• Government Relations Affinity Group• Health Care Reform Action Team• Medical Innovation Action Team• Membership Committee• Policy Action Team• Quality Patient Advisory Committee• Revenue Diversification Task Force**• Value Workgroup

* Created in 2017.** Decommissioned in 2017.

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Delivering Our Messages via Traditional and New MediaThe NHC occupies a unique position in the health care ecosystem. Through our diverse membership, the NHC can speak with authority on many systemic health care issues, providing a unified voice for patients with chronic conditions and their family caregivers.

Representing the Patient Community via Speaking Engagements

In 2017, the NHC executives and staff were invited to take part in more than 70 speaking engagements on far-reaching, patient-focused topics such as Real-World Evidence, value, quality, health care costs, and patient-focused drug development. The NHC staff spoke at meetings and conferences such as the Morning Consult’s “The Value Collaborative’s Initiative,” the Patient as Partner’s Annual Conference, FDA, the Department of Health and Human Services, the Duke-Margolis Workshop on Clinical Outcome Assessments in Drug Development, and the National Institutes of Health. For many of these engagements, NHC speakers bring, and sometimes introduce, the voice of the patient to the audiences, demonstrating how an engaged patient population makes for better policy, treatments, and cures.

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NHC in the News

Often, the NHC is asked to provide comment to the news media on a variety of topics. We also proactively engage with the news media to ensure the voice of the patient is included in the public discourse. NHC spokespersons were featured in media outlets such as:

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Engaging via Digital Media and the Web

The NHC’s social media presence experienced steady growth throughout 2017, with increases in followers and engagement on our Twitter, Facebook, and Linkedin networks. We interacted with nearly 500,000 social media users during 2017. This includes our most popular post of the year. Our video about the negative impact of repealing the Affordable Care Act was viewed by thousands of people – helping prevent ACA repeal and replace. The NHC also began revamping sections of its website, so that members, non-members, patient advocates, and the public can find resources and information on the issues and events that have the greatest impact on the patient advocacy community more quickly and easily.

A Strong Financial Base to Support Our MissionEach summer, the NHC posts its IRS Form 990 on the About the NHC page of our website. Over the past three years, the NHC increased revenue by 10%. The audited financial statement for fiscal year 2017 begins on the next page.

NATIONAL HEALTH COUNCIL, INC.

DECEMBER 31, 2017 AND 2016

TABLE OF CONTENTS

Page

Independent Auditors’ Report 1 - 2

Financial Statements:

Statements of Financial Position 3

Statements of Activities 4

Statements of Functional Expenses 5 - 6

Statements of Cash Flows 7

Notes to Financial Statements 8 - 14

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INDEPENDENT AUDITORS’ REPORT

To the Board of DirectorsNational Health Council, Inc.Washington, D.C.

We have audited the accompanying financial statements of National Health Council, Inc. (anonprofit organization), which comprise the statements of financial position as of December 31, 2017 and 2016, and the related statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

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

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors considerinternal control relevant to the entity’s preparation and fair presentation of the 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 bymanagement, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

11921 Rockville Pike, Suite 501 301.770.5500 Voice North Bethesda, Maryland 301.881.7747 Fax 20852-2794 cpas@sarfinoandrhoades.com

J Gregory Sarfino CPA David R Himes CPA Michael J Devlin CPABrian W Dow CPA www.sarfinoandrhoades.com

Certified Public Accountantsand Business Advisors

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Opinion

In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of National Health Council, Inc. as of December 31, 2017and 2016, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

February 26, 2018

NATIONAL HEALTH COUNCIL, INC.

STATEMENTS OF FINANCIAL POSITION

2017 2016

CURRENT ASSETS:Cash (Notes 1 and 4) 2,306,956$ 2,389,335$Investment (Notes 1, 2 and 3) 517,985 508,789Pledges and accounts receivable (Notes 1 and 9) 465,489 252,230Prepaid expenses and other 51,237 18,041

TOTAL CURRENT ASSETS 3,341,667$ 3,168,395$

PROPERTY AND EQUIPMENT (Notes 1 and 5) 147,779 148,459

OTHER ASSET:Lease deposit 15,878 15,878

TOTAL ASSETS 3,505,324$ 3,332,732$

CURRENT LIABILITIES:Accounts payable 162,483$ 356,877$Accrued expenses 113,335 60,537Deferred compensation liability (Note 8) 20,514 -Deferred revenue (Note 1) 603,631 539,753

TOTAL CURRENT LIABILITIES 899,963$ 957,167$

LONG TERM LIABILITY:Deferred rent (Note 10) 251,826 263,370

TOTAL LIABILITIES 1,151,789$ 1,220,537$

COMMITMENTS (Note 10)

NET ASSETS (Notes 1 and 7):Unrestricted 1,351,762$ 1,073,925$Temporarily restricted 1,001,773 1,038,270

TOTAL NET ASSETS 2,353,535$ 2,112,195$

TOTAL LIABILITIES AND NET ASSETS 3,505,324$ 3,332,732$

ASSETS

LIABILITIES AND NET ASSETS

DECEMBER 31,

The accompanying notes are an integral part of these financial statements.

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NATIONAL HEALTH COUNCIL, INC.

STATEMENTS OF ACTIVITIES

Temporarily TemporarilyUnrestricted Restricted Total Unrestricted Restricted Total

SUPPORT AND REVENUE (Notes 1 and 6):Support:

Sponsorship contributions and grant 203,711$ 2,285,175$ 2,488,886$ 53,425$ 2,383,900$ 2,437,325$Membership dues 1,224,980 - 1,224,980 1,272,421 - 1,272,421Contributed services 115,574 - 115,574 - - -

Honoraria 35,925 - 35,925 23,452 - 23,452Interest and dividend income 8,931 - 8,931 8,512 - 8,512Publication sales and other income 4,388 - 4,388 2,126 - 2,126Unrealized gain on investments 392 - 392 2,858 - 2,858Net assets released from restrictions 2,321,672 (2,321,672) - 2,769,557 (2,769,557) -

TOTAL SUPPORT AND REVENUE 3,915,573$ (36,497)$ 3,879,076$ 4,132,351$ (385,657)$ 3,746,694$

EXPENSES:Program services:

Special projects 1,606,246$ -$ 1,606,246$ 1,668,071$ -$ 1,668,071$Member services 1,147,617 - 1,147,617 1,174,624 - 1,174,624Conferences 339,130 - 339,130 318,448 - 318,448Publications 16,543 - 16,543 22,863 - 22,863

Total program services 3,109,536$ -$ 3,109,536$ 3,184,006$ -$ 3,184,006$Supporting services:

General and administrative 294,897$ -$ 294,897$ 101,100$ -$ 101,100$Governance 108,745 - 108,745 103,664 - 103,664Membership development 60,260 - 60,260 77,326 - 77,326Fundraising 55,817 - 55,817 32,914 - 32,914Strategic planning 8,481 - 8,481 543 - 543

Total supporting services 528,200$ -$ 528,200$ 315,547$ -$ 315,547$

TOTAL EXPENSES 3,637,736$ -$ 3,637,736$ 3,499,553$ -$ 3,499,553$

CHANGES IN NET ASSETS 277,837$ (36,497)$ 241,340$ 632,798$ (385,657)$ 247,141$

NET ASSETS, BEGINNING OF YEAR 1,073,925 1,038,270 2,112,195 441,127 1,423,927 1,865,054

NET ASSETS, END OF YEAR 1,351,762$ 1,001,773$ 2,353,535$ 1,073,925$ 1,038,270$ 2,112,195$

2017 2016FOR THE YEARS ENDED DECEMBER 31,

The accompanying notes are an integral part of these financial statements.

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NATIONAL HEALTH COUNCIL, INC.

STATEMENT OF FUNCTIONAL EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2017

Total TotalSpecial Member Program General and Membership Strategic SupportingProjects Services Conferences Publications Services Administrative Governance Development Fundraising Planning Services Total

Personnel Costs:Salaries 669,139$ 475,763$ 134,711$ 5,396$ 1,285,009$ 123,123$ 51,734$ 36,435$ 35,216$ 3,256$ 249,764$ 1,534,773$Fringe benefits 162,043 112,642 32,369 1,311 308,365 20,292 12,398 8,745 8,474 802 50,711 359,076

Fees:Contract 530,703 357,489 9,433 7,492 905,117 1,570 11,613 3,609 1,784 2,266 20,842 925,959Legal 4,532 9,094 912 36 14,574 116,408 350 247 238 22 117,265 131,839Accounting and audit 30,613 21,765 6,163 247 58,788 5,632 2,367 1,667 1,611 149 11,426 70,214Computer 19,777 17,069 3,267 131 40,244 2,977 1,251 881 851 79 6,039 46,283

Occupancy 89,030 63,301 17,924 718 170,973 16,380 6,883 4,848 4,686 433 33,230 204,203Conferences, conventions

and meetings 38,157 35,981 117,574 10 191,722 234 17,795 389 122 6 18,546 210,268Depreciation and amortization 14,910 10,602 3,002 121 28,635 2,743 1,153 812 785 73 5,566 34,201Travel 13,614 7,314 4,893 - 25,821 11 133 428 95 979 1,646 27,467Equipment rental and

maintenance 8,498 6,042 1,711 69 16,320 1,564 657 463 447 41 3,172 19,492Insurance 7,989 5,678 1,608 65 15,340 1,468 618 435 420 39 2,980 18,320Telephone 5,297 5,398 1,230 18 11,943 398 413 585 165 17 1,578 13,521Office supplies 4,360 3,392 968 36 8,756 798 351 236 228 289 1,902 10,658Bank charges and fees 3,106 2,199 623 25 5,953 613 239 168 163 15 1,198 7,151Membership dues 925 5,459 45 2 6,431 41 17 12 382 1 453 6,884Printing 650 1,731 2,143 405 4,929 106 575 176 30 3 890 5,819Staff development 2,506 1,827 397 16 4,746 479 153 107 104 10 853 5,599Advertising - 2,798 - - 2,798 - - - - - - 2,798Publications and subscriptions - 1,765 - 443 2,208 - - - - - - 2,208Postage and shipping 288 169 52 2 511 44 18 13 12 1 88 599Messenger and express mail 109 139 105 - 353 16 27 4 4 - 51 404

TOTAL EXPENSES 1,606,246$ 1,147,617$ 339,130$ 16,543$ 3,109,536$ 294,897$ 108,745$ 60,260$ 55,817$ 8,481$ 528,200$ 3,637,736$

Program Services Supporting Services

The accompanying notes are an integral part of these financial statements.

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NATIONAL HEALTH COUNCIL, INC.

STATEMENT OF FUNCTIONAL EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2016

Total TotalSpecial Member Program General and Membership Strategic SupportingProjects Services Conferences Publications Services Administrative Governance Development Fundraising Planning Services Total

Personnel Costs:Salaries 625,442$ 551,528$ 121,840$ 11,606$ 1,310,416$ 69,001$ 46,617$ 48,581$ 22,062$ 315$ 186,576$ 1,496,992$Fringe benefits 140,262 126,733 26,888 2,630 296,513 14,760 10,480 11,038 5,104 76 41,458 337,971$

Fees:Contract 700,500 311,278 12,462 5,305 1,029,545 620 17,397 5,693 272 77 24,059 1,053,604Computer 17,245 16,322 2,582 247 36,396 1,462 985 1,029 467 7 3,950 40,346Accounting and audit 8,451 7,452 1,646 156 17,705 932 631 656 298 4 2,521 20,226Legal 3,459 3,601 674 64 7,798 382 256 269 122 2 1,031 8,829

Occupancy 85,361 75,271 16,629 1,585 178,846 9,416 6,357 6,630 3,011 43 25,457 204,303Conferences, conventions

and meetings 27,110 38,688 120,141 - 185,939 4 17,063 174 2 - 17,243 203,182Depreciation and amortization 16,440 14,496 3,202 306 34,444 1,814 1,224 1,277 580 8 4,903 39,347Travel 17,179 (6,593) 5,691 - 16,277 (1) 110 22 130 - 261 16,538Equipment rental and

maintenance 6,645 5,862 1,295 124 13,926 733 497 516 234 3 1,983 15,909Insurance 5,256 4,635 1,024 97 11,012 580 393 408 185 3 1,569 12,581Telephone 4,928 4,346 960 220 10,454 542 367 383 174 2 1,468 11,922Office supplies 3,325 7,036 711 32 11,104 191 253 182 61 1 688 11,792Membership dues 208 6,364 401 4 6,977 23 20 16 7 - 66 7,043Bank charges and fees 2,594 2,289 506 48 5,437 286 192 202 92 1 773 6,210Staff development 1,901 1,678 371 35 3,985 210 139 148 67 1 565 4,550Printing 990 1,191 1,059 391 3,631 60 453 42 19 - 574 4,205Advertising 445 754 88 8 1,295 49 34 35 16 - 134 1,429Publications and subscriptions - 1,342 - - 1,342 - - - - - - 1,342Messenger and express mail 122 165 155 1 443 12 176 9 4 - 201 644Postage and shipping 208 186 123 4 521 24 20 16 7 - 67 588

TOTAL EXPENSES 1,668,071$ 1,174,624$ 318,448$ 22,863$ 3,184,006$ 101,100$ 103,664$ 77,326$ 32,914$ 543$ 315,547$ 3,499,553$

Program Services Supporting Services

The accompanying notes are an integral part of these financial statements.

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NATIONAL HEALTH COUNCIL, INC.

STATEMENTS OF CASH FLOWS

2017 2016CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from members, sponsors, and customers 3,604,798$ 4,403,118$Cash paid to employees and suppliers (3,653,837) (3,269,949)Interest received 8,985 8,716

NET CASH PROVIDED BY (USED IN)OPERATING ACTIVITIES (40,054)$ 1,141,885$

PROPERTY AND EQUIPMENT (Notes 1 and 5)Purchase of investments (8,804)$ (8,553)$Purchases of property and equipment (33,521) (3,780)

NET CASH USED IN INVESTING ACTIVIITIES (42,325)$ (12,333)$

NET CHANGE IN CASH (82,379)$ 1,129,552$

CASH, BEGINNING OF YEAR 2,389,335 1,259,783

CASH, END OF YEAR 2,306,956$ 2,389,335$

RECONCILIATION OF CHANGES IN NET ASSETS TONET CASH PROVIDED BY (USED IN)

OPERATING ACTIVITIES:Changes in net assets 241,340$ 247,141$Reconciliation adjustments:

Depreciation and amortization 34,201 39,347Unrealized gain on investments (392) (2,858)Changes in assets and liabilities:

Decrease (increase) in operational assets:Pledges and accounts receivable (213,259) 552,696Prepaid expenses and other (33,196) (14,861)

Increase (decrease) in operational liabilities:Accounts payable (194,394) 208,026Accrued expenses 52,798 3,911Deferred compensation liability 20,514 -Deferred revenue 63,878 115,098Deferred rent (11,544) (6,615)

NET CASH PROVIDED BY (USED IN)OPERATING ACTIVITIES (40,054)$ 1,141,885$

FOR THE YEARS ENDEDDECEMBER 31,

The accompanying notes are an integral part of these financial statements.

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NATIONAL HEALTH COUNCIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMEBER 31, 2017 AND 2016

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Note 1. Organization and Summary of Significant Accounting Policies

Organization - The National Health Council, Inc. (the Council) is a not-for-profitorganization that provides national focus for sharing common concerns, evaluating needs, and pooling ideas and resources for national organizations in the health field.

Income Tax Status - The Council is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code, except for taxes on unrelated business income. There was no unrelated business income for the years ended December 31, 2017 and2016.

Basis of Accounting - The financial statements have been prepared on the accrual basis of accounting and accordingly, the Council recognizes revenue when earned and expenses when incurred.

Basis of Presentation - The financial statements have been presented in accordance with U.S. generally accepted accounting principles, including those applicable to nonprofit organizations. As such, the Council is required to report information regarding its financial position and activities according to three classes of net assets:

Unrestricted net assets - Unrestricted net assets represent funds which are fully available for operations at management’s discretion.

Temporarily restricted net assets - Temporarily restricted net assets are comprised of funds which are restricted by donors based upon the passage of time or the purpose restriction is fulfilled.

Permanently restricted net assets - Permanently restricted net assets include resources with permanent donor-imposed restrictions, which require the assets to be maintained in perpetuity, but permit the Council to expend all or part of the income derived from the donated assets.

The Council had no permanently restricted net assets as of December 31, 2017 and2016.

Cash - For purposes of the statements of cash flows, the Council considers certificatesof deposit to be cash along with its operating checking, savings and money marketaccounts.

Investments - Investments in marketable securities with readily determinable fairvalues are stated at fair value. Unrealized gains and losses are included in the change in net assets in the accompanying statements of activities.

NATIONAL HEALTH COUNCIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMEBER 31, 2017 AND 2016

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Note 1. Organization and Summary of Significant Accounting Policies - (Continued)

Pledges and Accounts Receivable - Pledges receivable represent sponsorships pledged but not yet received. Accounts receivable represent amounts billed but not yet collected. These items, which are uncollateralized, are stated at the amount management expects to collect from balances outstanding at year-end. All pledges are expected to be collected within one year. Based on management’s assessment of the payment history of members with outstanding balances and management’s current relationships with those members, management has concluded that realization losses, if any, on balances outstanding at year-end would be immaterial.

Property and Equipment - Property and equipment is recorded at cost. The Councilcapitalizes assets whose costs are in excess of $500. Depreciation is computed using the straight-line method over estimated useful lives of three to ten years. Amortization ofleasehold improvements is taken over the term of the lease. Expenditures formaintenance and repairs are charged to expense as incurred.

When property and equipment is retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts with any resulting gain or loss reflected in income or expense.

Revenue Recognition - Membership dues are recognized over a calendar year period for all members. Dues collected in advance are recorded as deferred revenue and recognized as revenue in the following year.

Contributions are recognized as revenue at the earlier of when they are received or when the Council has received an unconditional promise to give a specific amount. TheCouncil reports gifts of cash and other assets as 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 time restriction ends or a purpose restriction is fulfilled, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions.

Cost reimbursable grants are recognized as revenue when the related costs are incurred.

Contributions of donated services that create or enhance non-financial assets or require specialized skills that would typically need to be purchased if not provided by donationare recorded as revenue and expense at their estimated fair values in the period received. Such amounts are reflected as revenue and expense in the accompanyingstatement of activities.

NATIONAL HEALTH COUNCIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMEBER 31, 2017 AND 2016

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Note 1. Organization and Summary of Significant Accounting Policies - (Continued)

Functional Expense Allocations - The costs of providing the various programs and other activities have been summarized on a functional basis in the statements ofactivities. Accordingly, certain costs have been allocated among the programs and supporting services benefited.

Use of Estimates - The preparation of financial statements in conformity withaccounting principles generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Note 2. Investment - The Council invests cash in excess of its immediate needs in marketablesecurities, which are reported as investments in the statements of financial position. Following is a schedule of the investment held at December 31:

2017 2016Principal Investments Short-term Income Fund - Class A 517,985$ 508,789$

The following summarizes investment income for the years ended December 31:

2017 2016Interest and dividends 8,931$ 8,512$Unrealized gain on investment 392 2,858

Totals 9,323$ 11,370$

Note 3. Fair Value Measurements - The Council measures investments at fair value as required by the Fair Value Measurements Topic of the Accounting Standards Codification of the Financial Accounting Standards Board (FASB). The framework provides a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

The three levels of fair value hierarchy are described as follows: level 1 inputs are unadjusted quoted prices for identical assets or liabilities in active markets; level 2 inputs are observable market data, generally other than quoted prices; level 3 inputs are significant unobservable data. There are no level 2 or level 3 valued investments for the years ended December 31, 2017 and 2016.

NATIONAL HEALTH COUNCIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMEBER 31, 2017 AND 2016

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Note 3. Fair Value Measurements - (Continued)

Following is a description of the valuation methodology used for assets measured at fair value:

Fixed-income mutual fund - Securities which are traded on a national securities exchange are valued at the last reported sales price on the last business day of the year.

As of December 31, 2017 and 2016, the Council’s investment in a fixed-income mutual fund had a fair value, using level 1 measurement, of $517,985 and $508,789,respectively.

Note 4. Concentration of Credit Risk - Financial instruments that potentially subject the Council to concentrations of credit risk include cash deposits with commercial banks. The Council’s cash management policies limit its exposure to concentrations of credit risk by maintaining cash accounts at financial institutions whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC). Cash accounts exceeded the maximum FDIC coverage limit of $250,000 at times throughout the year and at year-end.

Note 5. Property and Equipment - Property and equipment consisted of the following as ofDecember 31:

2017 2016178,598$ 145,077$153,708 153,708

Subtotals 332,306$ 298,785$

amortization 184,527 150,326Totals 147,779$ 148,459$

Furniture, equipment and software

Less, Accumulated depreciation and

Leasehold improvements

Depreciation and amortization expense for the years ended December 31, 2017 and2016 was $34,201 and $39,347, respectively.

NATIONAL HEALTH COUNCIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMEBER 31, 2017 AND 2016

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Note 6. Grant - The Council entered into a cost-reimbursable grant agreement with the Patient-Centered Outcomes Research Institute (PCORI). Led by the Council, and in collaboration with other nonprofit stakeholders, this grant seeks to engage the patient community and others to create a non-disease-oriented, patient-specific curriculum on health care quality. The period of the grant is June 15, 2015 through December 15, 2017. The total value of the grant was $246,314, of which $122,877 was recognized as revenue during the year ended December 31, 2017.

Note 7. Temporarily Restricted Net Assets - Temporarily restricted net assets consist of contributions having donor-imposed purpose restrictions that will be met by the Council in a future period. Temporarily restricted net assets were for the following purposes asof December 31:

2017 2016Voluntary Health Agency Leadership Conference 276,752$ 149,075$Government Relations Representatives Retreat 196,350 138,289Policy Development Fund 150,519 154,377Patient Engagement 136,118 128,199Ecosystem - Quality 50,376 59,735Real World Evidence 44,475 20,797Advocacy Training 38,202 10,481Ecosystem - Payment Models 37,414 -Ecosystem - Value 31,117 301,960Patient Focused Drug Development 20,694 8,658CMSO Conference 18,881 35,688Patient Exchange Experience 875 4,477Progressive Approval - 19,773HIPAA - 6,761

Totals 1,001,773$ 1,038,270$

Note 8. Retirement and Deferred Compensation Plans - The Council maintains a defined contribution retirement plan qualified under Internal Revenue Code Section 403(b) covering substantially all employees. Contributions by the Council are based on fixed percentages of compensation, up to 8%, based on the participants’ years of service.

NATIONAL HEALTH COUNCIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMEBER 31, 2017 AND 2016

13

Note 8. Retirement and Deferred Compensation Plans - (Continued)

The Council also maintains a deferred compensation plan under Internal Revenue CodeSection 457(b). Highly compensated employees with a minimum of six months of service may be eligible to participate.

Total expense under these plans for the years ended December 31, 2017 and 2016 was$64,995 and $64,395, respectively.

Effective January 1, 2017, the Council adopted a nonqualified deferred compensation plan within the meaning of Section 457(f) of the Internal Revenue Code for the future benefit of the Council’s Chief Executive Officer (CEO). Under the plan provisions, an amount equal to 5% of the CEO’s salary and bonus paid shall be credited to an account each calendar year beginning January 1, 2017 and ending December 31, 2019. The 457(f) plan expense recognized for the year ended December 31, 2017 was $20,514.

The Council has also established a supplemental tax deferred retirement plan under Section 403(b) of the Internal Revenue Code. Under the Plan, participants are permitted to contribute a portion of their compensation that accumulates on a tax-deferred basis.

Note 9. Concentrations - Sixty-nine percent of pledges receivable were due from a single sponsor as of December 31, 2017.

Note 10. Commitments - The Council entered into an office lease extension expiring on July 31,2024. The lease extension provided for an abatement of rent for the six-month period beginning August 1, 2014. Lease payments will increase 2.5% annually on theanniversary of the lease. The lease also included a tenant improvement allowance. Thelease abatement, scheduled rent increases, and the tenant improvement allowance giverise to a deferred lease obligation, which is amortized over the term of the lease.

Rent expense was $204,203 and $204,303 for the years ended December 31, 2017 and2016.

The Council entered into a five-year non-cancellable operating lease for a copier expiring October 2020. The lease payments are $306 per month.

NATIONAL HEALTH COUNCIL, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMEBER 31, 2017 AND 2016

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Note 10. Commitments - (Continued)

Future minimum lease commitments are as follows:

Year ending Office CopierDecember 31, Lease Lease Totals

2018 207,341$ 3,667$ 211,008$2019 214,494 3,667 218,1612020 222,599 2,750 225,3492021 228,149 - 228,1492022 233,850 - 233,850

Thereafter 464,642 - 464,642Totals 1,571,075$ 10,084$ 1,581,159$

The Council enters into agreements with hotels for future events. These agreements generally require guarantees for minimum room utilization or other items in order to avoid attrition costs.

Note 11. Subsequent Events - In preparation of these financial statements, the Council has evaluated events and transactions for potential recognition or disclosure through February 26, 2018, which is the date the financial statements were available to be issued.