Merger Process Update

April 29, 2011

Merger Process Update is published periodically to keep members of the

Northeast Health, St. Peter’s, and Seton Health communities informed on
the progress to merge these three organizations and improve access to,
and delivery of, health care in our region.

Affiliation Summary
¾ Overall, significant progress continues to be made in preparing for
the operation of the new health system.

¾ The Federal Trade Commission (FTC) has closed its extensive “Civil
Review” of the merger of Northeast Health, St. Peter’s Health Care
Services and Seton Health without challenging the merger.

¾ The FTC action represents a significant milestone toward the final

transaction to combine the three organizations.

¾ Work has begun to prepare the legal and financial documents

necessary to complete the transaction. It is expected that the final
legal transaction that will create the new merged health system
will occur late this summer.

¾ While completion of the FTC “Civil Review” is a significant

milestone in the merger process, it does not complete the creation
of the new health system. The actual merger will occur once key
planning and integration activities have been concluded.

Content ¾ The new not-for-profit organization that will become the “parent
corporation” for the Northeast Heath, St. Peter’s and Seton Health
systems is expected to be completed before the end of the
Planning & Integration Phase summer. The creation and start of operations of the new parent
2 corporation will signify the actual completion of the merger.

Leadership
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System Design Assessment
Regulatory Process
¾ The FTC began its review in June 2010, after the formal Affiliation
System Identity Process
4 Agreement was signed. The FTC review was routine and
Other Information expected.

¾ Work related to fulfilling regulatory requirements for the merger has

been a primary focus of most merger-related activity since mid-
2010.
 ¾ To ensure that the institutions fully met the FTC’s request for data
related to the assessment, officials from Northeast Health,
St. Peter’s and Seton Health retrieved and searched through
nearly eight million paper and electronic documents -- with an
average length of more than six pages per document.
Eventually about 100,000 documents were submitted to the FTC
to meet their request.

¾ The FTC decision also means that the three organizations can
now begin a final Planning and Integration Process that will
bring the Affiliation Agreement and a conceptual design of the
new health system to an operational level.

¾ Despite having signed the binding Affiliation Agreement last year,

regulatory barriers still prevented the organizations from sharing
with each other such sensitive information as pricing, salaries,
benefits, market share, and other key operational data necessary
to complete the merger.

Planning and Integration Phase

With the FTC action, the Planning and Integration Process can now
begin immediately.

¾ Planning and Integration Workgroups will be formulated in the

next few weeks. With guidance from senior management,
these workgroups will recommend and prioritize what functions
and services must be integrated, and what changes must be
made for the merger to be completed.

¾ Executive Management will be working with Deloitte Consulting

to prioritize the Planning and Integration activities and the
supporting Planning and Integration workgroups. Workgroup
participants will be chosen from all three entities by subject
matter expertise and appropriate staff from all related entities
will be represented.

¾ Action plans will be developed to complete the highest priority

activities.

¾ Next steps will then be determined based on several factors.

The full implementation process is expected to take place over
the next three years.

Merger Process Update: 4-29-2011

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 Leadership
As previously announced there is no immediate effect on the
operation of any of the three organizations and it is not expected to
have any impact until all pre-merger activities have been completed.
However, some information regarding the leadership of the new
parent organization is known.

¾ Steven Boyle, the current President, CEO of St. Peter’s, will be

CEO of the new company. James Reed, MD, currently President
& CEO of Northeast Health, will be the President of the new
company. Both will report directly to the new Board of Trustees.

¾ A permanent senior management structure for the new health

system will also soon be developed as part of the planning and
integration phase.

System Design Assessment

¾ The overall goal of the Planning and Integration Process will be
to implement a preliminary “blueprint” of the new health care
system that was developed in 2010. A key aspect of the plan is
the estimated investment of $55 million in facilities and
information technology upgrades – nearly $6 million in
information technology and nearly $50 million in facility
upgrades at the two Troy hospitals and Albany Memorial
Hospital. Troy will also benefit from the availability of more
sophisticated cardiac services and a new outpatient cancer
treatment center.

¾ The proposed design of the new health system includes the

reconfiguration and merging of certain services, particularly in
the four acute care hospitals which will make up the new
system -- St. Mary’s and Samaritan hospitals in Troy, and Albany
Memorial and St. Peter’s hospitals in Albany.

¾ All four acute care hospitals will continue to operate under the
proposed plan, as will Sunnyview Rehabilitation Hospital in
Schenectady. While the new corporation is expected to be
formally created this summer, it could take as many as three
years for the new corporation to make many of the changes
and to fully integrate the three current health systems.

Merger Process Update: 4-29-2011

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 System Identity Process
¾ A process to select a name and identity for the new
organization has been underway for some time. Significant
progress has been made in this process, but work continues.
These recommendations will be presented to the Boards of the
three organizations this summer.

¾ An Implementation Plan, along with a time line, is also being

developed. The new identity will not be adopted until the new
corporation is formed by the final merger transaction.

¾ This process is much more than determining a new name and

logo for the new corporation. It is about how we represent the
new corporation and its components in thousands of
interactions with the public each day, and to make it easier for
them to identify and find the services they need.

Other Information
¾ Northeast Health will continue to be a secular organization. The
new organization will abide by the Ethical and Religious
Directives (ERDs) for Catholic Health Services. However,
Northeast Health remains committed to ensuring that
reproductive services are available in Rensselaer County.

¾ In light of that commitment, Northeast Health has created

Burdett Care Center (BCC), a separately licensed hospital that
will provide maternity and reproductive services on the
Samaritan campus. State approvals and construction for BCC
have been completed and it will become operational at the
same time the merger between St. Peter’s, Northeast Health
and Seton Health is finalized.

¾ St. Mary’s maternity services will move to BCC after the merger
has been completed. A decision on the date will be made as
we move forward with the Planning & Integration Phase, but is
not expected to occur sooner than three months post-merger.

If you have any questions, please direct them to your

manager, director or Vice President.

Merger Process Update: 4-29-2011

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