Elk Regional Professional Group Inc.

“Significant changes to bylaws: as a result of the affiliation with penn highlands healthcare (phh), elk regional professional group amended its bylaws. Significant changes include the following: -the number of directors now will be comprised of at least two directors, who are nominated and elected according to the process set forth in the narrative for form 990, part vi, section a, lines 6, 7a, & 7b. Additionally, there are two ex-officio directors identified as the president of this organization and the president of elk. These ex-officio directors have the same rights as the elected directors. At all times, at least twenty percent, but not more than thirty percent of the total number of directors will be physicians employed by the organization. -quorum will constitute 2/3 of the full board -in the event of dissolution, all assets will be distributed to one or more organizations qualifying for a 501(c)(3) exemption, and if possible or practical, to elk or other affiliated organizations. -the sole member is now elk regional health center (elk). Phh also holds certain powers over the directors and system-wide issues, including the approval of the election and removal of officers and directors and the approval of any and all amendments to the bylaws. See the narrative for form 990, part vi, section a, lines 6, 7a, & 7b for additional information regarding the role of the member and phh. -the organization is now subject to a system-wide conflict of interest policy. See the narrative for form 990, part vi, section b, line 12c for additional information regarding the conflict of interest policy.”

“Members: elk regional health center, inc. (elk) is the sole member. Additionally, penn highlands healthcare (phh) holds certain powers, including the approval of the election and removal of officers and directors and approval of any and all amendments to the bylaws or other organizational/governance documents. Phh and elk shall have the following powers with respect to the election and removal of directors: prior to the end of phh's fiscal year, the phh board will meet to elect the directors, with the exception of ex-officio directors. At least sixty (60) days in advance of this meeting, elk shall provide to phh's governance/nominating committee (the "phh governance/nominating committee") a list of one or more candidates (the number of candidates to be determined in the phh governance/nominating committee's discretion) for each expiring director position, with the exception of any ex-officio directors. The list of candidates shall have been developed by elk in consultation with this organization's board. The phh governance/nominating committee shall review each candidate in accordance with the criteria set forth in the phh bylaws, the criteria, if any, set forth in this organization's bylaws or policies for which said candidate is being considered for board service, and the policies and rules of phh, including, without limitation, the conflict interest policy (all of which shall be referred to collectively herein as the "eligibility criteria") and develop a list of one or more candidates for each open position (the number of candidates to be determined in the phh governance/nominating committee's discretion). Once the slate of candidates is nominated by the phh governance/nominating committee, the board of elk shall submit to the phh board for election such slate of candidates for the open board positions. The phh board may elect by a vote of the majority or refuse to elect each candidate submitted by the board of elk and may not elect any candidate not submitted by the board of elk and nominated by the phh governance/nominating committee. The board of phh has the power to remove such director at any time with or without cause. In the event that this organization desires to fill a vacancy occurring on its board, the phh governance/nominating committee and the board of phh, at the request of elk, shall act to fill such vacancy. Subject to the approval of elk and phh as set forth in the bylaws, the articles and the bylaws may be altered, amended, or repealed and new bylaws or articles may be adopted by the affirmative vote of two-thirds (2/3) of the board. Written notice of the intent to amend the bylaws or the articles and a draft of the proposed change shall be sent to all directors, by the secretary, at least five (5) days prior to any meeting at which amendment of the bylaws or the articles is intended.”

“Form 990 review process: the form 990 is prepared by an independent accounting firm based on the audited financial statements and information provided by the accounting department of the organization. The draft form 990 is reviewed by the cfo and the controller. After all suggested changes from the cfo and controller are made, the updated draft form 990 is provided for review to the full board. Any questions or comments from the board are addressed before filing.”

“Monitoring compliance with the conflict of interest policy: penn highlands healthcare, inc. (phh), maintains a conflict of interest policy which applies to all subsidiaries. The conflict of interest policy applies to board members, officers, executive employees, and any other manager or supervisor exercising substantial influence over operations. Each covered person will promptly and fully disclose all material facts of every actual or potential dual interest existing at the time when he/she becomes a covered person, and annually through each phh system entity's disclosure statement, which requests disclosure of relationships, investments, and transactions that may lead to an actual conflict of interest. All completed disclosure statements will be provided to the phh governance/nominating committee. This committee, in consultation with the chairperson or vice chairperson of each phh system entity's board, shall evaluate the completed disclosure statements and determine if there are any conflicts that are so pervasive as to render any covered person ineligible for service. The chairperson of each phh system entity's board will disclose to the full board of said phh system entity all dual interests reported to him or her under the policy and will also make the disclosure statements of all covered persons available to directors at any time during the year. If a potential dual interest arises as a result of a contemplated phh system entity board (or committee) action, the chairperson of said phh system entity's board or the interested person shall, or any other director may, raise the question of the interested person's dual interest. The disinterested members of the phh system entity's board (or committee) will evaluate the disclosures and the material facts relating to the transaction, arrangement, or policy giving rise to the dual interest to determine whether they involve actual conflicts of interest and may attempt to develop alternatives to remove the conflict from the transaction, arrangement, or policy. A covered person who has a dual interest shall not be present for or shall leave any portion of a meeting at which a phh system entity's board (or committee) is voting to determine whether a conflict exists, but may be present prior to the vote to make a presentation to said board (or committee), to disclose additional facts, or to respond to questions. If a phh system entity's board (or committee) determines that an actual conflict of interest exists, the interested person shall be so advised and the chairperson of a phh system entity's board or committee shall, if appropriate, appoint a disinterested person or committee or direct management to investigate alternatives to the proposed transaction or arrangement, if this has not already been done. Any interested person who has an actual conflict of interest with respect to the transaction or arrangement does not participate in and is not present for the vote regarding any such transaction or arrangement. If an individual whose company or employer has a business relationship with a phh system entity, but the individual does not have an actual conflict of interest with respect to this business relationship, the individual may nonetheless voluntarily recuse him/herself from voting on any matters related to the relationship.”

“Compensation determination: penn highlands healthcare, inc. (phh) performs the compensation review for the phh executives, including the ceo of phh elk and erpg. An independent compensation consultant, yaffe & company, is contracted to complete an annual compensation review. Included in this review is comparative data. The phh board reviews and approves the compensation. The ceo also has an annual evaluation completed by the phh elk board that is shared with the phh board during an executive session at each of the boards. These processes are documented in the board minutes.”

“Governing document availability: the governing documents, conflict of interest policy, and financial statements are available upon written request from lori scutella, administrative secretary. Documents may be mailed, e-mailed, faxed, or held for pickup by requesting persons.”

“Board member compensation: no directors receive any compensation for their director duties. Dr. R. Scott mckimm is compensated as a physician. Rose campbell is compensated for her duties as ceo of phh and phh elk.”

“Organization's mission: a subsidiary of penn highlands elk, erpg was initially designed to integrate and assist the physicians of hospital-based departments, such as anesthesia and emergency services. Since its inception, however, erpg has become an important physician employment vehicle through which elk regional health center is able to successfully recruit and retain high quality providers. Since its incorporation, erpg has grown into a large and effective multi-specialty group which includes the following services/specialties: anesthesia; emergency medicine; emg; family and general medicine; general surgery; internal medicine; ob/gyn; orthopedic surgery; pain management; pathology; urology. Erpg offices cover a large geographic radius with practices located in: bennett's valley; emporium; johnsonburg; kersey; st. Marys; ridgway; weedville. The talent and commitment of the erpg physicians enables erhc to provide the highest quality of care at the lowest possible cost, and to create a health care service delivery system wherein quality, patient safety, customer services, and continuity of care is of the highest importance. Through the erpg providers, erhc builds on its commitment to the community by providing a full complement of comprehensive health care services within one health care system, as well as creating easy access to health care and seamless transition from one health care setting to another. Form 990, part iii, line 3 changes to program services: beginning december 2013, the emergency room operations, physician salaries, and revenues were moved to be managed by schumacher group. In april 2014, most of the physician offices were transferred to dubois regional medical center, a related organization post-affiliation with penn highlands healthcare.”

“Other fees for services: $ 880,013 professional service fees 164,455 billing fees --------- $1,044,468”

“Other changes in net assets: $1,410,927 transfer from affiliates (6,619) fair value adjustment* ----------- $1,404,308 *in october 2012, elk regional health center (health center) d/b/a penn highlands elk signed an affiliation agreement effective july 1, 2013, with penn highlands healthcare, a pennsylvania nonprofit corporation (penn highlands). Penn highlands became the sole member of the health center. The affiliation agreement required assets and liabilities be recorded at fair value as of july 1, 2013, on the penn highlands healthcare financial statements. The health center elected to push down any fair value adjustments to the standalone health center financial statements. As a result, a consolidated $5,084,233 adjustment was made primarily to adjust the carrying value of property and equipment to fair value. Each entity was allocated their share of the adjustment, and the fair value adjustment is reported in the reconciliation amount above. The amounts reported on schedule d, part vi, include this adjustment to fair value.”

“Change in oversight or selection process: as a result of the amendment of the bylaws related to the merger with penn highlands healthcare (phh), phh now holds the sole power over the selection of the independent accountant.”