Baylor Scott & White Holdings

“Business Relationship: Drayton McLane, Jr. and Lyndon L. Olson, Jr. Business Relationship: Jack Martin and Drayton McLane, Jr.”

“Since the prior Form 990 was filed, the following changes have been made to the Organization's bylaws. Amendments were made effective July 1, 2017 to provide for a single, three-year term for the offices of Chair and Vice Chair of the governing body. Effective July 1, 2018, the Chief Executive Officer will be an ex officio, voting member of the governing body; a vacancy occurs upon the expiration the member's current term without reappointment; and board members will be required to satisfy and attest to annual board education requirements. Additionally, the Compensation and Governance Committee is divided into a Compensation Committee that is responsible for compensation matters and a Governance Committee that is responsible for governance matters. Effective October 1, 2018, the revised bylaws provide that the Organization's governing body appoints the Chief Executive Officer, President and Secretary, as required under state law, and the Treasurer, as required by our banking relationships; the other officers will be appointed by the Chief Executive Officer in accordance with current governance practices; and the indemnification section of the bylaws has been revised to provide the maximum protection available to the Organization's members of the governing body and officers under state law while protecting the interests of the corporation.”

“Process used to review the Form 990: The Form 990 is prepared and reviewed by the BSWH tax department. During the return preparation process the tax department works with other functional areas including finance, accounting, treasury, legal, human resources, and corporate compliance for advice, information and assistance to prepare a complete and accurate return. Upon completion, the Form 990 is reviewed by the organization's President, financial officer and/or other key officers. A complete final copy of the return is provided to the organization's governing body prior to filing with the IRS.”

“Process used to monitor and enforce compliance with the organization's conflict of interest policy: Persons with an actual or perceived ability to influence the organization have the duty to disclose annually and otherwise promptly as potential conflicts are identified, any familial, professional or financial relationships with entities or individuals that do, or seek to do business with the organization or that compete with the organization. These individuals include the organization's officers, governing body, management, physicians with administrative services agreements, employed physicians and other key personnel who interact with outside organizations or businesses on behalf of the organization. The BSW Holdings Board of Trustees Audit and Compliance Committee and the BSW Holdings Corporate Compliance Committee review all relevant disclosures submitted by these individuals to determine whether a conflict of interest exists and to determine an appropriate resolution, if necessary. Any individual with a perceived or potential conflict is prohibited from voting or participating in the decision making process regarding such transaction with that individual.”

“Process for determining compensation: The organization, a controlled affiliate of BSW Holdings, recognizes that those chosen to lead the organization are vital to its ongoing success and growth. Thus, it must attract, retain and engage the highest quality officers and key employees to lead the organization and help the organization maintain its national reputation for achieving high targets for medical quality, patient safety, and patient satisfaction. A significant portion of the organization's officers and key employees' total compensation is based on significant performance achievements. This strategy places a greater emphasis on the importance of the organization achieving targeted improvements in the areas of people, quality, patient satisfaction and financial stewardship, annually. Total executive compensation is part of an integrated talent management strategy developed by the BSW Holdings Board of Trustees and its Compensation Committee to attract, motivate, and retain the best leadership resources for the organization. Executive compensation is determined pursuant to guidelines outlined in the intermediate sanction rules under IRC Section 4958 including taking steps to meet the rebuttable presumption standard of reasonableness under Treasury Regulation 53.4958-6, as summarized below. When making compensation decisions, the organization compares itself to similarly-sized, and structured businesses including other integrated health care service systems and other similarly-sized organizations, both locally and nationally. Each year the BSW Holdings Board of Trustees and the Compensation Committee, on behalf of the organization through reserved powers held by BSW Holdings, works directly with an independent compensation expert(s) to identify reasonable and competitive market rates as well as provide an annual review of the total compensation of the organization's top management officials and other officers and key employees to ensure total compensation is within a fair market range. The annual review included management reviewing all officers and key employees listed on the Form 990 during the current tax year. Any individual whose direct compensation exceeded the projected compensation from prior year, any new individual whose position has not been reviewed by the Compensation Committee during the prior 2 years, or any individual whose responsibilities or scope of operations expanded during the current year were reviewed by the Compensation Committee during the current tax year. The Compensation Committee is made up of members of the BSW Holdings Board of Trustees, who are independent, community volunteers. Guided by the information provided by the independent compensation expert(s), the Compensation Committee approves the annual process and methodology for setting fair market salary ranges, earned incentives, and/or benefit offerings for the organization's President, other officers and/or key employees to be comparable to similar organizations for similar services and/or positions. Furthermore, the Compensation Committee is charged with the responsibility of reviewing annually the major elements of the executive compensation program to assure designs remain consistent with the business needs, market practices, and compensation philosophy. As part of the decision making process, the Compensation Committee will often meet in executive session to discuss and review recommendations made by the independent compensation expert(s). No officer or key employee whose compensation is being reviewed is present during these discussions. All decisions are properly documented in the minutes of the meetings.”

“Process for making governing documents, conflict of interest policy, & financial statements available to the public: The organization's certificate of formation and amendments thereto are made available to the public by the filing of those documents with the Texas Secretary of State. Also, the organization is included within the combined financial statements of BSW Holdings that are made available to the public by the posting of those documents through DAC Bond. The organization's other governing documents and conflicts of interest policy are not made available to the public.”

“Contract Labor : Program service expenses 3,300. Management and general expenses 0. Fundraising expenses 0. Total expenses 3,300. Other Purchased Services : Program service expenses 289,212. Management and general expenses 1,102,550. Fundraising expenses 0. Total expenses 1,391,762. Repairs & Maintenance : Program service expenses 388. Management and general expenses 0. Fundraising expenses 0. Total expenses 388. Professional Fees : Program service expenses 9,538,606. Management and general expenses 0. Fundraising expenses 0. Total expenses 9,538,606. Corporate Overhead : Program service expenses 19,084,783. Management and general expenses 0. Fundraising expenses 0. Total expenses 19,084,783.”

“Transfer of tax exempt bond assets/liabilities to tax exempt parent -338,919,429. Self Insurance Liability Reserve -3,623. Distributions to/from tax exempt affiliate 497,149,307.”

“Disclosure Statement Related to Forms 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, Filed on Behalf of the Taxpayer: In accordance with IRC Section 6038 and the constructive ownership rules of IRC Sections 958(a) and (b), the taxpayer is required to file Forms 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, with respect to certain controlled foreign corporations (CFCs) including Baylor Scott & White Assurance SPC. These filing requirements are or will be satisfied through the filing of Form 5471 for this CFC by the U.S. taxpayer identified below who has the same filing requirement. Taxpayer Name: Baylor University Medical Center Taxpayer Address: 2001 Bryan Street Suite 2200 Dallas, TX 75201 Taxpayer Identification Number of U.S. tax return with which the Forms 5471 were or will be filed: 75-1837454 IRS Service Center where U.S. tax return was or will be filed: E-filed”