Nemours New Jersey Physician Practice PC

“Nemours, a Florida nonprofit corporation, dba Nemours Children's Health System, provides world-class pediatric medical care to children in Florida, Delaware, Pennsylvania, and New Jersey. Because the State of New Jersey has a prohibition on the corporate practice of medicine under New Jersey state statutes and guidelines issued by the New Jersey Board of Medical Examiners (See, for e.g., N.J.S.A. 45:9-5.1), NJPP, a separate New Jersey professional corporation wholly controlled by Nemours was incorporated in order to provide pediatric specialty outpatient care to children in New Jersey. The Internal Revenue Service has recognized that professional corporations established in those states with a corporate practice of medicine doctrine, like New Jersey, could qualify as a federal income tax-exempt charitable organization under Section 501(c)(3) of the Internal Revenue Code. See "Corporate Practice of Medicine" by Charles F. Kaiser III and Marvin Friedlander, Internal Revenue Service TE/GE CPE Manual 2000-F ("Manual"). NJPP has received Section 501(c)(3) tax-exempt status as a charitable, educational and scientific organization under the "integral part" doctrine as NJPP is performing an essential function for Nemours, i.e., the provision of specialty outpatient medical services to children in New Jersey which services Nemours would otherwise provide directly, if New Jersey did not have the corporate practice of medicine doctrine. The Certificate of Incorporation of NJPP, on page 1, Article 2, expressly states that the Corporation is organized to engage in the business of rendering professional services to the public that a Doctor of Medicine or Osteopathy is authorized to render and will be organized and operated exclusively for charitable, educational and scientific purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code") and to further the charitable purposes of Nemours and its divisions, including but not limited to the Nemours and Nemours Children's Hospital, Delaware. The Certificate of Incorporation of NJPP on page 2, Article 4, paragraph (d) also provides for distribution of the assets of NJPP upon dissolution to Nemours and not to any shareholder. NJPP has issued all of its shares of stock (100 common shares as authorized in Section 4 of the Certificate of Incorporation of Nemours NJ) to Meg Frizzola DO, a physician licensed to practice medicine in New Jersey to comply with the corporate practice of medicine doctrine. Dr. Frizzola is the sole Director and President of NJPP and the Chief Medical Officer for Delaware Valley. Under New Jersey's corporate practice of medicine prohibition, only New Jersey licensed physicians can serve as shareholders and directors of the professional corporation which is providing medical services. Accordingly, NJPP only has one Board member and one Voting Board member. However, safeguards have been put in place in the corporate documents and policies of NJPP and in the Stock Succession and Transfer Agreement (described below) and Management Services Agreement (described below) to ensure control of NJPP by Nemours.”

“Dr. Frizzola, Mr. Higginbotham, and Ms. Livingston have a shared business relationship. All are employees of Nemours.”

“Nemours is an IRC section 501(c)(3) charitable organization recognized by the IRS as a hospital under IRC section 170(b)(1)(A)(iii). Nemours provides comprehensive management services, administrative personnel, office space, equipment, supplies and non-professional services to NJPP under the Management Services Agreement between NJPP and Nemours, as manager. Nemours conducts all of the administrative and business functions for the NJPP at all locations operated by NJPP. By the provisions of the Management Services Agreement, Nemours has effective control over the operations of NJPP.”

“NJPP has a close connection with Nemours and Nemours has control over NJPP. The Certificate of Incorporation of NJPP expressly states that the Corporation is organized to engage in the business of rendering professional services to the public that a Doctor of Medicine or Osteopathy is authorized to render and will be organized and operated exclusively for charitable, educational and scientific purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code") and to further the charitable purposes of Nemours and its divisions, including but not limited to the Nemours and Nemours Children's Hospital, Delaware. The inclusion of the Section 501(c)(3) language in the Certificate of Incorporation is not contrary to or incompatible with the language of or the intent of the New Jersey Professional Service Corporation Act, N.J.S.A. §14A-17.1 et seq. The Certificate of lncorporation of NJPP also provides for distribution of the assets of NJPP upon dissolution to Nemours and not to any shareholder. Dr. Frizzola is the sole Director and President of NJPP and the Chief Medical Officer for Delaware Valley. Under New Jersey's corporate practice of medicine prohibition, only New Jersey licensed physicians can serve as shareholders and directors of the professional corporation which is providing medical services. However, several safeguards have been put in place in the corporate documents and policies of NJPP and in the Stock Succession and Transfer Agreement and Management Services Agreement to assure control of NJPP by Nemours.”

“See explanation under Form 990, Part VI, Section A, Line 6.”

“See explanation under Form 990, Part VI, Section A, Line 6.”

“Nemours management reviewed a draft of the Form 990 prior to filing. Upon finalization of the return, Management provided a final copy of the return, via email, to the sole director prior to filing with the IRS.”

“NJPP has reviewed and adopted the conflict of interest policy established by Nemours. Nemours is committed to the belief that sound business practices start with an absolute commitment from each employee to act ethically in carrying out Nemours business, and to comply with the laws and regulations that impact its business, thus Nemours' employees must avoid participating in activities that create or appear to create a conflict of interest. Nemours has specifically identified the following areas in its policy to be potential conflicts of interest: financial interest, outside employment, paid faculty arrangements, consultant or research contracts, acceptance of gifts, gratuities, business courtesies, travel, lodging and entertainment, misuse of resources or assets, personal gain using undue influence, direct dealings with vendors, use of confidential information, and an individual's support of political causes. Nemours' policy requires certain individuals to disclose participation in activities or circumstances that may present a conflict of interest on an annual basis or if at any time such individual becomes aware of circumstances that may present a conflict of interest. These disclosures are reviewed by the Nemours Finance, Audit, and Compliance Committee, as necessary.”

“Nemours Board of Directors designated the People, Engagement and Compensation Committee (the Committee) to serve as the board committee responsible for establishing compensation practices to assure that executive compensation is reasonable and does not violate the private inurement prohibition. The practices and processes are designed to provide market-competitive compensation, to enable the board to exercise good governance oversight, and to use a review and approval process that will qualify for the rebuttable presumption of reasonableness under the federal tax law rules. The Committee annually reviews, in consultation with an independent executive compensation consulting firm specializing in healthcare and the not-for-profit industry, independently sourced benchmark market data to establish the compensation of officers, senior leadership and key employees and to align compensation with the compensation practices of organizations similar to Nemours. The Committee has established, and reference, a compensation philosophy statement for senior leaders that articulates the goals of the executive compensation program, the peer group used for compensation decisions, and the targeted market position. The Board of Directors determined and approves the compensation for the CEO using the same IRS-approved rebuttable presumption process as The Committee. To indicate alignment with the compensation practices of organizations similar to Nemours, the compensation philosophy targets the market median for executives, including officers, senior leadership and key employees. Total cash compensation is also generally targeted to be at the median of Nemours' peers.”

“NJPP's governing documents and conflict of interest policy are included in NJPP's Form 1023, which is available for public disclosure.”

“Other changes in net assets includes a payable to Nemours of $37,183,016.”

“NJPP is consolidated in the Nemours audited financial statements. The Nemours Finance, Audit, and Compliance Committee is responsible for the selection of the independent auditors and has oversight of the audit.”