Scott & White Hospital-Marble Falls

“Significant changes to the governing documents: The organization's governing documents were changed to appoint the Scott & White Healthcare Board of Trustees (the Board) to also serve as the governing body of the organization. Except for certain reserved powers held by Baylor Scott & White Holdings as described below in Part VI, Line 7a and 7b, the Board, under the guidance of Baylor Scott & White Holdings, will have the following limited fiduciary powers: determining physician compensation in accordance with system wide compensation plans and philosophy established by Baylor Scott & White Holdings; granting physician clinical privileges; approving safety, risk management and quality of care plans; approving annual operating and capital budgets with system budgets; monitor and assess health care service quality; appointing hospital presidents; approving medical staff bylaws, rules and regulations; appointing medical staff; ensuring medical staff accountability for the quality of patient care; philanthropy, community relations activities and health care advocacy initiatives; and other duties expressly required by law, regulation or standards governing the organization.”

“Members or stockholders: The organization is a Texas nonprofit membership organization in which SWHC, a tax exempt, Texas nonprofit corporation, is the sole member.”

“Election of members of governing body by members, stockholders, or other persons: BSW Holdings, a tax exempt, Texas nonprofit corporation is the ultimate parent entity of the organization. BSW Holdings has control and substantial reserved powers over the organization, including those to elect and remove the governing body of the organization. The BSW Holdings' Board of Trustees is comprised of a majority of independent community representatives that provide leadership and governance to BSW Holdings and its affiliated tax exempt entities, including the filing organization, to ensure it is meeting its charitable purpose.”

“Governing body decisions subject to approval: All rights and powers were reserved to the organization's ultimate parent, BSW Holdings, except only those rights and powers expressly set forth in the bylaws, required by state or federal law, or to meet the requirements and standards promulgated by joint commission. For example, BSW Holdings' substantial reserved rights and powers include, without limitation, approval of the organization's articles of incorporation and bylaws and amendments thereto, appointment and removal of members of the organization's governing body, approval of dissolutions and mergers, and other similar decisions over the organization. The BSW Holdings' Board of Trustees is comprised of a majority of independent community representatives that provide leadership and governance to BSW Holdings and its affiliated tax exempt entities, including the filing organization, to ensure it is meeting its charitable purpose.”

“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 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 and Governance Committee (C&G 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 similar-sized, and structured businesses including other integrated health care service systems and other similar-sized organizations, both locally and nationally. The BSW Holdings' Board of Trustees and C&G Committee, on behalf of the organization, 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 system's top management officials and key employees. The C&G 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 C&G Committee approves and recommends to the BSW Holdings' Board of Trustees salary increases, 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 C&G 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 C&G Committee will often meet in executive session to discuss and review recommendations made by the independent compensation expert(s). During the executive session no officer or key employee whose compensation is being reviewed is present during these discussions. All decisions are contemporaneously documented in the C&G Committee minutes which are timely reviewed and approved by the C&G Committee.”

“Process for making governing documents, conflict of interest policy, & financial statements available to the public: The organization's articles of incorporation 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 and are attached to this return. The organization's other governing documents and conflicts of interest policy are not made available to the public.”

“Betsy Patterson, Dawn Ruiz, Jennifer Lockmiller, Kelly Ross, Michael Quintanilla, R. Bramer Owens, and Rachelle Buley transferred from a related organization during the tax year. They devoted an average of 40 hours per week to the organizations before and after the transfer.”

“Other Purchased Services : Program service expenses 188,302. Management and general expenses 0. Fundraising expenses 0. Total expenses 188,302. Contract Labor : Program service expenses 1,276,717. Management and general expenses 25,875. Fundraising expenses 0. Total expenses 1,302,592. Laboratory: Program service expenses 537,723. Management and general expenses 0. Fundraising expenses 0. Total expenses 537,723. Repairs & Maintenance : Program service expenses 70,324. Management and general expenses 0. Fundraising expenses 0. Total expenses 70,324. Professional Fees : Program service expenses 500. Management and general expenses 12,500. Fundraising expenses 0. Total expenses 13,000. Corporate Overhead : Program service expenses 0. Management and general expenses 3,307,943. Fundraising expenses 0. Total expenses 3,307,943.”

“Change in Net Assets of Related Foundation -6,721,937. Transfers Between Entities Under Common Control -103,197. Self Insurance Liability Reserve -238,928.”

“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 Forms 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”