Ridgecrest Regional Hospital

“Please refer to explanation for Form 990, Part VI, Lines 7A and 7B.”

“Two Board members were compensated for providing professional physician services to the Hospital. Simultaneously, they both served as volunteers on the Board of Directors. Those individuals were: Earl Ferguson, MD, Physician professional fees of $88,845; Lawrence Cosner, MD, Physician professional fees of $183,996.Two family members to Board member Earl Ferguson, MD had business relationships with the Hospital. The Hospital compensated William Ferguson (Brother to Earl Ferguson, MD)$185,977 as physician salary. The Hospital also compensated Katherine Ferguson (Sister-in-Law to Earl Ferguson, MD) $193,142 in physician salary and physician On-Call professional fees. Since Earl Ferguson, MD had family members with reportable business transactions to the Schedule L; and both Earl Ferguson and Lawrence Cosner, MD had business transactions with the hospital reportable on Schedule L (exceeding $10,000 in total compensation and other payments): Both Earl Ferguson and Lawrence Cosner are deemed to have lost independence in voting as hospital Board members (Per Form 990 Instructions).”

“The Corporate Members have the right to elect the members of the Board of Directors. The Corporate Membership consists of the Emeritus Members as approved by the Board of Directors, and 40 persons, who must reside in the hospital service area, elected to membership by a vote of the Corporate Members. Employees of the hospital are not eligible for Corporate Membership.”

“The duties of Corporate Members are as follows: a) Serve on committees; b)Elect directors at the annual meeting; c) Amend the bylaws; and d) Approve dissolutions or mergers.”

“The Corporate Members have the right to one vote per Member for voting on certain decisions. Under the Bylaws, the Corporate members have the right to: elect the members of the Board of Directors; fill a vacancy on the Board of Directors; and ratify the Bylaws that have been approved by the Board of Directors. In addition, Members have certain rights granted pursuant to the California Nonprofit Public Benefit Corporation act including the right to: remove a director; approve most amendments to the Articles of Incorporation; approve a sale of assets not in the usual and regular course of its business; merge with another entity; and dissolve.”

“The 990 is provided to the executive board via electronic distribution.”

“There is Annual Disclosure on Conflict of Interest Policy for directors, Officers, Medical Staff Officers, and Administrative Employees. Compliance with conflict of interest policy is monitored by the CEO.”

“Compensation for the CEO was determined by a compensation committee of the executive board using compensation comparison provided by HASC.”

“For other officers, the HASC salary survey is used to comply with prohibition from direct solicitation of salary information due to anti-trust regulations.”

“All public documents are made available upon request.”

“Program Services and Management expenses were allocated according to the Medicare Cost Report expense allocations.”