Providence Facey Medical Foundation

“Providence Health System - Southern California, a California nonprofit religious corporation, is the sole corporate member.”

“The Corporate Member may recommend to Providence Health & Services the following actions: A) To fix the number of Directors, appoint the Board of Directors and to remove such Directors of this Corporation at any time. B) To appoint and remove the President/CEO of this Corporation and to remove such President/CEO, with or without cause, after requesting a recommendation from the Board of Directors.”

“The Corporate Member shall have the right to recommend to Providence Health & Services the following actions with respect to this Corporation and of any corporation or other legal entity of which this Corporation is the sole controlling member or shareholder: A) To adopt or change the mission, philosophy, or values. B) To amend or repeal the Articles of Incorporation or the Bylaws. C) To approve the acquisition of assets, the incurrence of indebtedness or the lease, sale, transfer, assignment, or encumbering of assets, if the amount involved in any such transaction is in excess of an amount specified from time to time by resolution of the Providence Member and to approve the sale or transfer of other property which may have either historical or religious significance. D) To approve the dissolution, liquidation, consolidation or merger with another corporation or entity. E) To approve on a consolidated system-wide basis the annual operating and capital budgets and approval of any deviations from such budget in excess of an amount or percentage specified from time to time by resolution of Providence Health & Services. F) To appoint the certified public accountants after receiving the recommendation of the Board of Directors and to receive the annual audit report from such accountants. G) To approve the initiation or closure of any major work.”

“The Form 990 is prepared internally by experienced staff and reviewed by the internal Director of Taxes for Providence Health & Services and external tax advisors. The Finance Committee and signing Officer reviewed the Form 990 in detail. Once approved, an electronic copy of the Form 990 is emailed to the Board prior to filing with the IRS.”

“Providence Health & Services maintains a conflict of interest policy that applies to board members and management of all Providence-related organizations. The purpose of the policy is to guide and direct those serving the Providence Health & Services corporations and other legal entities so they can (1) fulfill their fiduciary responsibilities and exercise stewardship in ways that promote and protect the best interests of Providence and, (2) avoid situations that create a conflict, or the appearance of a conflict, between the interests of an individual associated with Providence and Providence. On an annual basis, each board member and management level employee must complete and submit an updated conflict of interest statement. Conflict of interest disclosures are reviewed by the System Integrity Department working in conjunction with the Department of Legal Affairs. If it is determined that an actual conflict exists, appropriate follow-up action is taken with the individual to rectify the conflict.”

“It is Providence's intention to make financial information accessible and transparent. Although the filing of Form 990 provides insight into how Providence achieves its Mission, delivers its programs and stewards its finances, deciphering the information directly from Form 990 can be challenging. The following paragraphs provide further information about the process we use to determine compensation for top management, officers and key employees. Providence has a single fiduciary Board, with responsibility for financial oversight associated with fulfillment of the Providence Mission, developing system policies, protecting the assets entrusted to the organization and overseeing the strategic and operational affairs of Providence's legal entities. Providence also maintains a network of community ministry boards with responsibility for quality of care oversight, community relations, advocacy and community needs assessments. Providence has a consistent compensation philosophy for all of its employees, including our senior executives. Salaries for senior executives are determined by the Providence Board's Human Resources Committee and approved by the full Board of Directors, none of whom is a Providence employee. The Board retains an independent consultant each year to review salaries of those in the most significant leadership roles in the organization. Part of the consultant's role is to review an extensive array of compensation surveys of large, not-for-profit health care systems in the United States. Providence is one of the larger health systems in the country, and as such, the Board benchmarks executive compensation against other large, not-for-profit health systems whose revenue is similar to that of Providence. Base salaries for Providence executives are set at the median level of the market, as identified by the independent consultant and reviewed with the Human Resources Committee. Each year, the Board Chair conducts a formal performance evaluation of the President/CEO that considers input from the other directors and senior leaders reporting to the President. The evaluation is discussed with the Human Resources Committee and then a recommendation is made by the committee to the full Board. The Board Chair and the Chair of the Human Resources Committee also meet with an independent consultant to develop a salary recommendation; which is reviewed and approved first by the committee and then by the Board of Directors. Additionally, the President/CEO utilizes the market information provided by the consultant along with formal performance evaluations, to determine salary recommendations for other senior executives. This process includes a rigorous analysis of those recommendations with the Human Resources Committee as a part of the review and approval process. Performance incentives allow executives to earn additional compensation if they achieve specific organizational goals for furthering Providence operating commitments and strategic objectives - advancing the Providence Mission and core values, meeting benchmarks for charity care, achieving quality targets, delivering top-rated patient satisfaction, meeting employee satisfaction goals and reaching financial performance objectives. The Board of Directors conducts a thorough process to ensure performance incentives are aligned with appropriate practices for not-for-profit health care systems. The Board's process for executive compensation fully complies with IRS standards and mirrors the best practices recommended in the "Report to Congress and the Nonprofit Sector on Governance, Transparency, and Accountability" submitted to the Senate Finance Committee by the Panel on the Nonprofit Sector.”

“The organization makes its financial statements and tax returns available upon request. The organization does not make its governing documents or conflict of interest policy available to the public.”

“Facey Medical Foundation has investments in limited partnerships that operate surgical centers. These limited partnerships are controlled by another tax exempt 501 (c) (3) organization.”

“Total compensation reported for Gary Leary on Part VII is $13,250. The $13,250 is composed solely of board service compensation.”

“Medical Fees: Program service expenses 100,037,005. Management and general expenses 0. Fundraising expenses 0. Total expenses 100,037,005. Other Medical Purchased Services: Program service expenses 6,843,796. Management and general expenses 0. Fundraising expenses 0. Total expenses 6,843,796. Other Purchased Services: Program service expenses 1,743,032. Management and general expenses 632,801. Fundraising expenses 0. Total expenses 2,375,833. Agency Labor: Program service expenses 60,905. Management and general expenses 183,097. Fundraising expenses 0. Total expenses 244,002. Collections: Program service expenses 0. Management and general expenses 59,138. Fundraising expenses 0. Total expenses 59,138.”

“Imputed Interest on UniHealth Grant Obligation -37,755. Additional Paid in Capital ( Contributed by Providence) 12,800,000. Rounding 1.”

“The Providence Health & Services Audit and Compliance Committee assists the Board of Directors with the oversight of the integrity of the System's consolidated financial statements and reporting, the audit process and the System's internal financial controls and policies; compliance with ethical, legal and regulatory standards and requirements; the independence, qualifications and performance of the System's internal and external auditors; the System's investment committee; and informs the Board of Directors of critical risk areas and recommended mitigation.”

“The following programs and amounts represent the community benefit provided by Facey Medical Foundation and the costs associated with them: Direct Charitable Write-Offs Charity (Indigent Care) $ 142,825 MediMedi/Medi-Cal $5,256,364 Community Outreach/Education Programs $ 591,527 Total Community Benefit Costs thru 12/31/14 $5,990,716 UniHealth Grant Disclosure: In September 2006, FMF entered into a binding grant agreement with UniHealth, whereby FMF is required to pay annual grants to UniHealth of $500,000 for a total aggregate of $5,000,000 over 10 years. In addition to the annual grant obligations, FMF may be required to make additional grant payments equal to 50% of the amount by which FMF's annual net operating income, exceeds 1.5% of FMF's annual net revenue, as defined in the grant agreement. The additional grant payments shall not exceed $5,000,000 in the aggregate for fiscal years 2006 through 2015. For the period ended December 31, 2014 and the period ended December 31, 2013, respectively, no amounts have been accrued for the additional Grant payments,as FMF's operating results have not met the requirements as defined in the grant agreement. Ten annual grant and additional grant payments, if any, are due 45 days after receipt of FMF's annual audited financial statements. As of December 31, 2014 and December 31, 2013 the $5,000,000 grant-net of payments and a discount of $37,755 and $58,083 for the year ended December 31, 2014 and for the December 31, 2013, respectively, is reflected in net assets in the accompanying statements of financial position. The discount rate used, 4.6%, represents the 10-year treasury rate in existence at the date the grant agreement was executed. FMF may prepay the discounted amounts of any remaining grant obligation or additional grant payment at any time during the 10-year period. The grant payable as of December 31, 2014 and December 31, 2013, is $983,509 and $945,754 respectively, and is included in the accompanying statements of financial position. Because the grant was consummated with UniHealth, FMF's then sole corporate member, the transaction was considered a net asset transfer for accounting purposes.”

“Although Facey Medical Foundation qualifies for public charity status for Schedule A purposes as an organization providing medical care pursuant to Internal Revenue Code section 170 (b)(1)(A)(iii) and Treasury Regulations section 1.170A-9(d) (1) (ii), it is not required to file Schedule H with its Form 990 as it is not an organization that is required to be licensed, registered or similarly recognized by a state as a hospital.”

“AFFILIATION AGREEMENTS Effective March 1, 2014, the Providence Health System entered into an affiliation agreement with Sisters of Charity of Leavenworth Health System (SCL) to transfer sponsorship of Saint John's Health Center (Saint John's) to the Health System. Saint John's operates a nonprofit medical center, a cancer institute, and physician clinics to serve the Santa Monica, California community and surrounding area. Effective May 1, 2014, the Providence Health System entered into an affiliation agreement with PacMed Clinics (PacMed). PacMed is a private, nonprofit, multi-specialty medical group with nine clinics in the Puget Sound area and more than 150 primary care and specialty providers at the date of affiliation. Pursuant to the affiliation agreement, Western HealthConnect became PacMed's sole corporate Member. No cash or other purchase consideration was transferred to effect the affiliation. Effective June 13, 2014, the Providence Health System entered into an affiliation agreement with Kadlec Health System (Kadlec). Kadlec operates a nonprofit medical center, a neurological resource center, a supporting foundation, and physician clinics to serve the tri-cities area of Kennewick, Pasco, and Richland, Washington. Pursuant to the affiliation agreement, Western HealthConnect became the sole member of Kadlec. No cash or other purchase consideration was transferred to effect the affiliation.”