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TIN:
SCHEDULE O
(Form 990 or 990-EZ)
Department of the Treasury
Internal Revenue Service
(Form 990 or 990-EZ)
Department of the Treasury
Internal Revenue Service
Supplemental Information to Form 990 or 990-EZ
Complete to provide information for responses to specific questions on
Form 990 or to provide any additional information.
Attach to Form 990 or 990-EZ.OMB No. 1545-0047
2012
Open to Public
Inspection
Inspection
Name of the organization
PRIORITY HEALTH
Employer identification number
38-2715520
38-2715520
| Identifier | Return Reference | Explanation |
|---|---|---|
| PROGRAM SERVICE DESCRIPTION | FORM 990, PART III, LINE 4A | PRIORITY HEALTH HMO PRIORITY HEALTH IS AN INTEGRAL PART OF THE SPECTRUM HEALTH SYSTEM, AN INTEGRATED HEALTH SYSTEM SERVING COMMUNITIES THROUGHOUT MICHIGAN. PRIORITY HEALTH'S MISSION, LED BY ITS COMMUNITY BOARD, STRIVES TO RETURN VALUE TO THE COMMUNITIES SERVED BEYOND THE PROVISION OF HEALTH CARE TO ITS MEMBERS. PRIORITY HEALTH HAS BUILT A LONG HISTORY OF OFFERING MICHIGAN EMPLOYEES PROGRESSIVE PRODUCTS AND INNOVATIVE PROGRAMS INTENDED TO KEEP COSTS DOWN AND MEMBERS HEALTHY. ITS BROAD PORTFOLIO OF PRODUCTS AND SERVICES INCLUDES TRADITIONAL MEDICAL PLANS AS WELL AS HSA'S, HRA'S AND OTHER CONSUMER-DRIVEN PRODUCTS. PRIORITY HEALTH CURRENTLY HAS AN "EXCELLENT" ACCREDITATION FOR ITS HMO PRODUCTS FROM THE NATIONAL COMMITTEE FOR QUALITY ASSURANCE (NCQA), AN INDEPENDENT MANAGED CARE ACCREDITING BODY. THIS IS THE HIGHEST RATING A HEALTH PLAN CAN EARN. PRIORITY HEALTH PURSUES INITIATIVES THAT WILL IMPROVE PATIENT OUTCOMES WHILE HELPING TO REDUCE THE OVERALL COST TO THE MEMBER. IN 2012, IN ADDITION TO PROGRAMS THAT WERE IMPLEMENTED IN PRIOR YEARS, PRIORITY HEALTH LOWERED HEALTH COSTS BY OVER $39 MILLION THROUGH NEW MANAGED CARE INITIATIVES THAT INFLUENCE PHYSICIAN PRACTICES, PROMOTE APPROPRIATE HEALTH CARE UTILIZATION AND INCREASE QUALITY WHICH EXTENDS BEYOND PRIORITY HEALTH'S MEMBERS. PEER AND UTILIZATION REVIEW ASSURES THAT SERVICES ARE RENDERED IN A COST EFFICIENT AND PROFESSIONAL MANNER. EVIDENCE-BASED MEDICINE IMPROVES QUALITY AND LOWERS COST. PRIORITY HEALTH MEASURES EACH PHYSICIAN'S TREATMENT OF PREFERENCE SENSITIVE CONDITIONS AND DISTRIBUTES THIS BENCHMARK DATA UN-BLINDED TO ALL PHYSICIANS TO HIGHLIGHT OUTLIERS IN STANDARDS OF CARE TO PROMPT ACTION PLANS AROUND CHANGES IN TREATMENT APPROACH AND ENGAGEMENT OF PATIENTS IN ALTERNATIVE TREATMENTS. CONSUMER DECISION MAKING TOOLS HAVE ALSO BEEN DEVELOPED TO PROVIDE PATIENTS WITH ALTERNATIVES TO TREATMENT WITH RELATED EVIDENCE BASED OUTCOMES. PHARMACEUTICAL FORMULARY ASSESSMENTS GUIDE PHYSICIAN PRESCRIPTION ORDERING BEHAVIORS TOWARD THE LOWEST COST DRUGS THAT ARE PROVEN EFFECTIVE. QUALITY AND INCENTIVE PROGRAMS DESIGNED TO MONITOR AND REDUCE HIGH COST HEALTH CARE AREAS SUCH AS EMERGENCY ROOM VISITS, HIGH DIAGNOSTIC IMAGING, AND UNNECESSARY ADMISSIONS HAVE BEEN IMPLEMENTED ACROSS THE STATE OF MICHIGAN. OTHER EXAMPLES OF INITIATIVES INCLUDE IMPLEMENTATION OF ELECTRONIC MEDICAL RECORDS, WHICH BENEFIT NON-PRIORITY HEALTH PATIENTS. PRIORITY HEALTH DEVELOPS AND PUBLISHES PREVENTIVE HEALTH CARE GUIDELINES AVAILABLE TO THE GENERAL PUBLIC ON ITS WEBSITE. IN ADDITION, PRIORITY HEALTH USES COMMUNITY RATING WHICH MINIMIZES THE ECONOMIC IMPACT OF SEVERE ILLNESS ON A GIVEN INDIVIDUAL OR GROUP. PRIORITY HEALTH SERVES WHAT THE IRS HAS DEFINED AS THE "MOST IN NEED" POPULATION OF INDIVIDUALS, SMALL GROUPS AND ELDERLY, MAKING UP 43% OF THE MEMBERSHIP BASE. PRIORITY HEALTH PROVIDED COMMUNITY-RATED AFFORDABLE HEALTH INSURANCE TO 98,000 MEMBERS WHO ARE INDIVIDUALS AND SMALL GROUPS IN 2012. PRIORITY HEALTH ALSO PROVIDES CAPITAL SUPPORT FOR ITS WHOLLY OWNED SUBSIDIARY, PRIORITY HEALTH GOVERNMENT PROGRAMS, INC., WHICH PROVIDES ACCESS TO EXCELLENT HEALTH CARE TO OVER 70,000 MEDICAID MEMBERS. PRIORITY HEALTH SHARES RISK WITH PROVIDERS AND EMPLOYERS THROUGH CAPITATION, WITHHOLDS, AND OVER $35 MILLION OF INCENTIVES AND OTHER RISK SHARING ARRANGEMENTS. THIS PROMOTES LOWER OVERALL HEALTH CARE COSTS AND IMPROVED QUALITY TO THE COMMUNITY. |
| PROGRAM SERVICE DESCRIPTION | FORM 990, PART III, LINE 4B | PRIORITY HEALTH MEDICARE PRIORITY HEALTH BEGAN OFFERING MEDICARE ADVANTAGE PLANS IN JULY 2005 AND MEDICARE ADVANTAGE PLANS WITH PRESCRIPTION DRUG COVERAGE IN JANUARY 2006. PRIORITY HEALTH'S MEDICARE PROGRAM HAS ONE OF THE LOWEST READMISSION RATES IN THE COUNTRY. ITS MEDICARE ADVANTAGE PLANS VARY IN PRICE BASED ON WHERE INDIVIDUALS LIVE AND WHAT BENEFITS THEY NEED. INDIVIDUALS ELIGIBLE FOR MEDICARE AND LIVING WITHIN 51 MICHIGAN COUNTIES MAY CHOOSE FROM PRIORITY HEALTH MEDICARE ADVANTAGE PLANS. PRIORITY HEALTH STRIVES TO WORK WITH THE COMMUNITY AND MAKE MEDICARE SIMPLE TO UNDERSTAND. THAT IS WHY IT WROTE AND PUBLISHED "MEDICARE ADVANTAGE FOR DUMMIES." IT WAS WRITTEN BY A PRIORITY HEALTH EMPLOYEE, IN COOPERATION WITH WILEY PUBLISHING, OWNERS OF THE DUMMIES SERIES. THE BOOK HAS BEEN DISTRIBUTED FREE TO OVER 200,000 PEOPLE ACROSS MICHIGAN. AS A RESULT OF PRIORITY HEALTH'S WORK WITH THE COMMUNITY AND DEDICATION TO OFFERING PLANS THAT DELIVER HIGH QUALITY, ITS MEDICARE ADVANTAGE PLANS HAVE RECEIVED THE HIGHEST STAR RATING IN MICHIGAN BY THE CENTERS FOR MEDICARE AND MEDICAID SERVICES (CMS). |
| PROGRAM SERVICE DESCRIPTION | FORM 990, PART III, LINE 4C | WELLNESS FOR MORE THAN 20 YEARS, PREVENTION AND WELLNESS HAVE BEEN THE FOUNDATION OF PRIORITY HEALTH'S APPROACH TO HEALTH CARE. THIS APPROACH HAS POSITIONED THE COMPANY AS AN INDUSTRY LEADER IN KEEPING MEMBERS HEALTHY BY PREVENTING ILLNESS, MANAGING CHRONIC CONDITIONS AND ULTIMATELY REDUCING COSTS. PRIORITY HEALTH PROVIDES WELLNESS PROGRAMS WITHIN ITS STANDARD HEALTH PLANS, OFFERS STAND-ALONE WELLNESS PROGRAMS TO EMPLOYER GROUPS, PARTICIPATES IN, AND SPONSORS WELLNESS PROGRAMS FOR THE COMMUNITY AT LARGE TO IMPROVE THE HEALTH OF ALL PEOPLE, NOT JUST MEMBERS. IN 2012, OVER 250 HOURS OF WELLNESS CLASSES AND HEALTH FAIRS WERE PROVIDED TO THE COMMUNITY TO PROMOTE HEALTHY LIVING. SPECIFICALLY, PRIORITY HEALTH SPONSORS PROGRAMS WITHIN THE COMMUNITY SUCH AS BIKE CLINICS, CYCLING TEAMS WHICH ALSO PUT ON CLINICS IN SCHOOLS AND PROVIDES FREE HELMETS TO CHILDREN, WALKS AND VARIOUS OTHER SCHOOL OR COMMUNITY EVENTS TO PROMOTE HEALTHIER LIVING. PRIORITY HEALTH PARTICIPATES IN PARTNERSHIP WITH MARANDA, A WEST MICHIGAN NEWS CELEBRITY, DIRECTING MESSAGES TO CHILDREN ON HEALTH AND OTHER POSITIVE MESSAGING. MARANDA PRESENTS A TV SERIES CALLED "WHERE YOU LIVE" AND BRINGS IN EXPERTS TO TALK TO KIDS ABOUT HEALTHY LIVING. THIS PARTNERSHIP ALSO SPONSORS EVENTS THROUGHOUT WEST MICHIGAN REACHING OUT TO KIDS IN AT-RISK COMMUNITIES. PRIORITY HEALTH CONDUCTS FREE WELLNESS CLASSES THROUGHOUT THE STATE. THE BROADER COMMUNITY IS WELCOME TO ATTEND CLASSES THAT EDUCATE THE COMMUNITY IN TOPICS SUCH AS NUTRITION, FITNESS AND PREVENTION. PRIORITY HEALTH ALSO SPONSORS OR PRODUCES COMMUNITY EDUCATION PROGRAMS, HEALTH FAIRS, WALKS/RUNS/TRIATHLONS, AND NEWSLETTERS. PRIORITY HEALTH SUPPORTS HEALTH AND SOCIAL WELFARE ACTIVITIES VIA WELL THOUGHT OUT CONTRIBUTIONS OF OVER $230,000 ANNUALLY TO ORGANIZATIONS IN ORDER TO IMPROVE HEALTH SERVICES AND CONDITIONS IN NEIGHBORHOODS, WORKPLACES AND SCHOOLS THROUGHOUT THE COMMUNITIES IT SERVES. FURTHERMORE, PRIORITY HEALTH HAS DEVELOPED A PROGRAM IN WHICH EMPLOYEES ARE ENCOURAGED TO CONTRIBUTE TO HEALTH-BASED COMMUNITY ORGANIZATIONS. THROUGH THIS PROGRAM, HUNDREDS OF HOURS (DURING BUSINESS TIME) AND OVER $210,000 ANNUALLY HAS BEEN GIVEN BACK TO THE COMMUNITY. EMPLOYERS WHO OFFERED HEALTHBYCHOICE FROM 2009-2012 AVOIDED NEARLY $2.5 MILLION IN MEDICAL COSTS AND EMPLOYEES HEALTH MEASURES WERE SIGNIFICANTLY IMPROVED. |
| AUDITED FINANCIAL STATEMENTS | FORM 990, PART IV, LINE 12A | THE ORGANIZATION'S FINANCIAL STATEMENTS ARE AUDITED ANNUALLY BY AN INDEPENDENT ACCOUNTING FIRM. THE "NO" RESPONSE TO THESE QUESTIONS RELATES TO THE FACT THAT THE GAAP BASIS FINANCIAL STATEMENTS WERE PREPARED ON A CONSOLIDATED BASIS AND NOT ON A STAND ALONE BASIS. THE ORGANIZATION IS AUDITED ANNUALLY ON A STAND ALONE BASIS AND ISSUED FINANCIAL STATEMENTS ON A STAND ALONE BASIS WHICH ARE PREPARED IN ACCORDANCE WITH SAP (STATUTORY ACCOUNTING PRINCIPLES), AS REQUIRED BY REGULATORY AUTHORITIES. THE FIGURES IN THIS TAX RETURN RECONCILE TO THE FINANCIAL STATEMENTS PREPARED UNDER STATUTORY ACCOUNTING PRINCIPLES AS SUBMITTED TO THE STATE OF MICHIGAN. |
| NUMBER OF EMPLOYEES REPORTED ON FORM W-3 | FORM 990, PART V, LINE 2A | ALL EMPLOYEES OF PRIORITY HEALTH WERE EMPLOYED DURING THE YEAR BY PRIORITY HEALTH MANAGED BENEFITS (38-3085182) AND/OR SPECTRUM HEALTH SYSTEM (38-3382353) AND LEASED BACK TO PRIORITY HEALTH. SALARIES AND WAGES ARE ALLOCATED TO PRIORITY HEALTH VIA A MANAGEMENT FEE. THE SALARIES AND WAGES REPORTED IN PART IX STATEMENT OF FUNCTIONAL EXPENSES REFLECTS THE PORTION OF SALARIES AND WAGES ALLOCATED TO PRIORITY HEALTH. PRIORITY HEALTH MANAGED BENEFITS AND/OR SPECTRUM HEALTH SYSTEM FILED ALL APPLICABLE IRS TAX FILINGS INCLUDING FORMS W-2 AND W-3 ON BEHALF OF PRIORITY HEALTH. |
| INDEPENDENT VOTING MEMBERS | FORM 990, PART VI, LINE 1B | THE MEMBERS OF THE BOARD OF DIRECTORS OF PRIORITY HEALTH ARE ALSO MEMBERS OF THE BOARD OF DIRECTORS FOR PRIORITY HEALTH MANAGED BENEFITS, INC. ("PHMB") (EIN 38-3085182); A SISTER COMPANY AND WHOLLY OWNED SUBSIDIARY OF SPECTRUM HEALTH SYSTEM, THE PARENT ORGANIZATION. PHMB IS A TAXABLE ORGANIZATION THAT PROVIDES SUPPORT SERVICES TO PRIORITY HEALTH. PURSUANT TO THE DEFINITIONS IN THE INSTRUCTIONS TO THIS TAX RETURN, BOARD MEMBERS ARE NOT CONSIDERED INDEPENDENT IF THEY SERVE ON THE BOARD OF TAXABLE ORGANIZATIONS DOING BUSINESS WITH THE ORGANIZATION (EVEN THOUGH THERE IS COMMON OWNERSHIP). AS SUCH, THE ORGANIZATION REPORTS ZERO INDEPENDENT BOARD MEMBERS. HOWEVER, IT SHOULD BE NOTED THAT THERE ARE TWELVE MEMBERS OF THE BOARD OF DIRECTORS THAT WOULD MEET THE INDEPENDENCE DEFINITION IF NOT FOR THE PHMB BOARD MEMBER CONFLICT. |
| Significant changes to organizational documents | Form 990, Part VI, Section A, Line 4 | THE ORGANIZATIONS BYLAWS WERE RESTATED TO REDUCE THE MINIMUM NUMBER OF DIRECTORS ON THE BOARD FROM TWENTY ONE TO FIFTEEN AND THE MAXIMUM NUMBER OF DIRECTORS FROM TWENTY SEVEN TO TWENTY ONE. |
| Classes of members or stockholders | Form 990, Part VI, Section A, Line 6 | THE ORGANIZATION HAS THREE SHAREHOLDERS AS FOLLOWS: SPECTRUM HEALTH SYSTEM (EIN 38-3382353), CLASS A SHAREHOLDER - 93.9% MUNSON HEALTHCARE (EIN 38-1362830), CLASS B SHAREHOLDER - 5.5% NORTHERN MICHIGAN REGIONAL HEALTH SYSTEM (EIN 38-2146751), CLASS B SHAREHOLDER - 0.6% ALL SHAREHOLDERS ARE TAX-EXEMPT INTERNAL REVENUE CODE SECTION 501(C)(3) ORGANIZATIONS. |
| Members or stockholders electing members of governing body | Form 990, Part VI, Section A, Line 7a | ELECTION OF MEMBERS AND THEIR RIGHTS FROM PRIORITY HEALTH BYLAWS: 6.2 NUMBER AND CLASS OF DIRECTORS. THE BOARD OF DIRECTORS WILL BE COMPOSED OF NOT LESS THAN FIFTEEN (15) AND NOT MORE THAN TWENTY-ONE (21) MEMBERS, WHICH WILL BE DIVIDED INTO THE FOLLOWING CLASSES: 6.2.1 ONE-THIRD (1/3) OF THE DIRECTORS WILL BE ADULT ENROLLEES AS SPECIFIED UNDER MCL SECTION 500.3511(1) AND ELECTED PURSUANT TO SECTION 6.3 BELOW. AT LEAST ONE (1) OF SUCH ADULT ENROLLEE DIRECTORS WILL BE FROM THE CORPORATION'S NORTHERN SERVICE AREA THAT IS ALSO SERVED BY MUNSON HEALTHCARE OR HEALTHSHARE, INC. (TOGETHER, "NORTHERN SHAREHOLDERS"). 6.2.2 TWO (2) OF THE DIRECTORS WILL BE APPOINTED JOINTLY BY THE NORTHERN SHAREHOLDERS. OF SUCH DIRECTORS, ONE (1) WILL BE A PHYSICIAN. 6.2.3 THE REMAINDER OF THE DIRECTORS (NOT LESS THAN EIGHT (8)) WILL BE APPOINTED BY SPECTRUM HEALTH. 6.3 ELECTION OF ADULT ENROLLEE MEMBERS. THE GOVERNANCE COMMITTEE OR SIMILARLY DELEGATED COMMITTEE OF THE BOARD OF DIRECTORS WILL SOLICIT NAMES OF POTENTIAL CANDIDATES FROM THE MEMBERS, SHAREHOLDERS, DIRECTORS AND COMMUNITY. THE COMMITTEE WILL SUBMIT TO THE BOARD OF DIRECTORS A LIST OF NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS AS ADULT ENROLLEE REPRESENTATIVES. AT LEAST ONE (1) MEMBER WILL BE NOMINATED FOR EACH DIRECTORSHIP TO BE FILLED AT SUCH ANNUAL MEETING. IN ADDITION, ANY GROUP OF ADULT ENROLLEES IN THE CORPORATION'S HEALTH MAINTENANCE PLAN, UPON FILING A PETITION WITH MORE THAN ONE HUNDRED (100) LEGITIMATE SIGNATURES OF CURRENT MEMBERS WITH THE SECRETARY OF THE BOARD OF DIRECTORS AT LEAST NINETY (90) DAYS PRIOR TO THE ELECTION DATE FOR THE BOARD OF DIRECTORS, MAY NOMINATE A CANDIDATE FOR ELECTION TO THE BOARD OF DIRECTORS. ELIGIBLE MEMBERS WILL BE GIVEN THE OPPORTUNITY TO VOTE ON THE CANDIDATES FOR ELECTION TO THE BOARD OF DIRECTORS. NO MORE THAN TWO (2) PERSONS EMPLOYED BY OR AFFILIATED WITH ANY ONE (1) EMPLOYER OR OTHER GROUP MAY BE NOMINATED. 6.4 TERM. THE ADULT ENROLLEE MEMBERS WILL BE DIVIDED INTO THREE (3) CLASSES, WHICH WILL BE AS EVENLY DIVIDED AS POSSIBLE. THE TERMS OF OFFICE OF THE CLASSES WILL EXPIRE IN THREE (3) SUCCESSIVE YEARS, WITH ONE (1) CLASS EXPIRING EACH YEAR. EACH ELECTED DIRECTOR WILL BE ELECTED FOR A TERM OF THREE (3) YEARS (EXCEPT FOR THE DIRECTORS ELECTED IMMEDIATELY AFTER ADOPTION OF THIS SECTION 6.4 WHO WILL SERVE THE TERMS DESIGNATED BY THE BOARD OF DIRECTORS). THE DIRECTORS APPOINTED BY THE NORTHERN SHAREHOLDERS AND SPECTRUM HEALTH WILL SERVE ONE (1) YEAR TERMS OR UNTIL SUCH TIME AS THEIR SUCCESSOR IS APPOINTED. 6.5 VACANCIES. ANY VACANCY IN A BOARD OF DIRECTOR POSITION DESIGNATED BY THE NORTHERN SHAREHOLDERS OR SPECTRUM HEALTH WILL BE FILLED BY THE NORTHERN SHAREHOLDERS OR SPECTRUM HEALTH, RESPECTIVELY. ANY VACANCY IN A POSITION FOR AN ADULT ENROLLEE WILL BE FILLED BY THE REMAINING ADULT ENROLLEES ON THE BOARD OF DIRECTORS. EACH PERSON APPOINTED TO FILL A VACANCY WILL COMPLETE THE UNEXPIRED PORTION OF THE ORIGINAL TERM OF THE DIRECTOR BEING REPLACED. |
| Decisions requiring approval by members or stockholders | Form 990, Part VI, Section A, Line 7b | DECISIONS SUBJECT TO APPROVAL OF SHAREHOLDERS (NOT MEMBERS) CERTAIN DECISIONS ARE SUBJECT TO APPROVAL OF SHAREHOLDERS. FROM PRIORITY HEALTH BYLAWS: 2.2 CLASS A SHAREHOLDER'S RESERVED POWERS. THE CLASS A SHAREHOLDER SHALL HAVE THE RESERVED POWERS SET FORTH IN THIS SECTION 2.2. THE CORPORATION'S BOARD OF DIRECTORS MAY RECOMMEND ACTION TO THE CLASS A SHAREHOLDER WITH RESPECT TO THE RESERVED POWERS SET FORTH IN THIS SECTION 2.2. THE ACTIONS LISTED BELOW MAY, NOTWITHSTANDING ANY OTHER PROVISION OF THESE BYLAWS OR THE ARTICLES, BE UNILATERALLY CAUSED AND/OR TAKEN BY THE CLASS A SHAREHOLDER, WITHIN ITS SOLE AND EXCLUSIVE POWER AND DISCRETION, AND SHALL NOT BE DEEMED AUTHORIZED UNLESS AND UNTIL APPROVED BY THE CLASS A SHAREHOLDER: 2.2.1 AMENDMENT OF THE ARTICLES OF INCORPORATION OR BYLAWS OF THE CORPORATION AS PROVIDED IN SECTION 13.1 OF THESE BYLAWS; 2.2.2 ELECTION AND/OR REMOVAL OF THE CLASS A SHAREHOLDER-APPOINTED MEMBERS OF THE CORPORATION'S BOARD OF DIRECTORS PURSUANT TO ARTICLE VI OF THESE BYLAWS; 2.2.3 ELECTION AND/OR REMOVAL OF THE CORPORATION'S CHAIRPERSON OF THE BOARD OF DIRECTORS; 2.2.4 HIRING, DISCHARGE, AND EVALUATION OF THE CORPORATION'S PRESIDENT FOLLOWING CONSULTATION WITH THE CORPORATION'S BOARD OF DIRECTORS PURSUANT TO SECTION 7.3; 2.2.5 ADOPTION OF THE CORPORATION'S STRATEGIC PLAN(S); 2.2.6 ADOPTION OF THE CORPORATION'S ANNUAL OPERATING AND CAPITAL BUDGETS, AND ANY AMENDMENTS TO SUCH BUDGETS; 2.2.7 ALL CAPITAL EXPENDITURES BY THE CORPORATION IN EXCESS OF THAT AMOUNT (THE "AUTHORITY MATRIX AMOUNT") SET FORTH IN THE AUTHORITY MATRIX FOR CAPITAL EXPENDITURES AND LOANS TO NON-SPECTRUM HEALTH ENTITIES (THE "EXPENDITURE AUTHORITY MATRIX"), A CURRENT COPY OF WHICH IS ATTACHED HERETO AS EXHIBIT A AND WHICH MAY BE AMENDED FROM TIME TO TIME BY SPECTRUM HEALTH SYSTEM ("SPECTRUM HEALTH"); 2.2.8 ALL BORROWINGS OR GUARANTEES OF INDEBTEDNESS BY THE CORPORATION (OR ANY ENTITY CONTROLLED BY THE CORPORATION), INCLUDING ANY OPERATING LEASE IN AN AMOUNT GREATER THAN ONE MILLION DOLLARS ($1,000,000.00) DURING THE INITIAL LEASE TERM, NOT INCLUDING RENEWALS AND/OR EXTENSIONS; 2.2.9 ALL LENDING BY THE CORPORATION (OR ANY ENTITY CONTROLLED BY THE CORPORATION) TO PERSONS OTHER THAN SPECTRUM HEALTH OR AN ENTITY CONTROLLED BY SPECTRUM HEALTH IN EXCESS OF THE AUTHORITY MATRIX AMOUNT; 2.2.10 THE CORPORATION'S INVESTMENTS OF CASH AND/OR RESERVES, WHETHER ON AN INDIVIDUAL BASIS OR AS PART OF A POOLED INVESTMENT STRATEGY; 2.2.11 ANY MERGER OR CONSOLIDATION OF THE CORPORATION (OR ANY ENTITY CONTROLLED BY THE CORPORATION), OR ANY OTHER CHANGE IN OWNERSHIP PERCENTAGES, CONTROL, OR CAPITAL STRUCTURE OF THE CORPORATION (OR ANY ENTITY CONTROLLED BY THE CORPORATION); 2.2.12 THE PURCHASE OF ALL, OR A MAJORITY OF, ANOTHER CORPORATION, LIMITED LIABILITY COMPANY, PARTNERSHIP OR OTHER LEGAL ENTITY'S STOCK, MEMBERSHIP INTEREST, PARTNERSHIP INTEREST, OTHER OWNERSHIP INTEREST, OR ASSETS; 2.2.13 THE CREATION OF ANY ENTITY CONTROLLED, DIRECTLY OR INDIRECTLY, BY THE CORPORATION; 2.2.14 THE SALE OR TRANSFER OF MORE THAN TEN PERCENT (10%) OF THE ASSETS OF THE CORPORATION (OR ANY ENTITY CONTROLLED BY THE CORPORATION) TO ANY PERSON OR ENTITY NOT CONTROLLED BY SPECTRUM HEALTH; 2.2.15 DISSOLUTION OF THE CORPORATION; 2.2.16 THE SELECTION, RETENTION, AND OVERSIGHT OF THE OUTSIDE AUDITORS FOR THE CORPORATION (OR ANY ENTITY CONTROLLED BY THE CORPORATION) AND 2.2.17 IN OTHER CASES WHEN REQUIRED BY LAW OR AS OTHERWISE PROVIDED IN THESE BYLAWS. THE CLASS A SHAREHOLDER, PRIOR TO EXERCISING ANY OF THE RESERVED POWERS SET FORTH ABOVE, SHALL NOTIFY THE CLASS B SHAREHOLDER (PROVIDED SUCH ACTION IS NOT TAKEN AT A DULY CALLED MEETING OF THE SHAREHOLDERS, BOARD OF DIRECTORS OR ANY DESIGNATED COMMITTEE). 2.3 CLASS B SHAREHOLDERS' RESERVED POWERS. THE CLASS B SHAREHOLDERS SHALL HAVE THE RESERVED POWERS SET FORTH IN THIS SECTION 2.3. THE CORPORATION'S BOARD OF DIRECTORS MAY RECOMMEND ACTION TO THE CLASS B SHAREHOLDERS WITH RESPECT TO THE RESERVED POWERS SET FORTH IN THIS SECTION 2.3. THE CLASS B SHAREHOLDERS MAY, NOTWITHSTANDING ANY OTHER PROVISION OF THESE BYLAWS OR THE ARTICLES, ACT JOINTLY, WITHIN THEIR SOLE AND EXCLUSIVE POWERS AND DISCRETION, ELECT AND/OR REMOVE THE CLASS B SHAREHOLDER-APPOINTED MEMBERS OF THE CORPORATION'S BOARD OF DIRECTORS PURSUANT TO ARTICLE VI OF THESE BYLAWS. 2.4 COMPLIANCE WITH SPECTRUM HEALTH POLICIES. NOTWITHSTANDING ANYTHING CONTAINED IN THESE BYLAWS TO THE CONTRARY, THE CORPORATION AND ITS SUBSIDIARIES SHALL AT ALL TIMES COMPLY WITH AND IMPLEMENT SPECTRUM HEALTH POLICIES AND PROCEDURES APPROVED BY THE CHIEF EXECUTIVE OFFICER OF SPECTRUM HEALTH, OR HIS/HER DESIGNEE AS BEING SPECIFICALLY APPLICABLE TO THE CORPORATION, EXCEPT TO THE EXTENT THAT SUCH COMPLIANCE AND/OR IMPLEMENTATION WOULD (A) MATERIALLY AND NEGATIVELY IMPACT THE RIGHTS, POWERS, OR PREFERENCES OF THE CLASS B SHAREHOLDERS; OR (B) BE NONCOMPLIANT WITH APPLICABLE LAWS AND/OR REGULATIONS. |
| Review of form 990 by governing body | Form 990, Part VI, Section B, Line 11b | THE REVIEW PROCESS FOR THIS FORM 990 IS AS FOLLOWS: 1. PREPARATION OF THE RETURN IS SUPERVISED AND REVIEWED BY THE ORGANIZATION'S CORPORATE TAX MANAGER. 2. A SECOND REVIEW IS PERFORMED BY AN EXTERNAL CPA FIRM WITH EXPERTISE IN TAX-EXEMPT RETURN PREPARATION. 3. THE RETURN IS REVIEWED BY THE ORGANIZATION'S FINANCE AND LEGAL DEPARTMENTS AND PRESENTED TO THE FINANCE AND AUDIT COMMITTEE WHO IS RESPONSIBLE FOR APPROVING THE RETURN FOR FILING AND DISTRIBUTION TO THE BOARD OF DIRECTORS. 4. THE RETURN IS SENT TO THE MEMBERS OF THE BOARD OF DIRECTORS. 5. THE ORGANIZATION'S CHIEF FINANCIAL OFFICER REVIEWS COMMENTS OR QUESTIONS RECEIVED BY MEMBERS OF THE BOARD OF DIRECTORS, IF ANY, TO ADDRESS OR TO INCORPORATE, AS APPROPRIATE, INTO THE RETURN PRIOR TO FILING. |
| Conflict of interest policy | Form 990, Part VI, Section B, Line 12c | MONITORING OF CONFLICTS OF INTEREST (BOARD): 1. THE SECRETARY OF THE BOARD OR OTHER DESIGNATED INDIVIDUAL IS RESPONSIBLE FOR OBTAINING FROM ALL DIRECTORS A COMPLETED ANNUAL DISCLOSURE STATEMENT. IN ADDITION, THE SECRETARY WILL OBTAIN AN ANNUAL DISCLOSURE STATEMENT FROM EACH NEW DIRECTOR AT THE TIME HE/SHE IS FIRST ELECTED OR APPOINTED TO THE BOARD OF DIRECTORS. 2. THE SECRETARY WILL COMPILE A LIST OF POTENTIAL AND ACTUAL CONFLICTS (THE "CONFLICT LIST") FROM THE ANNUAL DISCLOSURE STATEMENTS AND DISTRIBUTE THE LIST TO THE CHAIR OF THE BOARD AND THE PRESIDENT. 3. IN ADDITION TO COMPLETING THE ANNUAL DISCLOSURE STATEMENT, DIRECTORS MUST DISCLOSE ACTUAL AND POTENTIAL CONFLICTS AS THEY ARISE DUE TO CHANGED CIRCUMSTANCES. SUCH DISCLOSURES MAY BE MADE TO THE CHAIR OF THE BOARD, THE PRESIDENT OR THE SECRETARY. DISCLOSURES MADE IN THIS WAY SHALL BE GIVEN TO THE SECRETARY TO ADD TO THE CONFLICT LIST. 4. PRIOR TO EACH BOARD MEETING, THE CHAIR OF THE BOARD, THE PRESIDENT AND THE SECRETARY WILL REVIEW THE AGENDA TO DETERMINE IF ANY AGENDA ITEMS WOULD GIVE RISE TO A CONFLICT BASED ON THE CONFLICT LIST. IF AN ACTUAL OR POTENTIAL CONFLICT IS DETERMINED TO EXIST, THE CHAIR OF THE BOARD OR THE PRESIDENT WILL CONTACT THE DIRECTOR PRIOR TO THE MEETING TO ALERT THE DIRECTOR TO THE CONFLICT SITUATION. IF THE AGENDA ITEM IS FOR DISCUSSION ONLY, THE CHAIR OF THE BOARD AND THE DIRECTOR MAY DETERMINE THAT THE DIRECTOR MAY PARTICIPATE IN THE DISCUSSION AFTER DISCLOSING THE CONFLICT TO THE OTHER DIRECTORS. IF THE AGENDA ITEM REQUIRES A VOTE, THE DIRECTOR MUST EXCUSE HIM/HERSELF FROM THE MEETING PRIOR TO THE VOTE. 5. CONFLICTS THAT ARE DISCLOSED DURING BOARD MEETINGS SHALL BE RECORDED IN THE MINUTES OF THE MEETING, INCLUDING WHETHER OR NOT THE DIRECTOR PARTICIPATED IN ANY DISCUSSION ON THE TOPIC AND THE FACT THAT THE DIRECTOR LEFT THE MEETING PRIOR TO A VOTE. MONITORING OF CONFLICTS OF INTEREST (EMPLOYEES): ALL EMPLOYEES ARE REQUIRED TO DISCLOSE CONFLICTS OF INTEREST ANNUALLY. THE COMPLIANCE DEPARTMENT STAFF REVIEWS ALL DISCLOSURES AND GATHERS ADDITIONAL INFORMATION AS APPROPRIATE. THE COMPLIANCE DEPARTMENT STAFF DETERMINES IF ANY CONFLICTS ARE SIGNIFICANT AND ADDRESSES THEM WITH THE EMPLOYEE AND/OR THE HUMAN RESOURCES DEPARTMENT TO ELIMINATE ANY SIGNIFICANT CONFLICTS. A SUBCOMMITTEE OF THE COMPLIANCE COMMITTEE REVIEWS THE ACTIVITIES OF THE COMPLIANCE DEPARTMENT STAFF IN DETERMINING CONFLICTS TO DETERMINE IF THEY HAVE BEEN HANDLED APPROPRIATELY. |
| Process used to establish compensation of top management official | Form 990, Part VI, Section B, Line 15a | THE SPECTRUM HEALTH SYSTEM BOARD OF DIRECTORS (THROUGH ITS EXECUTIVE COMMITTEE) USES THE FOLLOWING PROCESS ANNUALLY FOR DETERMINING COMPENSATION OF THE TOP MANAGEMENT OFFICIAL AT PRIORITY HEALTH. LABOR MARKET DATA REFLECTING COMPARABLE ORGANIZATIONS AND JOBS (PREPARED BY INDEPENDENT FIRMS) ARE RELIED UPON. COMPETITIVE ASSESSMENT REPORTS ARE PROVIDED TO THE EXECUTIVE COMMITTEE IN ADVANCE OF MEETINGS. THE COMPETITIVE ASSESSMENT REPORT IS PREPARED BY A NATIONALLY KNOWN INDEPENDENT EXECUTIVE COMPENSATION FIRM AND WAS BASED ON THE FOLLOWING INDEPENDENT SURVEYS OF HEALTH CARE EXECUTIVES AT COMPARABLE HEALTH SYSTEMS: * SULLIVAN, COTTER AND ASSOCIATES, INC.: 2011 SURVEY OF MANAGER AND EXECUTIVE COMPENSATION IN HOSPITALS AND HEALTH SYSTEMS * INTEGRATED HEALTHCARE STRATEGIES: 2011 HEALTHCARE EXECUTIVE COMPENSATION SURVEY * MERCER HUMAN RESOURCES CONSULTING: 2011 INTEGRATED HEALTH NETWORKS COMPENSATION SURVEY * TOWERS WATSON DATA SERVICES: 2011/2012 HOSPITAL AND HEALTHCARE MANAGEMENT COMPENSATION REPORT THESE SOURCES ARE CONSISTENT WITH THOSE USED IN LAST YEAR'S ANALYSIS. COMPENSATION ADJUSTMENTS ARE APPROVED BY EXECUTIVE COMMITTEE MEMBERS, CONSISTENT WITH THE SPECTRUM HEALTH COMPENSATION PHILOSOPHY DESCRIBED BELOW. MINUTES OF COMMITTEE DISCUSSIONS AND DECISIONS ARE PREPARED TO MEMORIALIZE EXECUTIVE COMMITTEE DECISIONS BASED UPON THE ABOVE DATA. CASH COMPENSATION DATA RELIED UPON BY THE EXECUTIVE COMMITTEE IS NATIONAL AND REFLECTS THE COMPENSATION PAID TO EXECUTIVES IN COMPARABLE JOBS IN COMPARABLY-SIZED HEALTHCARE ORGANIZATIONS. SPECTRUM HEALTH RECRUITS NATIONALLY FOR ITS EXECUTIVES. BENEFITS DATA REFLECT NATIONAL HEALTHCARE MARKET PRACTICES. GEOGRAPHIC PAY DIFFERENTIAL AND COST OF LIVING DATA INDICATE CONSISTENCY WITH NATIONAL DATA. THIS PROCESS IS INTENDED TO ASSIST SPECTRUM HEALTH IN QUALIFYING FOR THE REBUTTABLE PRESUMPTION OF REASONABLENESS (INTERMEDIATE SANCTIONS REGULATIONS) AND COMPLYING WITH THE POTENTIAL SPECTRUM HEALTH EXCESS BENEFIT TRANSACTION POLICY FOR THOSE INDIVIDUALS IN THE GROUP WHO ARE DISQUALIFIED PERSONS. THE OPINION SUBMITTED FROM THE THIRD PARTY INDEPENDENT CONSULTING FIRM IS IN ACCORDANCE WITH THE PROVISIONS OF TREASURY REGULATIONS SECTION 53.4958-6(C)(2) AND IS ALSO INTENDED TO SATISFY THE PROFESSIONAL ADVICE REQUIREMENT OF TREASURY REGULATIONS SECTION 53.4958-1(D)(4)(III). |
| Process used to establish compensation of other officers/key employees | Form 990, Part VI, Section B, Line 15b | PRIORITY HEALTH HAS ALIGNED ITS EXECUTIVE COMPENSATION PROGRAM TO SUPPORT THE REQUIREMENTS OF INTERMEDIATE SANCTIONS REGULATIONS. THE PRINCIPAL PURPOSE OF THESE REGULATIONS IS TO ENSURE THAT THE COMPENSATION PAID TO SENIOR EXECUTIVES AND OTHER INSIDERS AT TAX-EXEMPT ORGANIZATIONS IS REASONABLE (SEE 1 BELOW). COVERED POSITIONS INCLUDE ANY KEY EXECUTIVE WHO AT ANY TIME IN THE PAST FIVE YEARS WAS IN A POSITION TO EXERCISE SUBSTANTIAL INFLUENCE OVER THE AFFAIRS OF THE ORGANIZATION. THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS RETAINS AN INDEPENDENT THIRD PARTY CONSULTANT TO PROVIDE COMPENSATION ANALYSIS AND ADVICE AND TO REVIEW THE COMPETITIVENESS AND REASONABLENESS OF THE TOTAL COMPENSATION AND BENEFITS PROVIDED TO EXECUTIVES. THE CONSULTANT USES TWO COMMERCIALLY AVAILABLE HEALTH PLAN EXECUTIVE COMPENSATION SURVEYS. IN 2012, BASED ON FY 2011 PERFORMANCE, THE INDEPENDENT CONSULTANT NOTED THAT IN THEIR OPINION WHEN THE TOTAL BENEFIT PACKAGE IS COMBINED WITH CASH COMPENSATION, PRIORITY HEALTH EXECUTIVE COMPENSATION IS REASONABLE WITH AN INTERMEDIATE SANCTIONS PERSPECTIVE. (1) OTHER OFFICERS AND KEY EMPLOYEES ARE EMPLOYED BY PRIORITY HEALTH MANAGED BENEFITS, INC., A MICHIGAN FOR-PROFIT CORPORATION (PHMB); HOWEVER, PHMB HAS ELECTED TO COMPLY WITH THESE REGULATIONS AS ITS REVENUE IS PRIMARILY DERIVED FROM MANAGEMENT FEES PAID BY PRIORITY HEALTH, WHICH IS A TAX-EXEMPT ORGANIZATION. REFERENCES TO PRIORITY HEALTH REFER TO BOTH ENTITIES, AS APPROPRIATE. |
| Governing documents, conflict of interest policy and financial statements available to the public | Form 990, Part VI, Section C, Line 19 | THE ORGANIZATION'S ARTICLES OF INCORPORATION, BYLAWS AND FINANCIAL STATEMENTS ARE ON FILE WITH THE STATE OF MICHIGAN AND AVAILABLE TO THE PUBLIC THROUGH THE STATE. IN ADDITION, THE OVERALL SYSTEM CONSOLIDATED FINANCIAL STATEMENTS ARE PROVIDED AT WWW.SPECTRUM-HEALTH.ORG IN THE SECTION TITLED "ABOUT US". THE ORGANIZATION'S CONFLICT OF INTEREST POLICY IS MADE AVAILABLE UPON REQUEST. |
| COMPENSATION | FORM 990, PART IX, LINE 6 | MS. JUDITH HOOYENGA SERVED AS SECRETARY IN A PRIOR YEAR AND AS AN EMPLOYEE. THE COMPENSATION REPORTED ON THIS LINE WAS FOR HER SERVICES AS AN EMPLOYEE OF THE ORGANIZATION, IN A LESSER CAPACITY OTHER THAN OFFICER, NOT AS A FORMER OFFICER. |
| Other changes in net assets or fund balances | Form 990 , Part XI, Line 9 | NET UNREALIZED GAIN (LOSS) ON SUBSIDIARIES - 5206342; CHANGE IN NONADMITTED ASSETS - 8110031; |
| AUDITED FINANCIAL STATEMENTS | FORM 990, PART XII, LINE 2B | THE ORGANIZATION'S FINANCIAL STATEMENTS ARE AUDITED ANNUALLY BY AN INDEPENDENT ACCOUNTING FIRM. THE ORGANIZATION ISSUED GAAP BASIS FINANCIAL STATEMENTS WHICH ARE PREPARED ON A CONSOLIDATED BASIS AND NOT ON A STAND ALONE BASIS. THE ORGANIZATION IS AUDITED ANNUALLY ON A STAND ALONE BASIS AND ISSUED FINANCIAL STATEMENTS ON A STAND ALONE BASIS WHICH ARE PREPARED IN ACCORDANCE WITH SAP (STATUTORY ACCOUNTING PRINCIPLES), AS REQUIRED BY REGULATORY AUTHORITIES. THE FIGURES IN THIS TAX RETURN RECONCILE TO THE FINANCIAL STATEMENTS PREPARED UNDER STATUTORY ACCOUNTING PRINCIPLES AS SUBMITTED TO THE STATE OF MICHIGAN. |
| AMENDED RETURN | HEADING, ITEM B | FORM 990, SCHEDULE J, PART II IS BEING AMENDED TO CORRECTLY REPORT RETIREMENT AND OTHER DEFERRED COMPENSATION IN SCHEDULE J, PART II, COLUMN C, RETIREMENT AND OTHER DEFERRED COMPENSATION THAT WAS INADVERTENTLY REPORTED IN SCHEDULE J, PART II COLUMN D, NONTAXABLE BENEFITS ON THE ORIGINALLY FILED FORM 990. |
For Paperwork Reduction Act Notice, see the Instructions for Form 990 or 990-EZ.
Cat. No. 51056K
Schedule O (Form 990 or 990-EZ) 2012
Additional Data
| Software ID: | 12000266 |
| Software Version: | v2012.1.0 |