2012-11-14T10:42:02-06:00 2011-12-31 861065772 DELOITTE TAX LLP 201 E KENNEDY BLVD SUITE 1200 TAMPA FL 33602 990 2011-01-01 592317607 SANTAFE HEALTHCARE INC SANT 3523728400 POBOX 749 GAINESVILLE FL 326270749 RANDALL L STUART 3523378730 2012-11-14 1 STEVEN E ROVNER P00648526 8132738300 2011 2016-02-24 21:20:13Z MICHAEL P GALLAGHER POBOX 749 GAINESVILLE FL 326270749 13596033 0 X WWW.SANTAFEHEALTHCAREFL.ORG X 1982 FL TO IMPROVE THE HEALTH AND WELL-BEING OF PEOPLE IN THE COMMUNITIES WE SERVE. 12 11 6 0 0 0 4300000 0 4518575 3779374 36103 29979 3917936 2518536 12772614 6327889 12574861 3002571 0 0 9904783 9636078 0 0 0 1847733 2154696 24327377 14793345 -11554763 -8465456 61373360 51794787 23065842 31072349 38307518 20722438 X THE MISSION OF SANTAFE HEALTHCARE, INC. IS TO SERVE AS THE NOT-FOR-PROFIT SYSTEM PARENT FOR ITS FAMILY OF NOT-FOR-PROFIT, MISSION-DRIVEN AFFILIATE ORGANIZATIONS. SEE SCHEDULE O FOR CONTINUATION OF THE ORGANIZATION'S MISSION.(CONTINUED FROM PAGE 2, PART III) SANTAFE HEALTHCARE DELIVERS ITS MISSION BY PROVIDING FINANCIAL MANAGEMENT AND OVERSIGHT, AND STRATEGIC MANAGEMENT AND EXPERTISE TO ITS AFFILIATES, WHILE PROMOTING THE EFFECTIVE PROVISION OF HEALTHCARE, HOSPICE AND PALLIATIVE CARE, AND SENIOR HOUSING AND RELATED SERVICES THROUGH ITS AFFILATES. THIS MISSION IS GOVERNED THROUGH A LOCAL, COMMUNITY-BASED BOARD WHICH PROVIDES STRATEGIC DIRECTION AND VALUES-BASED OVERSIGHT AND SUPPORT. 0 0 4833060 3002571 3779374 SANTAFE HEALTHCARE PROVIDED GOVERNANCE AND OVERSIGHT TO THE FOLLOWING AFFILIATED CHARITABLE, TAX-EXEMPT AND NOT-FOR-PROFIT ORGANIZATIONS: NORTH CENTRAL FLORIDA HOSPICE, INC.; SANTAFE SENIOR LIVING, INC.; NORTH FLORIDA RETIREMENT VILLAGE, INC.; BVG ACQUISITION, INC.; BONITA SPRINGS RETIREMENT VILLAGE, INC.; EAST RIDGE RETIREMENT VILLAGE, INC.; SANTAFE SENIOR LIVING FOUNDATION, INC.; AVMED, INC.; AND SF HOLDING CORP., INC. TOTAL PROGRAM SERVICES EXPENSES FOR THESE AFFILIATED ORGANIZATIONS REPRESENTED APPROXIMATELY $1.4 BILLION IN 2011. 4833060 1 0 0 0 0 0 0 0 0 0 1 0 0 1 1 1 0 1 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 64 0 1 6 1 0 0 0 0 0 0 0 0 0 0 X 12 11 0 0 0 0 0 0 0 1 1 0 0 1 1 1 1 1 1 1 1 0 X RANDALL L STUART SR VP & CFO 3523378730 4300 NW 89TH BLVD GAINESVILLE FL 326065688 X SCOTTIE J BUTLER 4.00 X X 65229 0 0 JOE G DUNLAP 1.00 X X 18407 55756 0 ALBERT E DOTSON PHD 1.00 X X 43126 0 0 BEN I DOERR JR 1.00 X 45523 0 0 RICHARD M ANDERSON MD 1.00 X 42475 0 0 GEORGE E FLETCHER 1.00 X 41057 0 0 M T MUSTIAN 1.00 X 36484 0 0 THOMAS A NATIELLO PHD 1.00 X 41384 0 0 JACKSON N SASSER PHD 1.00 X 41494 0 0 JAMES L STRINGFELLOW SR 1.00 X 42692 0 0 GLENDA E HOOD 1.00 X 43780 0 0 MICHAEL P GALLAGHER 5.00 X X 2101549 0 252885 STEVEN M ZIEGLER 1.00 X 0 261721 76912 CATHERINE E AYERS 15.00 X 0 620740 136667 RANDALL L STUART 3.00 X 610873 0 153972 TROY R HART 5.00 X 388703 0 85387 TIMOTHY J BOWEN 0.10 X 395459 0 78096 JOSEPH GIRARDI 0.10 X 180620 0 9236 ROBERT MCNICHOLS 2.00 X 232200 0 19154 STEPHEN J DEMONTMOLLIN 0.00 X 0 480468 23983 4371055 1418685 836292 6 1 1 0 AVMED INC PO BOX 749 GAINESVILLE FL 326270749 MANAGEMENT & INSURANCE 964480 DELOITTE & TOUCHE LLP 4152 COLLECTION CENTER DR CHICAGO IL 60693 AUDIT SERVICES 538391 WILLIS OF FLORIDA INC 3000 BAYPORT DR STE 300 TAMPA FL 33607 CONSULTING 383474 C DAVID COFFEY PA 5346 SW91ST TERRACE GAINESVILLE FL 32608 LEGAL 182622 DAVIS & FERNANDES PA 4432 NW 23RD AVE STE 9 GAINESVILLE FL 32601 LEGAL 134718 5 MANAGEMENT FEES 561000 3779374 3779374 3779374 27849 27849 7270274 7268144 2130 2130 2130 PENSION CONTRIBUTION R 900099 2518536 2518536 2518536 6327889 3779374 0 2548515 3002571 3002571 2336076 2336076 1052868 532749 520119 6062733 80756 5981977 85895 28009 57886 98506 21720 76786 922240 922240 51793 44382 7411 50641 50641 53213 53213 757911 185303 572608 64271 64271 41002 41002 129545 180 129365 27993 27993 40937 40937 COMMUNITY SPONSORSHIPS 15150 15150 14793345 4833060 9960285 0 734275 6037058 18198968 6504893 17000 73750 738448 738448 738448 46058 0 15342130 15342130 26296481 23098508 61373360 51794787 1599920 672006 21465922 30400343 23065842 31072349 X 38307518 20722438 38307518 20722438 61373360 51794787 X -8465456 -9119624 X X 0 1 1 X 0 X X X 0 0 0 NORTH CENTRAL FLORIDA HOSPICE 592490893 9 1 1 0 NORTH FLORIDA RETIREMENT VILLAGE 591912330 9 1 1 0 SANTAFE SENIOR LIVING FOUNDATION INC 264464727 7 0 1 0 BVG ACQUISITION INC 203701186 9 0 1 3002571 EAST RIDGE RETIREMENT VILLAGE INC 590903331 9 0 1 0 BONITA SPRINGS RETIREMENT VILLAGE INC 262386152 9 0 1 0 6 3002571 SCHEDULE A, PART IV, SUPPLEMENTAL INFORMATION: SANTAFE HEALTHCARE, INC. (SFHC) IS A TYPE II SUPPORTING ORGANIZATION THAT IDENTIFIES ITS SUPPORTED ORGANIZATIONS BY CLASS OR PURPOSE IN ITS ARTICLES OF INCORPORATION IN ACCORDANCE WITH TREASURY REGULATION SECTION 1.509(A)4(D)(2)(B). SCHEDULE A, PART IV, SUPPLEMENTAL INFORMATION: DURING 2011, SFHC PROVIDED $3,002,571 SUPPORT FOR THE BENEFIT OF BVG ACQUISITION, INC. (BVG). THE SUPPORT WAS CONTRIBUTED AS A GRANT FROM SFHC TO SANTAFE SENIOR LIVING, INC. (SFSL), THE PARENT ENTITY OF BVG. SFSL IS NOT A SUPPORTED ORGANIZATION OF SFHC AND THEREFORE IS NOT LISTED ON SCHEDULE A, PART I, LINE 11H. THUS, THE SUPPORT IS REPORTED AS PROVIDED TO BVG. 738448 738448 738448 DUE FROM AFFILIATES 15792806 OTHER ASSETS 5829887 ACCRUED INTEREST RECEIVABLE 79171 DEFERRED COMPENSATION ASSETS 1396644 23098508 ACCRUED PENSION LIABILITY 28059049 OTHER LIABILITIES 331635 BENEFITS PAYABLE 1989990 DUE TO AFFILIATES 19669 30400343 6327889 14793345 -8465456 -22150 -9097474 -9119624 -17585080 3809353 0 3809353 2518536 2518536 6327889 9272238 0 9272238 5521107 5521107 14793345 DESCRIPTION OF UNCERTAIN TAX POSITIONS UNDER FIN 48: PART X: EXPLANATION FOR UNCERTAIN TAX POSITIONS UNDER FIN 48: SFHC AND THE AFFILIATES HAVE NO UNCERTAIN TAX POSITIONS AS OF DECEMBER 31, 2011. SFHC AND AFFILIATES INCURRED NO INTEREST EXPENSE OR PENALTIES RELATED TO UNCERTAIN INCOME TAX PROVISIONS IN 2011 OR 2010. TAX YEARS 2008 THROUGH 2011 ARE SUBJECT TO EXAMINATION BY FEDERAL AND STATE TAXING AUTHORITIES. THERE ARE NO INCOME TAX EXAMINATIONS IN PROCESS AS OF THE DATE OF THIS REPORT. PART XI, LINE 8 - OTHER ADJUSTMENTS: CHANGE IN MINIMUM LIABILITY FOR QUALIFIED PENSION PLAN -9,097,474. PART XII, LINE 4B - OTHER ADJUSTMENTS: PENSION CONTRIBUTIONS FROM AFFILIATES CLASSIFIED AS REVENUE FOR TAX 2,518,536. PART XIII, LINE 4B - OTHER ADJUSTMENTS: PENSION CONTRIBUTIONS FROM AFFILIATES CLASSIFIED AS REVENUE FOR TAX 2,518,536. DISTRIBUTION TO SANTAFE SENIOR LIVING, INC. 3,002,571. 1 SANTAFE SENIOR LIVING INC PO BOX 749 GAINESVILLE FL 326270749 203700526 501(C)(3) 3002571 TO ASSIST SANTAFE SENIOR LIVING, A SUPPORTED ORGANIZATION, FULFILL ITS CHARITABLE MISSION. 1 PROCEDURE FOR MONITORING GRANTS IN THE U.S.: PART I, LINE 2: SCHEDULE I, PART I, LINE 2: SANTAFE HEALTHCARE, INC. AND SANTAFE SENIOR LIVING, INC. SHARE COMMON MANAGEMENT. AS A RESULT, MANAGEMENT ENSURES THE USE OF GRANT FUNDS BY SANTAFE SENIOR LIVING IS CONSISTENT WITH THEIR INTENDED PURPOSE. X X X 1 1 X X X X X 1 1 0 0 0 0 0 0 0 MICHAEL P GALLAGHER 825126 0 795972 0 480451 0 229162 0 23723 0 2354434 0 174240 0 STEVEN M ZIEGLER 0 252730 0 0 0 8991 0 59043 0 17869 0 338633 0 0 CATHERINE E AYERS 0 300387 0 182761 0 137592 0 104957 0 31710 0 757407 0 59074 RANDALL L STUART 351966 0 203275 0 55632 0 133041 0 20931 0 764845 0 34089 0 TROY R HART 293836 0 64980 0 29887 0 61873 0 23514 0 474090 0 13143 0 TIMOTHY J BOWEN 280332 0 84178 0 30949 0 57238 0 20858 0 473555 0 12581 0 JOSEPH GIRARDI 176087 0 0 0 4533 0 2359 0 6877 0 189856 0 0 0 ROBERT MCNICHOLS 181357 0 0 0 50843 0 0 0 19154 0 251354 0 0 0 STEPHEN J DEMONTMOLLIN 0 25426 0 0 0 455042 0 23677 0 306 0 504451 0 0 PART I, LINE 1A CHARTER FLIGHTS ARE SCHEDULED AS NEEDED TO COINCIDE WITH BOARD OF DIRECTORS AND OTHER CRITICAL MEETINGS. OPEN SEATS ON SUCH FLIGHTS ARE AVAILABLE TO ANY EMPLOYEE NEEDING TO CONDUCT BUSINESS IN THE MIAMI OR GAINESVILLE OFFICE. CERTAIN DIRECTORS AND THEIR COMPANIONS ATTENDED COMPANY PAID INDUSTRY SEMINARS AND TRADE CONVENTIONS AT THE REQUEST OF SANTAFE HEALTHCARE, INC. ALL BUSINESS COSTS, INCLUDING TRAVEL COSTS, PAID DIRECTLY BY THE ORGANIZATION OR REIMBURSED TO THE LISTED PERSON, WERE ACCOUNTED FOR UNDER AN ACCOUNTABLE PLAN UTILIZED BY THE ORGANIZATION. NO PART OF ANY TRAVEL COST WAS DEEMED A BENEFIT FOR ANY PERSON LISTED IN FORM 990, PART VII. INCIDENTAL EXPENSES ARE NOT REIMBURSED BY THE ORGANIZATION. TAX GROSS-UP PAYMENTS OCCUR FOR GROUP VARIABLE LIFE INSURANCE PREMIUMS PAID ON BEHALF OF THE LISTED AND OTHER EMPLOYEES. EMPLOYER PAID PREMIUMS ARE DEEMED TO BE TAXABLE COMPENSATION AND ARE GROSSED-UP FOR THE TAX IMPACT PRIOR TO BEING ADDED AS IMPUTED INCOME TO AN EMPLOYEE'S YEAR-END FORM W-2. TAX GROSS-UP PAYMENTS ARE PROVIDED FOR VESTED DISTRIBUTIONS FROM THE DEFINED CONTRIBUTION AND (NOW FROZEN) DEFINED BENEFIT PENSION RESTORATION PLANS. PART I, LINE 3 PART I, LINE 3: MICHAEL P. GALLAGHER IS THE CHIEF EXECUTIVE OFFICER (CEO) OF SANTAFE HEALTHCARE, INC. (SANTAFE). MR. GALLAGHER IS COMPENSATED DIRECTLY BY SANTAFE. SANTAFE UTILIZES THE FOLLOWING PROCESS TO ESTABLISH THE CEO'S COMPENSATION AND BENEFITS: ANNUALLY, THE BOARD OF DIRECTORS RETAINS AN INDEPENDENT THIRD PARTY COMPENSATION AND BENEFITS CONSULTING FIRM TO CONDUCT A MARKET COMPETITIVENESS REVIEW OF THE CEO'S TOTAL DIRECT COMPENSATION (BASE SALARY, ANNUAL INCENTIVES, AND LONG TERM INCENTIVES) AND BENEFITS. THE COMPETITIVE ANALYSIS INCLUDES COMPARISON TO SIMILAR POSITIONS IN COMPANIES OF SIMILAR SIZE WITHIN THE SAME OR SIMILAR INDUSTRY. THE INDEPENDENT CONSULTING FIRM MAKES RECOMMENDATIONS, IF ANY, DIRECTLY TO THE BOARD OF DIRECTORS. THE BOARD OF DIRECTORS ESTABLISHES THE FINAL COMPENSATION AND BENEFIT PACKAGE FOR THE CEO TAKING INTO CONSIDERATION THE MARKET COMPETITIVENESS REVIEW AND FINAL RECOMMENDATION OF THE INDEPENDENT CONSULTING FIRM. THE INDEPENDENT CONSULTING FIRM PROVIDES AN OPINION LETTER REGARDING THE REASONABLENESS OF THE CEO'S FINAL COMPENSATION AND BENEFITS PACKAGE. THE ACTIONS OF THE BOARD ARE DOCUMENTED IN THE MINUTES OF THE BOARD MEETING. PART I, LINES 4A-B LISTED PERSONS RECEIVING A SEVERANCE PAYMENT OR CHANGE OF CONTROL PAYMENT IN THE YEAR: STEPHEN DEMONTMOLLIN RECEIVED $370,540 IN COMPENSATION PAYMENTS FROM AVMED, INC., A RELATED TAX-EXEMPT ORGANIZATION, DUE TO HIS RESIGNATION AND RETIREMENT FROM EMPLOYMENT IN ACCORDANCE WITH BOARD-APPROVED RESIGNATION AND RETIREMENT AGREEMENTS. SCHEDULE J PART I, LINE 4B: LISTED PERSONS PARTICIPATING IN A SUPPLEMENTAL NONQUALIFIED RETIREMENT PLAN IN THE YEAR: SANTAFE HEALTHCARE, INC. (SANTAFE) MAINTAINS TWO ACTIVE NONQUALIFIED DEFERRED COMPENSATION RETIREMENT PLANS FOR A CERTAIN GROUP OF EXECUTIVES TO INCLUDE THOSE LISTED EMPLOYEES OF SANTAFE OR RELATED ORGANIZATIONS. ONE PLAN RESTORES RETIREMENT BENEFITS EQUIVALENT TO QUALIFIED 401(K) BENEFITS ON INCOME EARNED IN EXCESS OF THE INTERNAL REVENUE SERVICE CODE SECTION 401(A)(17) RECOGNIZABLE PAY LIMITS (A DEFINED CONTRIBUTION RESTORATION PLAN). VESTING FOR THIS PLAN IS ACHIEVED AT AGE 55 AND 10 YEARS OF SERVICE OR AT AGE 65 AND 5 YEARS OF SERVICE. THE SECOND SUPPLEMENTAL DEFINED CONTRIBUTION PLAN PROVIDES ADDITIONAL RETIREMENT INCOME BASED ON A PERCENTAGE OF BASE SALARY AND VESTS AT THREE AND FIVE YEARS OF SERVICE. MR. GALLAGHER RECEIVED PAYMENTS FROM THE NONQUALIFIED DEFINED CONTRIBUTION RESTORATION AND THE SUPPLEMENTAL RETIREMENT PLANS IN 2011. THE TOTAL AMOUNT OF THESE PAYMENTS WAS $373,453. MR. HART VESTED AND RECEIVED $16,645 FROM THE SUPPLEMENTAL RETIREMENT PLAN IN 2011. MR. STUART VESTED AND RECEIVED $39,583 FROM THE SUPPLEMENTAL RETIREMENT PLAN IN 2011. MR. BOWEN VESTED AND RECEIVED $17,688 FROM THE SUPPLEMENTAL RETIREMENT PLAN IN 2011 . CATHERINE E. AYERS AND STEVEN M. ZIEGLER ARE EMPLOYEES OF AVMED, INC. (AVMED), A RELATED TAX-EXEMPT ORGANIZATION . THEY PARTICIPATE IN TWO NONQUALIFIED DEFERRED COMPENSATION RETIREMENT PLANS SPONSORED BY AVMED FOR A CERTAIN GROUP OF EXECUTIVES. ONE PLAN RESTORES RETIREMENT BENEFITS EQUIVALENT TO QUALIFIED 401(K) BENEFITS ON INCOME EARNED IN EXCESS OF THE INTERNAL REVENUE SERVICE CODE SECTION 401(A)(17) RECOGNIZABLE PAY LIMITS (DEFINED CONTRIBUTION RESTORATION PLAN). VESTING IS ACHIEVED AT AGE 55 AND 10 YEARS OF SERVICE OR AT AGE 65 AND 5 YEARS OF SERVICE. THE SECOND SUPPLEMENTAL DEFINED CONTRIBUTION PLAN PROVIDES ADDITIONAL RETIREMENT INCOME BASED ON A PERCENTAGE OF BASE SALARY AND VESTS AT THREE AND FIVE YEARS OF SERVICE . MS. AYERS RECEIVED $114,039 FROM THE DEFINED CONTRIBUTION RESTORATION AND SUPPLEMENTAL RETIREMENT INCOME PLANS IN 2011. MR. DEMONTMOLLIN RECEIVED $35,992 FROM THE DEFINED CONTRIBUTION RESTORATION AND SUPPLEMENTAL RETIREMENT INCOME PLANS IN 2011 . SUPPLEMENTAL INFORMATION PART III SCHEDULE J, PART II: CERTAIN SENIOR EXECUTIVES ARE ACCOUNTABLE FOR AND PERFORM SERVICES FOR SANTAFE HEALTHCARE, INC. AND EACH OF ITS AFFILIATES. SANTAFE HEALTHCARE AND AFFILIATES REPRESENT A DIVERSIFIED FAMILY OF NOT-FOR-PROFIT ORGANIZATIONS WITH $2 BILLION IN REVENUE AND APPROXIMATELY 2,000 EMPLOYEES. THESE SENIOR EXECUTIVES ARE PAID DIRECTLY BY EITHER SANTAFE HEALTHCARE, INC. OR AVMED, INC. AND THEIR COMPENSATION AND BENEFITS ARE APPORTIONED AND CHARGED TO THE RESPECTIVE AFFILIATE BASED ON THE ESTIMATED AMOUNT OF TIME SPENT ON EACH AFFILIATE'S ACTIVITIES. FOR 2011, THE FOLLOWING PERCENTAGES OF EACH EXECUTIVE'S COMPENSATION AND BENEFITS (FOR THOSE SENIOR EXECUTIVES PAID BY A RELATED ORGANIZATION) IS APPORTIONED AND CHARGED TO SANTAFE HEALTHCARE, INC. AS FOLLOWS: << 25% - CATHERINE E AYERS << 2% - STEVEN ZIEGLER FOR 2011, THE FOLLOWING PERCENTAGES OF EACH EXECUTIVE'S COMPENSATION AND BENEFITS FOR THOSE SENIOR EXECUTIVES PAID BY SANTAFE HEALTHCARE, INC. IS APPORTIONED AND CHARGED TO CERTAIN AFFILIATES AS FOLLOWS: << 92% - MICHAEL P. GALLAGHER, PRESIDENT & CEO << 95% - RANDALL STUART, SVP - CFO FORM 990, PART VI, SECTION B, LINE 11 THE ORGANIZATION'S PROCESS FOR ENSURING THE ACCURATE PREPARATION, REVIEW AND APPROVAL OF THE 2011 FORM 990 BEGAN WITH PROFESSIONAL DEVELOPMENT OF STAFF (SEVERAL OF WHICH ARE CPAS) WHICH WERE INVOLVED IN THE PREPARATION OF THE 2011 FORM 990. IN ADDITION TO STAFF DEVELOPMENT, WHICH INCLUDED ATTENDING TAX SEMINARS AND CLASSES, MANAGEMENT ALSO CONSULTED WITH INDEPENDENT ACCOUNTING FIRMS AND TAX LEGAL COUNSEL REGARDING THE IRS FORM 990 CODE AND FILING REQUIREMENTS. THE ORGANIZATION ALSO PREVIOUSLY EDUCATED ITS MANAGEMENT TEAM, OFFICERS AND DIRECTORS, WITH THE ASSISTANCE OF DELOITTE TAX LLP, REGARDING THE FORM 990 AND THEIR INVOLVEMENT IN REVIEWING THE RETURN. FOLLOWING MANAGEMENT'S PREPARATION OF THE 2011 FORM 990, DELOITTE TAX LLP REVIEWED THE 2011 FORM 990. A COPY OF THE 2011 FORM 990 AND ATTACHMENTS WERE PROVIDED TO THE ORGANIZATION'S CURRENT BOARD OF DIRECTORS FOR THEIR REVIEW AND COMMENT. EXECUTIVE MANAGEMENT ADDRESSED ANY QUESTIONS RAISED BY THE BOARD MEMBERS PRIOR TO FILING THE 2011 FORM 990 AND ATTACHMENTS WITH THE IRS. FORM 990, PART VI, SECTION B, LINE 12C SANTAFE HEALTHCARE HAS A POLICY FOR MONITORING AND ENFORCING COMPLIANCE WITH ITS CONFLICT OF INTEREST POLICY. THE POLICY DETAILS THAT THE CORPORATE SECRETARY HAS RESPONSIBILITY FOR DELIVERY AND RECEIPT OF DIRECTOR AND OFFICER CONFLICT OF INTEREST STATEMENTS. THE HUMAN RESOURCES DEPARTMENT OBTAINS AN ACKNOWLEDGMENT OF UNDERSTANDING OF THE CONFLICT OF INTEREST POLICY FROM EVERY NEW EMPLOYEE AT THE DATE OF HIRE AND FROM ALL EMPLOYEES ANNUALLY. ANNUAL CONFLICT OF INTEREST STATEMENTS ARE REVIEWED BY INTERNAL STAFF TO ENSURE RECORDS ARE COMPLETE. AS PART OF THE CORPORATE CONTRACT REVIEW PROCESS, CONSIDERATION IS GIVEN TO ANY POTENTIAL CONFLICTS OF INTEREST INVOLVING OPERATIONAL OR FINANCIAL TRANSACTIONS. ALL EMPLOYEES AND BOARD MEMBERS ARE EXPECTED TO NOTIFY THE CORPORATE COMPLIANCE OFFICER IF A POTENTIAL CONFLICT EXISTS. IF A CASE IS DISCOVERED OR REPORTED, THE CORPORATE COMPLIANCE OFFICER MAKES A REPORT TO THE LEGAL DEPARTMENT AND THE CHAIRMAN OF THE BOARD AS TO THE FACTS AND CIRCUMSTANCES SURROUNDING THE INCIDENT. MEMORANDUMS (OR MINUTES) ARE MADE OF EVERY FINAL DECISION, INCLUDING THE REASONS THEREFORE AND THE ACTION TAKEN, WHETHER THE QUESTION IS DETERMINED TO BE SUBSTANTIAL OR NOT; AND A COPY OF SUCH MEMORANDUM (OR MINUTES) IS FILED WITH THE CORPORATE SECRETARY FOR EXAMINATION BY THE BOARD OF DIRECTORS. FORM 990, PART VI, SECTION B, LINE 15 MICHAEL P. GALLAGHER IS THE CHIEF EXECUTIVE OFFICER (CEO) OF SANTAFE HEALTHCARE, INC. (SANTAFE). MR. GALLAGHER IS DIRECTLY COMPENSATED BY SANTAFE. SANTAFE UTILIZES THE FOLLOWING PROCESS TO ESTABLISH THE CEO'S COMPENSATION AND BENEFITS: THE BOARD OF DIRECTORS ANNUALLY RETAINS AN INDEPENDENT THIRD PARTY COMPENSATION AND BENEFITS CONSULTING FIRM TO CONDUCT A MARKET COMPETITIVENESS REVIEW OF THE CEO'S TOTAL DIRECT COMPENSATION (BASE SALARY, ANNUAL INCENTIVES, AND LONG TERM INCENTIVES) AND BENEFITS. THE COMPETITIVE ANALYSIS INCLUDES COMPARISON TO SIMILAR POSITIONS IN COMPANIES OF SIMILAR SIZE WITHIN THE SAME OR SIMILAR INDUSTRY. THE INDEPENDENT CONSULTING FIRM MAKES RECOMMENDATIONS, IF ANY, DIRECTLY TO THE BOARD OF DIRECTORS. THE BOARD OF DIRECTORS ESTABLISHES THE FINAL COMPENSATION AND BENEFIT PACKAGE FOR THE CEO TAKING INTO CONSIDERATION THE MARKET COMPETITIVENESS REVIEW AND FINAL RECOMMENDATION OF THE INDEPENDENT CONSULTING FIRM. THE INDEPENDENT CONSULTING FIRM PROVIDES AN OPINION LETTER REGARDING THE REASONABLENESS OF THE FINAL COMPENSATION AND BENEFITS PACKAGE. THE ACTIONS OF THE BOARD ARE DOCUMENTED IN THE MINUTES OF THE BOARD MEETING. FORM 990, PART VI, SECTION B, LINE 15B: PROCESS FOR DETERMINING COMPENSATION FOR ALL EMPLOYEE OFFICERS AND KEY EMPLOYEES FOR SANTAFE HEALTHCARE, INC. (SANTAFE) IS AS FOLLOWS: THE SANTAFE BOARD OF DIRECTORS ANNUALLY RETAINS AN INDEPENDENT THIRD PARTY COMPENSATION AND BENEFITS FIRM (FIRM) TO CONDUCT A MARKET COMPETITIVENESS REVIEW OF ALL EXECUTIVES'TOTAL DIRECT COMPENSATION (BASE SALARY, ANNUAL INCENTIVES, AND LONG-TERM INCENTIVES) AND BENEFITS. THE COMPETITIVE ANALYSIS INCLUDES COMPARISONS TO SIMILAR POSITIONS IN COMPANIES OF SIMILAR SIZE WITHIN THE SAME OR SIMILAR INDUSTRY. AFTER COMPLETION OF ITS REVIEW, THE INDEPENDENT CONSULTING FIRM MAKES RECOMMENDATIONS, IF ANY, DIRECTLY TO THE SANTAFE BOARD OF DIRECTORS. THE INDEPENDENT CONSULTING FIRM PROVIDES AN OPINION LETTER REGARDING THE REASONABLENESS OF TOTAL DIRECT COMPENSATION AND EXECUTIVE BENEFITS. THE ACTIONS OF THE BOARD ARE DOCUMENTED IN THE MINUTES OF THE BOARD MEETINGS. THE BOARD OF DIRECTORS RETAINS AN INDEPENDENT THIRD PARTY CONSULTANT TO CONDUCT A MARKET COMPETITIVENESS REVIEW OF THE BOARD OF DIRECTORS' (INCLUDING OFFICER POSITIONS) COMPENSATION EVERY TWO TO THREE YEARS. THE COMPETITIVENESS ANALYSIS INCLUDES COMPARISONS TO BOTH NOT-FOR-PROFIT AND PUBLIC COMPANY (EXCLUDING EQUITY COMPONENT) DATA FOR COMPANIES WITHIN THE SAME OR SIMILAR INDUSTRY. ANY COMPENSATION CHANGES ARE APPROVED BY THE BOARD OF DIRECTORS BASED ON THE MARKET COMPETITIVENESS STUDY. A MARKET COMPETITIVENESS STUDY WAS CONDUCTED IN NOVEMBER 2010 FOR CHANGES MADE EFFECTIVE JANUARY 1, 2011. FORM 990, PART VI, SECTION C, LINE 19 SANTAFE HEALTHCARE'S PROCEDURE FOR MAKING VARIOUS DOCUMENTS AVAILABLE TO THE PUBLIC: SANTAFE HEALTHCARE, INC. MAKES ITS GOVERNING DOCUMENTS AVAILABLE TO THE PUBLIC ON A CASE BY CASE BASIS IF REQUESTED DIRECTLY FROM THE ORGANIZATION. THE ARTICLES OF INCORPORATION CAN BE ACCESSED DIRECTLY THROUGH THE FLORIDA DEPARTMENT OF STATE, DIVISION OF CORPORATIONS WEBSITE AT WWW.SUNBIZ.ORG. THE CORPORATE CONFLICT OF INTEREST POLICY AND AUDITED COMBINED FINANCIAL STATEMENTS, WHICH INCLUDE SANTAFE HEALTHCARE, CAN BE OBTAINED DIRECTLY FROM THE ORGANIZATION UPON WRITTEN REQUEST. COMPENSATION PAID BY RELATED ORGANIZATIONS: FORM 990, PART VII, SECTION A, LINE 1A: CERTAIN SENIOR EXECUTIVES ARE ACCOUNTABLE FOR AND PERFORM SERVICES FOR SANTAFE HEALTHCARE, INC. AND EACH OF ITS AFFILIATES. SANTAFE HEALTHCARE AND AFFILIATES REPRESENT A DIVERSIFIED FAMILY OF NOT-FOR-PROFIT ORGANIZATIONS WITH $2 BILLION IN REVENUE AND APPROXIMATELY 2,000 EMPLOYEES. THESE SENIOR EXECUTIVES ARE PAID DIRECTLY BY EITHER SANTAFE HEALTHCARE, INC. OR AVMED, INC. AND THEIR COMPENSATION AND BENEFITS ARE APPORTIONED AND CHARGED TO THE RESPECTIVE AFFILIATE BASED ON THE ESTIMATED AMOUNT OF TIME SPENT ON EACH AFFILIATE'S ACTIVITIES. FOR 2011, THE FOLLOWING PERCENTAGES OF EACH EXECUTIVE'S COMPENSATION AND BENEFITS (FOR THOSE SENIOR EXECUTIVES PAID BY A RELATED ORGANIZATION) IS APPORTIONED AND CHARGED TO SANTAFE HEALTHCARE, INC. AS FOLLOWS: << 25% - CATHERINE E AYERS << 2% - STEVEN ZIEGLER FOR 2011, THE FOLLOWING PERCENTAGES OF EACH EXECUTIVE'S COMPENSATION AND BENEFITS FOR THOSE SENIOR EXECUTIVES PAID BY SANTAFE HEALTHCARE, INC. IS APPORTIONED AND CHARGED TO CERTAIN AFFILIATES AS FOLLOWS: << 92% - MICHAEL P. GALLAGHER, PRESIDENT & CEO << 95% - RANDALL STUART, SVP - CFO CHANGES IN NET ASSETS OR FUND BALANCES: FORM 990, PART XI, LINE 5: NET UNREALIZED LOSSES ON INVESTMENTS: -22,150. CHANGE IN MINIMUM LIABILITY FOR QUALIFIED PENSION PLAN -9,097,474. TOTAL TO FORM 990, PART XI, LINE 5: -9,119,624. AUDIT COMMITTEE OVERSIGHT OF THE FINANCIAL STATEMENT AUDIT: FORM 990, PART XII, LINE 2C: THERE HAS BEEN NO CHANGE FROM THE PRIOR YEAR TO THE PROCESS RELATED TO AUDIT OVERSIGHT AND SELECTION OF THE INDEPENDENT ACCOUNTANT FOR THE ORGANIZATION. AVERAGE HOURS PER WEEK DEVOTED TO RELATED ORGANIZATIONS: FORM 990, PART VII, SECTION A, COLUMN B: MICHAEL P GALLAGHER DEVOTED AN AVERAGE OF 55 HOURS PER WEEK TO RELATED ORGANIZATIONS. STEVEN M ZIEGLER DEVOTED AN AVERAGE OF 62 HOURS PER WEEK TO RELATED ORGANIZATIONS. RANDALL L STUART DEVOTED AN AVERAGE OF 62 HOURS PER WEEK TO RELATED ORGANIZATIONS. CATHERINE E AYERS DEVOTED AN AVERAGE OF 45 HOURS PER WEEK TO RELATED ORGANIZATIONS. TROY R HART DEVOTED AN AVERAGE OF 50 HOURS PER WEEK TO RELATED ORGANIZATIONS. TIMOTHY J BOWEN DEVOTED AN AVERAGE OF 50 HOURS PER WEEK TO RELATED ORGANIZATIONS. JOSEPH GIRARDI DEVOTED AN AVERAGE OF 40 HOURS PER WEEK TO RELATED ORGANIZATIONS. ROBERT MCNICHOLS DEVOTED AN AVERAGE OF 38 HOURS PER WEEK TO RELATED ORGANIZATIONS. JOE G DUNLAP DEVOTED AN AVERAGE OF 3 HOURS PER WEEK TO RELATED ORGANIZATIONS. FORM 990, PART VII, SECTION B, INDEPENDENT CONTRACTORS: COMPENSATION TO INDEPENDENT CONTRACTORS IN THIS SECTION INCLUDE BOTH PAYMENTS MADE BY SFHC FOR ITS SOLE BENEFIT AND ALSO PAYMENTS MADE FOR THE BENEFIT OF RELATED ENTITIES. 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