Worcester Business Journal

wbjournal.com | July 24, 2017 | Worcester Business Journal 13 The bank of more time for your business. Contact: Sue Collins at 508.499.1881 and start saving time and money. Spend less time depositing checks and more time running your business with Office Deposit. Office Deposit is a simple and effective cost savings tool for your business. Have the freedom to scan and deposit checks right from your computer whenever it is convenient for you. Increase employee productivity, plus save time and travel expense with less trips to the bank. It's like having your favorite teller right in your office, 24/7. hometowncoop.com | Toll-Free 888.307.5887 Member FDIC | Member SIF Your Deposits Are Insured In Full. The bank of you. Sue Collins, Cash Management Officer Many healthcare nonprofits have for-profit subsidiaries which generate income for the larger parent organizations. Here are notable local examples. n Fallon Health of Worcester owns Fallon Health and Life Assurance Company. n Worcester-based UMass Memorial Health Care owns UMass Memorial Health Ventures Inc., the for-profit subsid- iary designed to manage affiliations with other companies, and a captive insurance company in the Cayman Islands, as well as some individual for-profit ventures. n Boston-based Blue Cross Blue Shield of Massachusetts owns Zaffre Investments, the private equity and venture capital arm of Blue Cross; Indigo Insurance Services, a national underwriting company; and Blue Benefit Administrators, a third- party medical plan administrator. n Wellesley-based Harvard Pilgrim Health Care owns Harvard Pilgrim Insurance Co. and Health Plans Inc. Sources: Each company Nonprofits' for-profit spinoffs L A W F O C U S the Massachusetts Nurses Association. The union representing the nurses employed at UMass Memorial hospitals, the MNA has been critical of a captive insurance company UMass Memorial formed in the Cayman Islands for the purpose of self insuring the organization for disability, workers compensation and malpractice claims. Self insurance is attractive for large organizations able to absorb the risk of insuring its employees without an outside insurance company. Melgar said UMass Memorial will use the profits of the com- pany to keep insurance costs level, or even reduce them in a good year. The insurance company is audited and managed by Bank of New York Mellon, according to Melgar, and he said the company is careful to demon- strate claims paid out match closely budgeted claims. But the MNA has speculated the system and others in Massachusetts may use a portion of profits from off- shore holdings to increase executive compensation. Melgar denied this claim and said healthcare organizations frequently choose to form insurance companies for the same purpose in the Cayman Islands because, in addition to tax benefits, local regulations are ideal for creating such entities. In Massachusetts, there's no legal struc- ture for doing so, Melgar said. Transparency bill fate uncertain David Schildmeier, spokesman for the MNA, said it's difficult to reconcile the fact that UMass Memorial has tens of millions in an offshore insurance company and has a healthy profit while the organization has moved to reduce services in recent years, saying it's los- ing money. He specifically pointed to the recent decision to close several beds in an inpatient psychiatric unit at UMass Memorial Medical Center's University Campus in Worcester. Schildmeier noted federal and state filings may include information about offshore and other for-profit holdings, but those are difficult for the average person to decipher. "The industry is very powerful, get- ting them to be transparent is difficult," Schildmeier said. The MNA is supporting a bill called the Hospital Profit Transparency and Fairness Act, which would require greater transparency of hospitals' financial holdings and seeks to limit exorbitant CEO compensation, accord- ing MNA. The bill before the Massachusetts leg- islature went to a hearing in June. Schildmeier said it will be an uphill bat- tle to get the bill approved, given the strength of the hospital lobby. Eric Schultz, CEO, Harvard Pilgrim Eric Dickson, CEO, UMass Memorial Health Care Richard Burke, CEO, Fallon Health Andrew Dreyfus, CEO, Blue Cross Blue Shield of Massachusetts W

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