2 Investigates: Local non-profit hospitals doing business in the Cayman Islands

by: Aaron Diamant Updated:

ATLANTA,None - A Channel 2 Action News investigation uncovered some metro Atlanta nonprofit hospitals doing business in the Cayman Islands and reporting low numbers when it comes to charity care.

Kennesaw State University senior Paul Castaneda is one of thousands who turn to
nonprofit hospitals. Castaneda started having chest pains on campus last fall and ended up at Kennestone Hospital in Marietta.

"I got an EKG. I got a CAT scan as well," said Castaneda.

The uninsured student left the emergency room with a bill for nearly $7,000.

"It did not even cross my mind that it was going to be that high," Castaneda said.

Unable to pay, Castaneda turned to the nonprofit hospital for help. Kennestone is one of five public hospitals in metro Atlanta operated by Wellstar Health System. Wellstar, like all
nonprofit hospitals in Georgia, receives tax breaks from the communities they serve.

"The reason they are tax-exempt is to perform a charity for their local community," said Holly Lang, executive director of Georgia Watch, a consumer advocacy group.

Each hospital reports the amount of charity care it provides to the IRS.

Channel 2's Aaron Diamant found the most recent tax returns filed by metro Atlanta's largest
nonprofit hospital systems.

Emory's two main hospitals averaged about 2 percent of its total expenses as charity care. Piedmont's hospitals averaged just fewer than 3 percent and Wellstar hospitals averaged just fewer than 5 percent.

"We don't understand why these numbers are so low," said Lang, referring to the figures. "There's no way that three to five percent at each hospital is reasonable and truly reflecting the needs of its community."

Diamant received a tip and traveled to the Cayman Islands to see where some of the
nonprofit hospitals set up insurance companies worth tens of millions of dollars. These private insurance companies are called "captives". The hospitals own them, but Cayman firms manage all the money.

"It's a very valuable tool from a risk management perspective," said Clayton Price with Insurance Managers Association of Cayman.

That is why Atlanta-area
nonprofit hospital systems transfer millions of dollars in premiums into Cayman managed accounts, building up massive pots of money to insure themselves against potential lawsuits, Price said. It's all perfectly legal.

"By knowing that they've got that program in place to cover them, it gives them a lot of comfort," Price added.

In Wellstar's case, it also appeared to give some top executives the opportunity to spend a lot of the
nonprofit's money.


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Channel 2 Action News obtained credit card statements for Wellstar's captive after making an open records request. They break down tens of thousands of dollars in charges over the last three years on airfare, five-star hotel stays and fancy restaurants in the Caymans, Puerto Rico and the Bahamas.

"That's wild," Lang said. "To what benefit is this to the patient?"

The hospitals turned down repeated requests for on-camera interviews. All three emailed statements breaking down the financial benefits of their Cayman-based captives.

Emory Healthcare told Diamant that its captive gives it "greater control over our claims ... reducing our overall costs."

Piedmont Healthcare called offshore captives the "industry standard."

Wellstar told Channel 2 Action News that its captive has saved the system $85 million over the years and said that the charges on the credit card statements were, "operating costs ... incurred to conduct board meetings and other business."

"If you saw these numbers with the United Way or Habitat for Humanity or think of any
nonprofit, there would be outrage," Lang said.

"Don't lose sight of what you're supposed to be doing. Helping the community, especially in times of need," said Castaneda.

According to the Cayman government, there are more than 700 healthcare captives based there, owned by
nonprofit and for-profit hospitals.

Other countries and other states here in the United States, including Georgia, have captive laws on the books. Cayman officials told Diamant when it comes to regulating healthcare captives, its system is far more stable, making it a top choice for hospitals.