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Thursday, May 30, 2024

Novant invests hundreds of millions in Caribbean, leading to questions about its nonprofit strategy

Novant NHRMC (Port City Daily/Amy Passaretti Willis)

NORTH CAROLINA — One of the biggest hospital networks in the southeast United States has invested hundreds of millions in the Caribbean for over a decade, leading experts to express concern about the nonprofits’ use of offshore tax havens.

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A Port City Daily review of Novant Health Inc.’s financial disclosures found the firm invested more than $525 million in the Caribbean and Central America as of its most recent complete filing in 2022. Earlier filings specified Novant’s financial involvement in Bermuda — long considered one of the top tax havens in the world.

“It’s disappointing that an entity that was created by the taxpayers for Forsyth County [where Novant headquarters are based] — that doesn’t pay property tax, doesn’t pay income tax, and doesn’t pay sales tax — wants to invest in tax havens instead of investing back in our own state,” Treasurer Dale Folwell said to Port City Daily Tuesday. 

PCD asked Novant what countries and types of investments are included in the $525 million and if it believes its offshore investment strategy is aligned with its nonprofit designation. Beyond sending a press release for Novant’s most recent audited financial report from April 1, spokesperson Julian March said the nonprofit had “nothing to add at this time.”

Novant’s integrated network offers health services in North Carolina, South Carolina, Georgia, and Virginia, and operates 19 health centers, including the New Hanover Regional Medical Center, Pender Medical Center, and Brunswick Medical Center in the tri-county region. According to the April 1 report, the nonprofit provided more than $1.6 billion in total community benefit, such as financial assistance to patients.

Nonprofit hospitals are exempt from most federal, state, and local taxes in exchange for providing community benefit and charity medical care. However, multiple reports from the treasurer’s office and North Carolina State Health Plan have argued there is inadequate oversight to ensure nonprofit hospitals provide sufficient charity care to justify tax exemptions. The reports — including one published in September 2023 by the treasurer’s office and state health plan — call for greater transparency and accountability for nonprofit hospitals. 

Novant does not have any known medical practices in the Caribbean or Central America, where its financial documents indicate investments in offshore tax havens — jurisdictions where businesses and individuals can avoid taxes and financial scrutiny. Although some Novant job vacancies have been posted on Barbados-based Caribbean Employment Services Inc., founded in 2020.

Countries within the IRS’ Caribbean and Central America designation are widely recognized as corporate tax havens by international authorities with few exceptions, such as Cuba. 

Tax avoidance through offshore investments is legal but controversial. Washington D.C.-based think tank Global Financial Integrity and Financial Times journalist Nicholas Shaxson — author of “Treasure Islands” — are among critics who argue the practice undermines tax-funded programs and enables financial crime and misconduct in less-regulated jurisdictions.

Tax havens are typically associated with multinational corporations, including complex strategies like the “Double Irish with a Dutch Sandwich,” in which businesses have shifted profits through subsidiary companies to take advantage of tax discrepancies in different jurisdictions. 

Nonprofits, typically exempt from taxes, also use offshore investment strategies to avoid taxes on aspects of their organization that are not exempt, such as investments in debt-financed financial firms. For example, a 2016 USA Today investigation found 16 New York nonprofit hospitals maintained a total of $2.6 billion in offshore investments.

Nonprofit hospitals have argued the strategy is legal and justified because it gives returns to reinvest in health services.

International Consortium of Investigative Journalists executive director Gerard Ryle — who led one the biggest offshore tax investigations, including the Panama Papers and Paradise Papers — told PCD many nonprofits use offshore schemes to avoid taxes on investments, such as private equity and hedge funds, which would be taxed in a nonprofit’s home country.

“ICIJ believes that the offshore strategies of hospitals and universities raise ethical, fairness and accountability issues and presents a pressing challenge for tax authorities,” Ryle said. “Left unchecked, the offshore sheltering of millions or billions of dollars cements secrecy, fiscal unfairness and legal ambiguity.”

Novant’s investments

(Courtesy ProPublica and Internal Revenue Service)

According to audited reports, Novant works with investment managers in U.S. and foreign jurisdictions, and is subject to oversight by different countries’ regulators.

Many of the world’s hedge funds are domiciled in Caribbean tax havens, such as the Cayman Islands and Bermuda. Johns Hopkins finance professor Jeff Hooke said hedge funds domiciled in the Caribbean generally operate in financial centers like New York City, but use the favorable regulatory jurisdiction to have an “interest free loan,” as their taxes are postponed until investments return to the United States. Offshore investment managers may repatriate money when a fund is liquidated or after new domestic tax cuts.

“It’s a commonly accepted tax dodge that the IRS has looked at for years and never done anything about it or can’t get the legislation approved,” Hooke said. “It’s been a constant problem.”

Novant’s 990 tax-exempt forms over the last decade or more show it has invested large amounts in the Caribbean and Central America:

  • 2022: $525 million
  • 2021: $702.9 million
  • 2020: $520.6 million
  • 2019: $127.3 million
  • 2018: $398.6 million
  • 2017: $352.9 million
  • 2016: $391.4 million
  • 2015: $440.8 million
  • 2014: $459 million
  • 2013: $336 million
  • 2012: $324 million
  • 2011: Investments in region listed without specific figure
  • 2010: Investments in region listed without specific figure
  • 2009: Investments in region listed without specific figure
  • 2008: Investments in region listed without specific figure

Novant hasn’t released its complete 2023 filing, but the hospital’s recent audited financial report shows $8.3 billion in operating revenue in 2023, with $460.8 million in net income after expenses and $310 million in investment income in 2023. The report also includes $3.3 billion in total long-term investments, including $300.5 million in hedge funds, which tend to focus on maximizing short-term profits.

Novant’s recent filings did not disclose specific investments or investment managers, but its 2022 filing noted Novant paid $786,000 to Winston-Salem based healthcare consulting firm Kingfisher Strategic Advisors. The form notes Novant’s executive vice president James Dean Swindle has 33% or greater ownership of the firm; Secretary of State records list him as the company’s registered agent and only member.

The nonprofit’s auditor is multinational accounting firm PricewaterhouseCoopers. PWC has faced scandals over the last decade for helping clients avoid taxes with offshore investments. PwC also has a broad presence in Caribbean tax shelters to offer services in hedge fund and asset management. 

PwC did not respond to Port City Daily’s questions about which firms and countries are involved with Novant’s investments.

Beyond investments, PwC offers “captive insurance” services in Bermuda and the Cayman Islands. Captive insurance refers to a subsidiary created to provide insurance to a non-insurance company. Nonprofit hospitals, such as New York-based Mount Sinai, have utilized offshore insurance companies in covering medical malpractice and other liabilities. The Government Accountability Office has warned offshore insurance can allow companies to improperly claim tax benefits.

Novant reported captive insurance totals from 2011 through 2014 that increased in subsequent years, starting at $3.9 million and going up to $9.5 million. Novant’s more recent filings do not cite involvement in captive insurance in the Caribbean and Central America.

As well, in 2011 and 2012, its reports list one employee or contractor in the region working on captive insurance. Later reports do not include employees or independent contractors involved in the Caribbean and Central America.

Novant’s 2010 filing also states one Bermuda office was used for captive insurance, while 10 existed in Central America and the Caribbean for investments, and four in Bermuda that also worked on investments. This was down from the 2008 filing, when it cited 14 offices involved in investments in Central America and the Caribbean and six in Bermuda.

(Courtesy ProPublica and Internal Revenue Service)

In 2022, Novant answered “no” on the 990 form to a question regarding foreign involvement: “At any time during the calendar year, did the organization have an interest in, or a signature or other authority over, a financial account in a foreign country (such as a bank account, securities account, or other financial account)?”

Novant answered yes to the question in previous years — 2014, for instance — but stated it was not a party to a prohibited tax shelter transaction. It disclosed foreign interests in Bermuda and Ireland in 2014 — both recognized as some of the top tax havens in the world. The nonprofit invested $148 million in Europe that year.

Nonprofits and corporations

Buncombe-based physician Mitch Li is the founder of Take Medicine Back, an advocacy group concerned with corporate involvement in medicine. He told PCD he believes Novant’s financial strategy is indicative of broader trends in healthcare.

“The culture of financialization and extracting profits has taken over almost every institution,” Li said. “And even if there’s not a traditional Wall Street person at the helm, the idea of how do we game the system to make the most money and exploit and extract everything is just pervasive.”

Folwell raised similar concerns. The state treasurer’s office carried out an audit of seven hospital’s financials in 2022 with the National Academy of State Health Policy, finding hospitals provided less in charity care — free or reduced medical services used to justify nonprofit status — than they receive in tax breaks. 

The report indicated Novant gained $630 million in Covid-relief funds and earned a net profit of $812 million, while charity care only represented 6% of its cash growth.

The report was peer-reviewed by Johns Hopkins healthcare accounting expert Ge Bai. She told PCD her findings have caused concern about how nonprofits should be required to operate.

“They have all sorts of for-profit arms, either in overseas operations or investments,” she said. “They’re no longer only relying on their revenue from patient care. So this is a general trend.”

Bai also noted limited transparency on offshore investments can make it difficult to determine how revenue is used to help a nonprofit’s charitable mission or if it is used for other purposes. She stated Novant should provide the public more detail about its offshore operations.

“Because it’s a nonprofit, you have all sorts of taxpayer subsidies,” she said. “So I think we should have a much higher expectation for them.”

Novant has expanded rapidly from acquisitions in recent years — including the $1.5 billion purchase of New Hanover Regional Medical Center in 2021 — and discussed further expansion as a core part of its strategy at the JP Morgan healthcare conference for investors in January.

Its expansions hit an obstacle on Jan. 25, however, as the FTC filed an antitrust lawsuit to block Novant’s $320 million acquisition of Lake Norman Regional Center and Davis Regional Medical Center in Iredell County. The FTC argued Novant’s rapid market consolidation in North Carolina would increase costs for patients.

“After reading these reports and looking at what the Federal Trade Commission has been saying about Novant, nothing surprises me anymore,” Folwell said.

Tips or comments? Email journalist Peter Castagno at

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