For-profit buyouts of not-for-profit hospitals are changing the knitting of hospital foundations.
Instead of raising money to support a hospital's charitable mission, foundations are becoming grantmaking organizations dedicated to supporting community programs.
It's too early in the game to measure donor reaction to such for-profit buyouts, said Albert J. Alvarez, chairman of the Association for Healthcare Philanthropy's think-tank project on the changing environment for healthcare philanthropy. But some development professionals fear that for-profit takeovers of not-for-profit hospitals are driving a number of donors away from healthcare entirely.
The trend raises some ethical questions, too, Alvarez said. He cites recent 50-50 partnerships between Columbia/HCA Healthcare Corp. and not-for-profit healthcare systems that sell themselves for 50 cents on the dollar.
The not-for-profits should be asking, "Are we selling our previous donors short?" he said. "It's incumbent upon responsible trustees to consider the investment by previous donors."
Few hospital systems have as much experience with tax-status switches as Denver-based HealthOne.
In 1985, for-profit American Medical International bought three not-for-profit Denver-area hospitals that later became the core of HealthOne. "That was the first real hitch," said Mary K. Anstine, president and chief executive officer of HealthOne Community Foundation. "All of a sudden the foundation had to figure out what it was going to do."
It remained in operation as a not-for-profit charity to oversee the small amount of money specifically donated or willed to the hospitals, she said. Proceeds from the sale of the hospitals, however, went to the Colorado Trust, a community-based grantmaking organization.
Then, in 1991, the board of directors of the hospital network decided to buy the hospitals back from AMI. But instead of positioning the foundation as a fund-raising vehicle for the newly not-for-profit hospital network, board members embarked on a new mission. The foundation dedicated itself to supporting community-based research and education programs and grants related to hospital programs, Anstine said.
Meanwhile, the network continued to grow with its September 1993 acquisition of Swedish Medical Center in Englewood, Colo. Suddenly there were two not-for-profit foundations to deal with: one focused on putting money back into the community and the other putting money back into Swedish. The two foundations were merged officially at the end of 1994, "and that was really merging two really different types of foundations," Anstine said.
The foundations' board members "really felt that because it was all one system, that the things that happen in the future should support the entire system if possible," she said. To accomplish that, the merged foundation created hundreds of restricted funds that honor donors' wishes.
Anstine, a board member of Presbyterian/St. Luke's Medical Center in Denver, HealthOne's flagship facility, had recently retired as head of trust and private banking at First Interstate Bank in Denver when she was asked whether she might be interested in leading the new foundation. She accepted the job in January.
Anstine said people have responded favorably to the new foundation. "We have seen about the same level of support from people who have supported the organization previously," she said.
For the year ended Aug. 31, 1994, the foundations raised $1.1 million compared with almost $700,000 in contributions and grants the previous year. From September 1994 to May 31, 1995, contributions reached almost $890,000.
"Where we haven't seen as much is new prospects," she acknowledged. With planned giving, such as bequests, people want to wait and see what happens, she said.
The next chapter of HealthOne's tax-status saga is about to unfold. It recently announced a 50-50 for-profit joint venture with Columbia (May 15, p. 6). The foundation will remain not-for-profit, but leaders are just beginning to figure out how to revise its mission and structure.
"I think that if (HealthOne) is going to do this joint venture, this foundation needs to just get going," Anstine said. "The most important thing that's going to come out of this is the communication piece."