Beaumont, Oakwood, Botsford hospital foundations merge

Three years after the merger of Beaumont Health System, Oakwood Healthcare Inc. and Botsford Hospital, the fundraising arms of the three health systems have legally merged, creating a foundation with $100 million in assets.

The Beaumont Health Foundation became a legal entity effective July 1.

It was always the plan to merge the three foundations, said Beaumont Health Foundation Chair Geoffrey Hockman, managing partner of Pelota LLC, a Birmingham-based investment consulting company and the chair of the former Beaumont Foundation board since 1992.

The only question was the amount of time it would take to merge them and the structure on how that merger would take place, he said. Those can be tricky questions if the concerns of donors, board members or the health system are at odds.

For a year following the merger of the three health systems, the foundation boards continued to operate separately, the Oakwood Foundation, an independent 501(c)3 nonprofit, and the foundations at Beaumont and Botsford as units of those systems. Each was entrusted with investing endowment funds on behalf of donors.

A year later, Beaumont Health System CEO John Fox challenged the foundation boards to look at how they could have the greatest impact in supporting the health system. And they came to the conclusion that they were stronger together than apart.

"The thought was that the foundation should serve as its own legal organization (and) also provide the ability to attract ... members of the community who would feel it was more prestigious to be involved on the board of a separate 501(c)3," said Margaret Cooney Casey, foundation president.

"It gives them a little more influence in the organization when they're not treated as a business unit and almost like a subcommittee of a board. And it gives them a little more say into the direction of how philanthropy might be used or how they might choose to raise funds and what they'd raise it for."

Aside from efficiencies gained from not having three separate, paid leadership structures, merging also provided a logical way to avoid multiple requests to funders, Casey said.

The merged foundation's assets include over 600 restricted funds totaling $55 million to be spent down over three to five years after the gifts were made and a $45 million endowment.

Its board currently has 11 members from the three predecessor foundations, with the former chairs of the Oakwood and Botsford foundations serving as vice chairmen on the merged board. The plan is to add a handful of additional directors from the communities to bring it to a maximum of 16 people, Casey said.

The foundation operates on an annual budget of about $8 million and employs 62 people, after eliminating a few duplicate positions, Casey said.

The combined foundation has raised $90 million over the past two years, about $6 million to $10 million more each year than the foundations had raised separately, Casey said.

Board members of the predecessor foundations, who all came from very different communities in terms of demographics and income levels, had early concerns about merging, Casey said.

"Each board had the same concerns: will our needs be properly represented, will our communities trust that they can continue to give to our needs at our hospital, and trust that they will stay there," Casey said.

There were also some donor concerns about whether the gift they'd make would fund what they intended at the hospital they intended, she said. The foundation's assurances to donors included educating donors on the merged organization's restricted funds that are audited and the stewardship reports produced for large gifts (typically six figures and above) on how their gift is used.

Beaumont Health Foundation is one of only a few remaining, independent health system foundations in Southeast Michigan.

The Crittenton Hospital Medical Center Foundation's board was downgraded into a hospital board advisory committee following Ascension Health Michigan's 2015 acquisition of Crittenton, and oversight for the foundation was transferred to the hospital board.

Conversely, following the merger of Ascension's subsidiary, St. John Health System, and Providence Hospital and Medical Centers late in 1999, the boards of the St. John Hospital Foundation and Providence Health Foundation elected to continue to each operate as independent, 501(c)3 nonprofits. St. John Hospital Foundation had assets of just over $43 million for fiscal 2016 ended June 30, and Providence Health Foundation $21.7 million.

Henry Ford Health System Foundation is the largest healthcare foundation in the region by assets, with $283.7 million in net assets/fund balances at the end of 2015.

"Beaumont, Oakwood, Botsford hospital foundations merge" originally appeared in Crain's Detroit Business.