Hospital mergers spawning new philanthropy

By Todd Cohen

HIGH POINT, N.C. — The Triad is poised to get over $100 million in new philanthropic assets, thanks to the pending combination of hospitals in High Point and Alamance County, respectively, with health care systems in Chapel Hill and Greensboro.

As part of its strategic alliance with High Point Regional Health System, UNC Health Care will provide $50 million to establish a new community health fund in High Point.

And as part of its partnership with Alamance Regional Medical Center in Burlington, Cone Health in Greensboro will provide $54 million to establish a new community foundation in Alamance County.

“It’s huge for Alamance County,” says Tracey Grayzer, director of marketing, community relations and development for Alamance Regional Medical Center.

While details of the two mergers still are being worked out and both deals are subject to regulatory approval, the new philanthropies they will create are expected to focus on the broad area of health and on some or all of the geographic regions the High Point and Alamance health systems serve.

Both new philanthropies will be grantmaking entities only and will operate separately from and in addition to both systems’ current foundations, which will continue to raise money to support their local hospitals and patients.

The existing High Point Regional Health System Foundation, for example, will continue to raise funds solely for capital, technology and patient care service needs at High Point Regional Hospital, says Denise M. Potter, vice president of the foundation, public relations and marketing for the system.

That foundation raises $1.5 million to $2 million a year in new income, plus $1.5 million in annual pledge payments, she says.

The existing fundraising foundation at Alamance Regional Medical Center will receive $1 million from Cone Health in addition to the $54 million Cone Health is giving to create the new foundation.

The existing foundation operates just over two-dozen patient funds, spending over $300,000 a year for support for patients, such as for prostheses, wigs for cancer patients, fuel expenses so patients can get to appointments, and rent for cancer patients whose treatment may consume all their income, says Grayzer.

The two new foundations will be the latest in a trend that began in 1973, when the first “health legacy” foundation was formed. Since then, nearly 200 similar foundations have been created throughout the U.S., most of them during the 1980s and 90s, and their ranks keep growing as an increasing number of hospitals and health organizations merge or shift to for-profit status, according to the Foundation Center.

Allen Smart, director of the health care division at the Kate B. Reynolds Charitable Trust in Winston-Salem, says the financial impact of the two new foundations would be significant, increasing the flow of philanthropic funds by roughly $2.5 million a year in each of their communities.

Key decisions still must be made for both new foundations about their geographic reach, funding focus and board makeup, decisions that Smart says will help determine their impact.

Some health legacy foundations, for example, focus on a narrow service area, such as the county in which a merged hospital is located, while others focus on a multi-county region the hospital serves.

And while many health legacy foundations focus on health, others address a broad range of issues such as education, economic development and the arts.

The new foundations also could name to their boards individuals who now serve on the boards of the existing hospital foundations, or they could opt to recruit new board members, a decision that Smart says could influence the initial selection of grantees.

“If the people are primarily associated with the hospitals, that says how open they might be to new thinking or new ideas,” he says.

Whatever the details of their focus and makeup, Smart says, the two new foundations will have a big impact in a state in which he estimates health-related giving from North Carolina foundations, other than hospital-related foundations that raise money for their own hospitals, totals about $100 million a year.

He also expects the merger trend to continue in the state and create more health legacy foundations.

The big wave of health legacy foundations were created from the mid-1980s through about 2000, a period when nonprofit hospitals were purchased by big for-profit chains or merged with other systems.

North Carolina has seen only a few of those health legacy foundations, including The John Rex Endowment in Raleigh and the Cape Fear Memorial Foundation in Wilmington, as well as Triangle North Healthcare Foundation, which was created through the merger of Maria Parham Medical Center in Henderson with Duke LifePoint Healthcare.

Most remaining stand-alone hospitals in North Carolina are nonprofits or publicly owned, Smart says.

“As more get sold to for-profits or other systems, there would be more of this new philanthropy in the state,” he says. “There has been little of this activity in North Carolina. I forecast more.”

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One response

  1. Great article!

    Healthcare conversion transactions (from sales and mergers of hospitals, health plans, and specialty clinics) have resulted in at least $23 billion in new charitable wealth for communities across the nation since the early 1980s. These health legacy foundations dole out about $1 billion in grant funding each year. This figure may not seem so impressive in the grand landscape of healthcare philanthropy, but HLFs are most often endowed with geographical restrictions, such as a converting hospital’s service area. As a result, many relatively small communities will now receive millions of dollars in new grant funds each year to improve the health and quality of life of area residents.

    Furthermore, the conversion phenomenon appears to be in the midst of a massive resurgence. Healthcare reform has ignited a frenzy of healthcare merger and acquisition activity since the spring of 2010, and transactions may result in an unprecedented infusion of charitable wealth for local healthcare delivery systems.

    –Sabrina Niggel

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