Assets For Health Findings from the 2001 Sur vey of New Health Foundations 2002 M A R C H Assets for Health Findings from the 2001 Sur vey of New Health Foundations 2002 M A R C H G R A N T M A K E R S I N H E A L T H III Preface Foundations with origins in health care conversions have been in existence for almost three decades. Those formed in the 1970s and 1980s have become mature organizations. Many of them are now virtually indistin- guishable from their counterparts that were formed in more traditional ways. Their boards and staffs are experienced in foundation operations, and their grantmaking reflects carefully constructed strategies. These organizations are working to affect not only the health of the communities they serve but also the field of health philanthropy. Grantmakers In Health (GIH) has been tracking the emergence and activities of foundations formed from transactions involving nonprofit health care organizations since 1996. Data collected from these surveys are used to regularly document the key elements of foundation structure, organization, independence, account- ability, and grantmaking. A year ago, we reported that assets from these foundations exceeded $16 billion, and that they resulted from a variety of conversion arrangements, including sales, mergers, joint ventures, and corporate restructuring. In years past, we have also documented variation in their structures, their relation- ships to the organizations that gave rise to them, and the extent of community involvement in the develop- ment of their missions and grantmaking agendas. Reporting on the activities of new health foundations is important for several reasons. As the bulk of conver- sion activity resulting in the formation of foundations has taken place since the mid-1990s, this is still a rela- tively new phenomenon. These transactions have important implications for how health care is delivered at the state and local level, and for the role of philanthropy in addressing health. These conversions also repre- sent significant increases in philanthropic dollars dedicated to local health improvement projects. Finally, the foundations are often created in the wake of controversy surrounding the conversion. Their structure and growth as grantmaking organizations is increasingly being monitored by their communities. These reports are intended to educate a variety of audiences on the contributions new health foundations are making toward improving health and health care in local communities. New foundations use the information as a tool to help them gauge their own development. The larger field of health philanthropy uses these reports to identify new foundations that might partner with them in their efforts to improve health and health care at the local level. These data may also serve as a guide for key stakeholders in communities including policy- makers, regulators, and consumer advocates that monitor and work with these new foundations. IV 2 0 0 1 S U R V E Y In addition to updating data on the creation and activities of the 129 foundations discussed in last year’s report, this report includes data on several additional foundations created by conversions. In total, 166 foun- dations were surveyed for this report, representing an increase in the number of organizations identified over previous years. This increase is due to several factors. First, while some of these foundations were already known to us, they were too new to respond to an extensive set of questions on their structure, governance, and behavior. Second, increased attention to the issue of nonprofit conversions and, in turn, the foundations that are created, has made it easier for local communities to identify them. Recognizing the increased visibility these foundations receive at the local level, we made a concerted effort this year to work with regional associa- tions of grantmakers (RAGs) and other local funders to identify these new foundations. Special thanks are due to the foundations that participated in the survey and to the grantmakers and RAGs that assisted us in our efforts to identify them. Saba Brelvi, program associate, and Malcolm Williams, senior program associate, comanaged the research, analysis, and writing of the report. Mary Kate Brousseau, research assistant, was instrumental in collecting the data. The authors would also like to thank Kate Treanor and Julia Tillman for their comments on earlier drafts, and Anne Schwartz and Lauren LeRoy for their ongoing support, advice, and important contributions to the final product. G R A N T M A K E R S I N H E A L T H V Table of Contents PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii LIST OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii BACKGROUND AND OVERVIEW ..........................................................1 SURVEY METHODOLOGY .................................................................2 RESULTS ..................................................................................3 Foundation Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Date of Foundation Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Foundation Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Geographic Distribution of Foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Transaction Arrangement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Placement of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Tax Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Time Elapsed Before Grantmaking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Staff Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Board Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Board Size and Makeup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Board Membership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Foundation Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Reserved Foundation Board Seats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Concurrent Board Seats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Conflict-of-Interest Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Community Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Community Involvement Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Grantmaking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Geographic Grantmaking Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Health Grantmaking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SUMMARY AND CONCLUSIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 APPENDIX 1 A Profile of New Health Foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 APPENDIX 2 Tax Status of New Health Foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 G R A N T M A K E R S I N H E A L T H VII List of Exhibits Exhibit 1. New Health Foundations by Year of Transaction and Current Assets (millions of dollars) . . . . . . . . . . . . . . . . . . 4 Exhibit 2. Assets of New Health Foundations (millions of dollars) by Type of Organization, 2001 . . . . . . . . . . . . . . . . . . . . 5 Exhibit 3. States with New Health Foundations by Number and Total Assets, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Exhibit 4. New Health Foundations by Type of Transaction and Transaction Arrangement, 2001 . . . . . . . . . . . . . . . . . . . . 6 Exhibit 5. Tax Status of New Health Foundations by Assets, 2001 (millions of dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Exhibit 6. Median Foundation Staff Size by Tax Status and Asset Size, 2001 (millions of dollars) . . . . . . . . . . . . . . . . . . . . . 8 Exhibit 7. Median Foundation Board Size by Tax Status and Asset Size, 2001 (millions of dollars). . . . . . . . . . . . . . . . . . . . 9 Exhibit 8. Racial and Ethnic Diversity of New Health Foundation Boards, 2001 (percentage of foundations) . . . . . . . . . . . 10 Exhibit 9. Reserved Board Seats of New Health Foundations by Type of Seat Reserved, 2001 (number and percentage of foundations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Exhibit 10. New Health Foundations with Board Members Sitting Concurrently on Board of Original Nonprofit Organization, 2001 (percentage of foundations). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Exhibit 11. New Health Foundations with Board Members Sitting Concurrently on Board of Purchasing Organization, 2001 (percentage of foundations). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Exhibit 12. New Health Foundation Strategies for Community Involvement, by Reason for Use, 2001 . . . . . . . . . . . . . . . . 14 Exhibit 13. Selected Health Grantmaking Areas, 2001 (number of foundations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Exhibit 14. New Health Foundation Funding in Health by Level of Funding, 2001 (percentage of foundations). . . . . . . . . . 17 G R A N T M A K E R S I N H E A L T H 1 Background and Overview The attention being paid to foundations formed as the result of transactions involving nonprofit health care organizations continues to grow. There is a great deal of interest from many segments of society about these new foundations – their origins, intentions, activities, and relationships with the community. Stories and reports of new health foundations have moved out of the realm of philanthropy and policy and onto the pages of the popular press. Some within philanthropy argue that this focus is inappropriate – that these new health foundations, once established, should be subject to no more public attention than other philanthropic organi- zations. Others assert that because the assets used to create these foundations are public in nature, they actual- ly require an additional layer of scrutiny beyond that of their more traditionally formed peers. Still others hold that these new health foundations are the result of significant changes in the health care system, and so are natural subjects for this kind of examination. While some foundations created from conversions have been in existence for nearly three decades, the majori- ty have been created in the past 10 years. Born out of transactions involving nonprofit hospitals, health plans, and health systems, their assets are usually directed towards improving the health of the local community. While many early conversions occurred without much involvement by regulators and consumer advocacy groups, more recent conversions have involved numerous stakeholders in what are often contentious processes over valuation of assets and directed use of conversion funds. Regardless of the circumstances surrounding their creation, these new health foundations have the potential to significantly affect health and health care in their communities. Although the assets of many of these individ- ual foundations are small relative to their older, more well-established counterparts, the fact that most of these organizations fund in a limited geographic area means that they are often the largest single source of assets dedicated to health projects in the community. Altogether, the $15.3 billion in assets that these new founda- tions currently hold represent almost $752 million in potential annual grantmaking geared toward improving health and health care in local communities.1 To date, Grantmakers In Health (GIH) has identified more than 160 foundations that are either new founda- tions created through these conversion agreements or existing ones which have received assets generated by conversions. As new foundations continue to emerge, new questions and areas of inquiry arise. The purpose of this report is to: • provide clear, concise, and comprehensive background information on these health foundations; • highlight and examine important issues regarding these organizations, including independence, board structure, and community responsiveness; and • serve as a user-friendly resource on new health foundations for different constituents, including funders, policymakers, community advocates, and the media. 1This amount reflects a decrease in the total assets of new health foundations from 2000; while there may be several reasons for this change, poor stock market performance in 2001 is likely the most significant factor. 2 2 0 0 1 S U R V E Y What Are Conversions? The past three decades have witnessed unprecedented growth in the number of transactions involving nonprofit hospitals, health plans, and health systems. Often referred to as conversions, many of these transactions involve the transfer of assets from a nonprofit to for-profit and sometimes other nonprofit health care organizations through sales, mergers, joint ventures, or corporate restructuring. For strug- gling nonprofits, converting can offer a way to preserve their historical missions, gain access to capital, and enhance their competitive positions. For thriving nonprofits, converting can allow nonprofit boards to secure the maximum assets for their communities in the face of increasing uncertainty and competi- tion in the health care market. Conversion options such as mergers and joint ventures may offer non- profit organizations a way to remain viable and stay competitive while retaining partial ownership in the health care organization. Some conversion transactions have led to the creation of new foundations endowed with assets generat- ed by the conversion that are charged with funding health-related activities in their communities. These foundations are often referred to as health care conversion foundations. This is not a legal term, nor is it adequately descriptive. The Internal Revenue Service (IRS) classifies these entities as private founda- tions, social welfare organizations, or public charities (see Appendix 2). Some transactions between nonprofits and municipal health care organizations have also led to the creation of foundations. Creating a new health foundation or transferring assets to an existing one are common ways to maintain the level of public benefit presumed to have been provided by the nonprofit organization prior to conversion. Although the degree to which nonprofit providers serve the community (and whether their behavior dif- fers from for-profit enterprises) has been much debated, the trend in law and regulation is to require that converted assets be used in a manner consistent with the original nonprofit’s mission. This trend is supported by the cy pres doctrine, meaning “as close as possible”; the doctrine supports an application of the assets to a mission as close as possible to that of the original nonprofit. Survey Methodology For this report, GIH was able to identify and survey 166 foundations that have developed as a result of trans- actions involving nonprofit organizations. In past surveys, we have tried to reduce the burden foundations face in completing multiple surveys by sending out one-page, fax-back forms to those foundations that had previously responded to a longer questionnaire. In 2001, however, we added a number of new questions and modified others in an attempt to gain a greater understanding of new foundation development and asked all foundations in our sample to complete the full survey. This year’s survey was designed to delve deeper into the questions of community involvement, independence, and accountability, in order to draw a clearer picture of the circumstances that surround the development and operations of these foundations. Responses were collected via mail and fax from 107 of the 166 new health foundations identified. Five foun- dations were too early in their development to respond to an extensive set of questions regarding their devel- G R A N T M A K E R S I N H E A L T H 3 opment. Data related to many questions from previous years’ surveys were used for 32 foundations that did not respond to the 2001 survey. Data on assets, location, year of transaction, and type of nonprofit organiza- tion converted for nine additional foundations were drawn from other sources and are included in the sum- mary table at the end of the report. Results This report updates information contained in previous publications and provides new data on various dimen- sions of the development and behavior of new health foundations. These data are presented in five major sec- tions: • Foundation Structure: basic information regarding the year of transaction, assets, type of organization involved in the transaction, type of transaction arrangement (i.e. sales, mergers, joint ventures, and corpo- rate restructuring), geographic location, tax status, and staffing. • Board Structure: data on average board size, composition, origins, and racial and ethnic diversity. • Foundation Independence: data on the independence of the foundations’ boards from the organizations involved in the transaction. • Community Involvement: data reflecting the extent to which the foundations have included the commu- nity in their development and ongoing operations. • Grantmaking Priorities: data regarding geographic grantmaking restrictions and major funding areas of the foundations. The foundations surveyed this year include funders appearing in previous reports as well as others surveyed for the first time. Some of these first-time respondents are brand new, while others have been in existence for some time but have only recently come to our attention. Given these different types of respondents, care must be taken in drawing comparisons between results from earlier reports and this report. For example, the increase in the number of foundations identified does not correspond to an increase in newly formed founda- tions. While differences between data from earlier reports and this year’s report can indicate changes, compar- isons should only be drawn where appropriate. Nevertheless, the addition of more than 30 foundations to the list has helped to clear our understanding of the development and operations of these foundations, and some interesting trends seem to have emerged. First, it is important to note that the conversion phenomenon is continuing. Between 1999 and 2001 at least 18 foundations were created, including five foundations that did not respond to the 2001 survey. In addition, the number of health plan conversions is growing relative to the number of transactions involving other types of nonprofit health care organizations. We are also seeing an increased diversity in tax status choices and foundation structures of these new organizations. Finally, the addition of new questions on board structure, and the increase in the number of surveyed foundations together mean that we have a better understanding of the interdependence of foundations and organizations involved in the conversion. In general, new health 4 2 0 0 1 S U R V E Y foundations retain their independence by shying away from maintaining formal relationships with these organizations. Foundation Structure Our profile of new health foundations begins with a description of the origins of these organizations, includ- ing data on the type of nonprofit organizations involved in the transactions and the type of transactions that resulted in foundations. It also reviews information specific to the creation of the foundations, including date of foundation formation, whether new foundations were created or assets were placed with existing charities, and the average length of time to move from foundation formation to making grants. Finally, and perhaps most importantly, a clearer picture of the structure of these new foundations comes from an analysis of their core attributes, including asset size, location, and tax status. Date of Foundation Formation. Although the conversion phenomenon continues and new foun- dations are created each year, most new health foundations were established in the mid-1980s or mid- to late- 1990s (Exhibit 1). In fact, the greatest rate of growth was in the five-year period between 1994 and 1999 when 70 percent of the foundations responding to this survey were formed. In 1995 alone, at least 24 new foundations were created. Exhibit 1. New Health Foundations by Year of Transaction and Current Assets (millions of dollars) YEAR OF MEDIAN MEAN CONVERSION NUMBER TOTAL ASSETS ASSETS ASSETS 1973 . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . . . . . . . . . . . $30.7. . . . . . . . . . . . . . . . . . . . . . $30.7 . . . . . . . . . . . . . . . . . $30.7 1977 . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . . . . . . . . . . . . 47.0 . . . . . . . . . . . . . . . . . . . . . . . 47.0 . . . . . . . . . . . . . . . . . . 47.0 1981 . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 . . . . . . . . . . . . . . . . . . . . . . . . 2.3 . . . . . . . . . . . . . . . . . . . 2.3 1983 . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5 . . . . . . . . . . . . . . . . . . . . . . . 18.5 . . . . . . . . . . . . . . . . . . 18.5 1984 . . . . . . . . . . . . . . . . . . . . . . 12 . . . . . . . . . . . . . . . . . . . . . . . . . 504.6 . . . . . . . . . . . . . . . . . . . . . . . 27.5 . . . . . . . . . . . . . . . . . . 42.0 1985 . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . . . . . 1,043.8 . . . . . . . . . . . . . . . . . . . . . . 143.0 . . . . . . . . . . . . . . . . . 208.8 1986 . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . 147.7 . . . . . . . . . . . . . . . . . . . . . . . 20.3 . . . . . . . . . . . . . . . . . . 36.9 1987 . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . . . . . . . . . 178.7 . . . . . . . . . . . . . . . . . . . . . . . 75.0 . . . . . . . . . . . . . . . . . . 59.5 1988 . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . . . . . . . . . . . . 18.7 . . . . . . . . . . . . . . . . . . . . . . . 18.7 . . . . . . . . . . . . . . . . . . 18.7 1989 . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.0 . . . . . . . . . . . . . . . . . . . . . . . . 9.0 . . . . . . . . . . . . . . . . . . . 9.0 1990 . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . . . . . . . . . . 180.8 . . . . . . . . . . . . . . . . . . . . . . . 90.4 . . . . . . . . . . . . . . . . . . 90.4 1991 . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . . . . . . . . . . . . 96.3 . . . . . . . . . . . . . . . . . . . . . . . 96.3 . . . . . . . . . . . . . . . . . . 96.3 1992 . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . . . . . . . 1,064.7 . . . . . . . . . . . . . . . . . . . . . . . 79.3 . . . . . . . . . . . . . . . . . 354.9 1993 . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . . . . . . . . . . . 81.6 . . . . . . . . . . . . . . . . . . . . . . . 40.8 . . . . . . . . . . . . . . . . . . 40.8 1994 . . . . . . . . . . . . . . . . . . . . . . 11 . . . . . . . . . . . . . . . . . . . . . . . . . 994.6 . . . . . . . . . . . . . . . . . . . . . . . 81.0 . . . . . . . . . . . . . . . . . . 90.4 1995 . . . . . . . . . . . . . . . . . . . . . . 24 . . . . . . . . . . . . . . . . . . . . . . . 2,517.9 . . . . . . . . . . . . . . . . . . . . . . . 81.8 . . . . . . . . . . . . . . . . . 104.9 1996 . . . . . . . . . . . . . . . . . . . . . . 21 . . . . . . . . . . . . . . . . . . . . . . . 5,521.2 . . . . . . . . . . . . . . . . . . . . . . . 65.0 . . . . . . . . . . . . . . . . . 262.9 1997 . . . . . . . . . . . . . . . . . . . . . . 18 . . . . . . . . . . . . . . . . . . . . . . . . . 621.8 . . . . . . . . . . . . . . . . . . . . . . . 27.5 . . . . . . . . . . . . . . . . . . 34.5 1998 . . . . . . . . . . . . . . . . . . . . . . 12 . . . . . . . . . . . . . . . . . . . . . . . 1,267.2 . . . . . . . . . . . . . . . . . . . . . . . 56.2 . . . . . . . . . . . . . . . . . 105.6 1999 . . . . . . . . . . . . . . . . . . . . . . . 9 . . . . . . . . . . . . . . . . . . . . . . . . . 495.5 . . . . . . . . . . . . . . . . . . . . . . . 45.0 . . . . . . . . . . . . . . . . . . 55.1 2000 . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . 288.7 . . . . . . . . . . . . . . . . . . . . . . . 79.0 . . . . . . . . . . . . . . . . . . 72.2 2001 . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . . . . . . . . . . 148.5 . . . . . . . . . . . . . . . . . . . . . . . 74.3 . . . . . . . . . . . . . . . . . . 74.3 Total . . . . . . . . . . . . . . . . . . . . . 139 . . . . . . . . . . . . . . . . . . . . . $15,279.9. . . . . . . . . . . . . . . . . . . . . . $45.0 . . . . . . . . . . . . . . . . $109.9 N=139 Source: Grantmakers In Health, Survey of New Health Foundations, 2001. G R A N T M A K E R S I N H E A L T H 5 Foundation Assets. In total, the assets from new health foundations exceed $15 billion (Exhibit 1). The smallest foundation has assets of $1.75 million, and the largest $3.5 billion, with a median of $45 million. The highest median is for foundations created from health systems ($105.5 million), followed by foundations created from health plans ($76.7 million). The median for foundations created from hospitals is $36.4 mil- lion (Exhibit 2). Although the median for foundations created from health systems is the highest, the three largest foundations are the result of health plan transactions. Transactions involving health plans have also gar- nered more interest recently as the number of Blue Cross plans converting increases. To date, six foundations have been created from converted Blue Cross plans. In addition, four other foundations too new to respond to the survey this year were created from transactions involving Blue Cross plans. Three recent Blue Cross transactions in Maryland, New York, and North Carolina may also result in the creation of new health foun- dations. Geographic Distribution of Foundations. Thirty-three states and the District of Columbia have had health care conversions that resulted in the creation of foundations. While these new foundations are spread across the nation, more than 50 percent of the total assets of all health foundations are concentrated in just four states – California, Ohio, Colorado, and Florida (Exhibit 3, page 6). The states with the most foun- dations are California (21 foundations totaling $6.8 billion) and Ohio (16, totaling $1.1 billion). California has not only the most foundations, but also the three largest funders, which alone account for one-third of all new health foundation assets. Virginia and Pennsylvania each have eight foundations, but their statewide assets are lower than the seven in Florida ($632 million) or the five in Colorado ($1 billion). Transaction Arrangement. In nonprofit to for-profit transactions, the conversion arrangement has important implications for foundation independence. Unlike sales, both mergers and joint ventures result in agreements that maintain relationships between the nonprofit organization and the for-profit partners, and sometimes the foundation. Most foundations (109), however, have developed as the result of a sale of a non- profit hospital, health system, or health plan (Exhibit 4, page 6). Of the remaining foundations, 13 developed from joint ventures, 11 are from mergers, and six are from corporate restructurings. The number of founda- tions created from joint venture transactions is declining relative to the total number of foundations, due in part to IRS rulings on these types of transactions. In 1998, the IRS ruled that some of these partnerships left too much control of the nonprofit health care organization to the for-profit partner, leaving the tax status of Exhibit 2. Assets of New Health Foundations (millions of dollars) by Type of Organization, 2001 TYPE OF TOTAL MEDIAN ORGANIZATION NUMBER ASSETS ASSETS Hospital . . . . . . . . . . . . . . . . . . . 94 . . . . . . . . . . . . . . . . $6,668.7. . . . . . . . . . . . . . . $36.4 Health plan . . . . . . . . . . . . . . . . 22 . . . . . . . . . . . . . . . . . 6,453.1 . . . . . . . . . . . . . . . . 76.7 Health system . . . . . . . . . . . . . . 14 . . . . . . . . . . . . . . . . . 1,845.4 . . . . . . . . . . . . . . . 105.5 Multiple organizationsa . . . . . . . . 5 . . . . . . . . . . . . . . . . . . 258.9 . . . . . . . . . . . . . . . . 42.0 Otherb . . . . . . . . . . . . . . . . . . . . . 4. . . . . . . . . . . . . . . . . . . . 53.7 . . . . . . . . . . . . . . . . . 7.9 Total . . . . . . . . . . . . . . . . . . . . 139. . . . . . . . . . . . . . . $15,279.9. . . . . . . . . . . . . . . $45.0 N = 139 aIncludes foundations created by transactions involving more than one type of nonprofit health care organization. bIncludes foundations created by transactions involving two nursing homes, one blood bank, and one rehabilitation hospital. Source: Grantmakers In Health, Survey of New Health Foundations, 2001. 6 2 0 0 1 S U R V E Y Exhibit 3. States with New Health Foundations by Number and Total Assets, 2001 2 3 1 3 2 2 2 8 2 21 6 3 16 2 5 7 3 1 DC 1 1 1 7 No conversion foundations 3 1 4 2 3 6 2 2 3 5 Assets of $1–$100 million 2 Assets of $101–$399 million Assets of $400–$999 million 7 Assets greater than $1 billion N = 139 Note: Total number of foundations per state reported on state. Source: Grantmakers In Health, Survey of New Health Foundations, 2001. Exhibit 4. New Health Foundations by Type of Transaction and Transaction Arrangement, 2001 TYPE OF TRANSACTION PERCENT TRANSACTION NUMBER ARRANGEMENT Nonprofit to for-profit . . . . . . . . . . . . . . . . . . 101.0. . . . . . . . . . . . All. . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.0. . . . . . . . . . . . Sale/buyout/acquisition . . . . . . . . . 82.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0. . . . . . . . . . . . Merger . . . . . . . . . . . . . . . . . . . . . . . . 2.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.0. . . . . . . . . . . . Joint venture . . . . . . . . . . . . . . . . . . 10.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0. . . . . . . . . . . . Corporate restructuring. . . . . . . . . . 5.0 Nonprofit to nonprofit a . . . . . . . . . . . . . . . . . . 33.0. . . . . . . . . . . . All. . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.5. . . . . . . . . . . . Sale/buyout/acquisition . . . . . . . . . 68.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5. . . . . . . . . . . . Merger . . . . . . . . . . . . . . . . . . . . . . . 25.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0. . . . . . . . . . . . Joint venture . . . . . . . . . . . . . . . . . . . 3.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0. . . . . . . . . . . . Corporate restructuring. . . . . . . . . . 3.0 Other b . . . . . . . . . . . . . . . . . . . . . 4.0. . . . . . . . . . . . All. . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0. . . . . . . . . . . . Sale/buyout/acquisition . . . . . . . . . 75.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0. . . . . . . . . . . . Merger . . . . . . . . . . . . . . . . . . . . . . . . 0.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0. . . . . . . . . . . . Joint venture . . . . . . . . . . . . . . . . . . 25.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0. . . . . . . . . . . . Corporate restructuring. . . . . . . . . . 0.0 N = 138 aData include one foundation that received assets from more than one transactoin – the sale of several hospitals, and the merger of one health center. A weighted average was created for this foundation’s two types of conversion arrange- ments by assigning (0.5) for the sales and (0.5) for the merger. bData include two foundations formed from the conversion of municipal hospitals to nonprofit status, one foundation cre- ated from the partnership of both a nonprofit and a for-profit health care organization, and one from the sale of several hospitals to both nonprofit and for-profit organizations. Note: Data do not include one foundation for which the transfer arrangement is not known. Source: Grantmakers In Health, Survey of New Health Foundations, 2001. G R A N T M A K E R S I N H E A L T H 7 the health care organization and, in turn, the foundation in jeopardy. As a result, at least two joint ventures have been dissolved and one foundation (the Arlington Health Foundation) eliminated. Placement of Assets. Distributing the assets of a conversion is one of the most important steps that a community takes regarding these transactions. Creating a vehicle that provides grants to improve health and health care is one way that regulators have interpreted their charge to use the assets in a manner that is consis- tent with the mission of the original nonprofit health care organization. In transactions that result in the cre- ation of a foundation, regulators must also decide whether to create a brand new foundation or add the assets to an existing charitable organization. When the assets are deposited with an existing charity, there are usually two types of organizations that are recipients: the fundraising charity of the original nonprofit, or a local com- munity foundation. When the former nonprofit’s fundraising arm receives the assets, its mission is usually modified to meet the expectation that these assets be used to improve health in the local community. In cases where a local community foundation is asked to manage the assets from the conversion as a separate fund (which may occur when the assets generated from the transaction are too small to warrant the administrative expense of creating a new foundation), the mission of the foundation remains the same, but grants awarded from the fund are generally restricted to health projects. Of the 126 foundations that provided data regarding this issue, 80 were newly created. Forty-six foundations were existing charities that received assets from a con- version. Tax Status. One of the first challenges faced by new foundations is selecting a tax status: private founda- tion, public charity, or social welfare organization. Because the tax status has implications for operations, grantmaking, and regulatory oversight, this can be an important decision as well. For foundations that were in existence prior to the receipt of conversion assets, the same tax status may be maintained. The most impor- tant difference among the various categories is that public charities, unlike other foundations, must also raise funds from the community. Private foundations face a number of restrictions regarding their grantmaking and lobbying; public charities face fewer of these requirements, and social welfare organizations have few such restrictions. (For a more in-depth discussion of tax status, see Appendix 2.) Private foundations account for 45 percent of new foundations, but hold a disproportionate amount of new foundation assets (Exhibit 5). This is reflected in the higher median assets for private foundations ($56 mil- lion), compared to public charities, which represent 50 percent of all new foundations and have median assets of $41.7 million. Because most social welfare organizations have been created from health plans (which lead to larger health foundations), social welfare organizations have the highest median assets, at $97 million. Exhibit 5. Tax Status of New Health Foundations by Assets, 2001 (millions of dollars) TAX STATUS NUMBER TOTAL ASSETS MEDIAN ASSETS Private foundation. . . . . . . . . . . . . . . . . . . . . . . . . . . 62 . . . . . . . . . . . . . . . . . $9,481.4 . . . . . . . . . . . . . . . . . . . . . . . $56.0 Social welfare organization 501(c)(4). . . . . . . . . . . . 6 . . . . . . . . . . . . . . . . . . 1,166.6 . . . . . . . . . . . . . . . . . . . . . . . . 97.0 Public charity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 . . . . . . . . . . . . . . . . . . 4,555.7 . . . . . . . . . . . . . . . . . . . . . . . . 41.7 509(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 . . . . . . . . . . . . . . . . . . 1,751.9 . . . . . . . . . . . . . . . . . . . . . . . . 27.0 509(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . . 167.8 . . . . . . . . . . . . . . . . . . . . . . . . 34.8 509(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 . . . . . . . . . . . . . . . . . . 2,636.0 . . . . . . . . . . . . . . . . . . . . . . . . 58.0 Municipal conversion . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . . . . . . . . . . . . . . . . . . 76.2 . . . . . . . . . . . . . . . . . . . . . . . . 38.1 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 . . . . . . . . . . . . . . . . $15,279.9 . . . . . . . . . . . . . . . . . . . . . . . $45.0 N = 139 Source: Grantmakers In Health, Survey of New Health Foundations, 2001. 8 2 0 0 1 S U R V E Y Time Elapsed Before Grantmaking. Another important marker of a new foundation’s develop- ment is the length of time it takes to get up and running. Foundations are under pressure from a variety of sources to begin grantmaking. Once assets are received, foundations must make yearly reports on their activi- ties to the IRS. Unlike public charities and social welfare organizations, private foundations are required to meet annual payout requirements and so face additional pressure to distribute assets quickly. Communities also are interested in having access to these assets as soon as possible. The length of time foundations have taken to distribute their first grants varies from 1 to 79 months. On average, however, foundations in this survey took 12 months after the conversion to make their first grants. Staff Size. The number of staff members employed by foundations varies, depending on both tax status and asset size. Foundations with larger assets do more grantmaking and thus tend to use more staff to distrib- ute the assets. Public charities require more staff than private foundations in order to run their non- grantmaking activities, such as fundraising and the operation of direct service programs. These direct service organizations can require a large number of employees – one public charity that responded to the survey employs 140 individuals in community clinics operated by the foundation (Exhibit 6). Finally, 10 founda- tions reported that they have no permanent staff. These foundations generally rely on board members, con- sultants, staff from other foundations, or a combination of these to conduct the work of the foundation. Board Composition An examination of board structure is important for several reasons. In addition to overall legal responsibility for the assets of the foundation, the board often provides direction to the foundation by developing its mission and vision. Boards also ensure that the work of the foundation reflects the mission and is responding to the Exhibit 6. Median Foundation Staff Size by Tax Status and Asset Size, 2001 (millions of dollars) ASSET SIZE (MILLIONS MEDIAN FOUNDATION TAX STATUS NUMBER OF DOLLARS) STAFF SIZE Private foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 . . . . . . . . . . . . . . . . . . . 0–10 . . . . . . . . . . . . . . . . . . . . . . . . 1.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 . . . . . . . . . . . . . . . . . . 11–100 . . . . . . . . . . . . . . . . . . . . . . . 2.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 . . . . . . . . . . . . . . . . . . . >100 . . . . . . . . . . . . . . . . . . . . . . . 13.0 Social welfare organization 501(c)(4). . . . . . . . . . . . . . 6 . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 Public charity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . . . . 4.0 509(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . . . . 4.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 . . . . . . . . . . . . . . . . . . . 0–10 . . . . . . . . . . . . . . . . . . . . . . . . 2.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 . . . . . . . . . . . . . . . . . . 11–100 . . . . . . . . . . . . . . . . . . . . . . . 4.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . >100 . . . . . . . . . . . . . . . . . . . . . . . . 6.0 509(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 509(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . . . . 5.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . . . . . . . . . . . . . . . . . . . 0–10 . . . . . . . . . . . . . . . . . . . . . . . . 4.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 . . . . . . . . . . . . . . . . . . 11–100 . . . . . . . . . . . . . . . . . . . . . . . 4.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 . . . . . . . . . . . . . . . . . . . >100 . . . . . . . . . . . . . . . . . . . . . . . . 6.0 All foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . . . . 4.0 N = 127 Notes: Data for 10 foundations without staff are not included. Data for two foundations resulting from the conversion of municipal hospitals are excluded; these endowments do not have a tax status. Source: Grantmakers In Health, Survey of New Health Foundations, 2001. G R A N T M A K E R S I N H E A L T H 9 health needs of the community. The structure of the board has important implications for its independence from other organizations involved in the transaction that created the foundation. This section explores several components of board composition and membership and provides important information on how new health foundation boards are selected. The following section discusses the relationship between board structure and foundation independence. Board Size and Makeup. The boards of new health foundations vary in both size and composition. Board sizes for the responding foundations range from 5 to 52 members. The median board size among all new health foundations is 13 (Exhibit 7). New health foundations have board members who come from a variety of constituencies. Of 135 responding foundations, 93 had board members chosen from the communi- ty, 84 had board members who are former board members of the original nonprofit, and 11 had board mem- bers who are also government officials. Racial and ethnic diversity at the board level is also an important consideration for new foundations. Because foundations often work in minority communities, a diverse board can help steer the work of the foundation so that it addresses the most pressing needs among racial and ethnic minorities. At the same time, having a diverse foundation board can help to build trust in the foundation’s work in minority communities. Like their more traditionally formed peers, however, new foundations have boards that are fairly homogeneous. Of the foundations reporting on the racial and ethnic makeup of their boards, two-thirds have two or fewer minority board members (Exhibit 8, page 10). Board Membership. This year’s survey included several questions regarding origins of the foundation board. Information on how the original board of the foundation was formed was collected from 101 organi- zations. The most common response (45 foundations) was that the foundation’s board was comprised only of Exhibit 7. Median Foundation Board Size by Tax Status and Asset Size, 2001 (millions of dollars) ASSET SIZE (MILLIONS MEDIAN FOUNDATION TAX STATUS NUMBER OF DOLLARS) BOARD SIZE Private foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62. . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . 11.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. . . . . . . . . . . . . . . . . . . . 0–10 . . . . . . . . . . . . . . . . . . . . . 15.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39. . . . . . . . . . . . . . . . . . . 11–100 . . . . . . . . . . . . . . . . . . . . 10.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 . . . . . . . . . . . . . . . . . . . >100 . . . . . . . . . . . . . . . . . . . . . 11.0 Social welfare organization 501(c)(4) . . . . . . . . . . . . . . 6. . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . 15.0 Public charity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69. . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . 15.0 509(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33. . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . 14.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. . . . . . . . . . . . . . . . . . . . 0–10 . . . . . . . . . . . . . . . . . . . . . 14.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18. . . . . . . . . . . . . . . . . . . 11–100 . . . . . . . . . . . . . . . . . . . . 13.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 . . . . . . . . . . . . . . . . . . . >100 . . . . . . . . . . . . . . . . . . . . . 19.0 509(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . 10.0 509(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33. . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . 15.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . . . . . . . . . . . . . . . . . 0–10 . . . . . . . . . . . . . . . . . . . . . 10.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22. . . . . . . . . . . . . . . . . . . 11–100 . . . . . . . . . . . . . . . . . . . . 15.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 . . . . . . . . . . . . . . . . . . . >100 . . . . . . . . . . . . . . . . . . . . . 15.0 All foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137. . . . . . . . . . . . . . . . . . . . . All . . . . . . . . . . . . . . . . . . . . . . 13.0 N = 137 Note: Data for two foundations resulting from the conversion of municipal hospitals are excluded; these endowments do not have a tax status. Source: Grantmakers In Health, Survey of New Health Foundations, 2001. 10 2 0 0 1 S U R V E Y Exhibit 8. Racial and Ethnic Diversity of New Health Foundation Boards, 2001 (percentage of foundations) Three or more minority board members Two minority board members 33% 32% One minority board member No minority board members 13% 22% N=130 Note: Data are unreported for nine foundations. Source: Grantmakers In Health, Survey of New Health Foundations, 2001. members of the board of the original nonprofit health care organization. This is also reflected in the high number of foundations with board members who formerly served on the board of the original nonprofit. An assortment of other strategies were used among the remaining 56 responding foundations. These ranged from appointments by government officials or organizations involved in the conversion to the development of spe- cialized committees to select new board members. There were also 109 foundations that reported on their process for adding new board members. A majority (85 foundations) use nominating committees of the board to recruit new board members. The other founda- tions used strategies ranging from a committee of outside community advisors to appointments by public offi- cials. Several of the foundations created as supporting organizations relied on the supported organization to approve new board members. The Sisters of Mercy of North Carolina Foundation, for example, forwards its recommendation regarding board appointments to the leadership of the supported organization (Sisters of Mercy of North Carolina) for approval. Finally, there were 104 foundations that reported on the term lengths of board members. A small number of these reported that their board members held lifetime terms. Of the others, term lengths varied from one year to six years; the median term length for foundation board members was three years. Foundation Independence An important issue faced by foundation boards – and one that receives a great deal of outside attention – is the extent to which they are independent from the organizations involved in the conversion. Because of the diversity of new health foundations, there is not a single standard for how independent these foundations should be, nor is there a single litmus test for how well foundations are performing in remaining independent. Rather, foundations’ tendencies towards independence are based upon the nature of the transactions, the mis- sions of the organizations involved, and the policies and procedures in place to address potential conflicts of interest. G R A N T M A K E R S I N H E A L T H 11 Foundation independence is a high-profile issue because it highlights the possibility that ongoing relationships between the foundation and the other organizations involved in the transactions – both for-profit and non- profit – can compromise the foundation’s ability to provide public benefits or fulfill the mission of the original nonprofit organization. This is true even when the transaction involves two nonprofit organizations. While these types of transactions are unlikely to raise public benefit concerns, questions may still remain about the compatibility of the foundation mission with that of the original nonprofit. Achieving independence from the financial interests of the organizations involved in the transaction is one way for new health foundations to ensure that the foundation serves the public’s benefit. Many foundations choose to have a complete and total separation from all the organizations involved in the transaction that resulted in the creation of the foundation. These foundations do not share board members with the original nonprofit health care organization or the purchasing organization, nor do they maintain financial relationships with any organization involved in the transaction. For others, however, this is not practical; joint ventures, for example, require continued relationships among the foundation, the original nonprofit, and the for-profit venture partner. The survey contained questions on several areas related to foundation independence: the reservation of seats on a foundation board for individuals affiliated with organizations involved in the conversion; the practice of permitting board members to sit on both the foundation board and the boards of organizations involved in the conversion; and the existence of policies addressing conflicts of interest. In practice, however, foundation independence is determined not only by the existence of policies and procedures to increase and ensure auton- omy, but also by the behavior of the foundation board and staff. Reserved Board Seats. There were 131 foundations that reported on whether the foundation reserved board seats (Exhibit 9, page 12). Of the 64 foundations reporting reserved board seats, 25 percent reserved seats for members of the religious order that had previously owned or been affiliated with the original non- profit organization, 17 percent reserved seats for representatives of the community, and 14 percent reserved seats for physicians. In some cases, foundations created from organizations without a religious affiliation also reserved seats for board, staff, or other appointees of organizations involved in the conversion. Approximately 17 percent of the foundations reserved seats for appointees associated with the original nonprofit, and 11 per- cent reserved seats for appointees affiliated with the purchasing organization. Concurrent Board Seats. Whether or not board seats are reserved, the presence of trustees from the original nonprofit on the new foundation board can also affect the organization’s independence. Of the 130 respondents to survey questions regarding concurrent board seats, 50 indicated that some of their board mem- bers also sat on the board of the original nonprofit (Exhibit 10, page 12). Twenty percent of these 50 are joint ventures and mergers, cases in which sharing of board members might be part of the partnership arrange- ment. There were also 18 foundations that shared board members with the purchasing organization (Exhibit 11, page 13). Of these, four were created from joint ventures and mergers. Conflict-of-Interest Policies. The development and use of conflict-of-interest policies are important ways for foundations to minimize both apparent and actual conflicts of interest among board and staff. These policies, created to address the situations faced by board members affiliated with other organizations, establish rules of conduct regarding these relationships. Most often, conflict-of-interest policies are used to address instances in which a foundation trustee is associated with a potential grantee. In order to limit this bias, these 12 2 0 0 1 S U R V E Y Exhibit 9. Reserved Board Seats of New Health Foundations by Type of Seat Reserved, 2001 (number and percentage of foundations) Members of religious organization 25 16 17 Representatives of the community 11 17 Members or appointees of original nonprofit 11 14 Physicians 9 8 Members or appointees of purchasing organization 5 9 Foundation CEO 6 8 Appointed by supported organization 5 Public officials 8 5 Government appointees 5 3 6 Other 4 0 5 10 15 20 25 Percent of foundations Number of foundations N=64 Notes: Sixty-seven foundations reported no reserved board seats. Foundations may have reported more than one type of reserved board seat. Data are unre- ported for eight foundations. Total percentages are for foundations that reserve board seats only. Source: Grantmakers In Health, Survey of New Health Foundations, 2001. Exhibit 10. New Health Foundations with Board Members Sitting Concurrently on Board of Original Nonprofit Organization, 2001 (percentage of foundations) 2% Board members sitting concurrently; foundation does not have a conflict-of-interest policy Board members sitting concurrently; foundation has a conflict-of-interest policy 37% 62% No board members sitting concurrently N=130 Note: Data are unreported for nine foundations. Source: Grantmakers In Health, Survey of New Health Foundations, 2001. G R A N T M A K E R S I N H E A L T H 13 Exhibit 11. New Health Foundations with Board Members Sitting Concurrently on Board of Purchasing Organization, 2001 (percentage of foundations) 2% Board members sitting concurrently; foundation does not have a conflict-of-interest policy 15% Board members sitting concurrently; foundation has a conflict-of-interest policy No board members sitting concurrently 83% N=109 Note: Data are unreported for 30 foundations. Source: Grantmakers In Health, Survey of New Health Foundations, 2001. policies usually require that board members disclose their outside affiliations and, in some cases, refrain from participating in foundation decisions regarding these potential grantees. Of the 136 foundations responding to this question, 124 (91 percent) had conflict-of-interest policies. Of the 58 foundations resulting from sales that shared board members with organizations involved in the transaction, only three did not have conflict-of- interest policies. Community Involvement All new health foundations have their origins in the communities they serve. For this reason, community involvement in the development and operations of these foundations is often a high-profile issue for them. It is usually expected (and often required) that the new foundations take into account the voices and opinions of their constituencies in some way. Community involvement is important for a number of reasons. Some argue that, by virtue of the benefit received by the original nonprofit health care organization from its tax- exempt status, the community has a stake in how the assets are used. Practically, community involvement can ensure that foundations are responsive to the most pressing health needs of the community. For the purposes of this survey, community involvement encompassed a number of different activities and strategies. Survey respondents were asked which of the following they employed, and for what purpose: • community advisory groups, • focus groups, • public hearings, • consultations with local public health officials, and • consultations with local academics. An obvious starting point in the examination of community involvement and responsiveness is the definition of community. New health foundations have various definitions of communities; sometimes these definitions 14 2 0 0 1 S U R V E Y are outlined during the conversion process, while other times they are realized only once the foundation is established. From a grantmaking perspective, there are several different kinds of communities, including those groups and populations whose needs are served by the foundation, people who live in the catchment area of the foundation, and other individuals and colleagues working in the nonprofit or health sector in the foundation’s geographic area. Many foundations understand the importance of involving the community in order to ensure that programs are responsive to community needs. Given that communities are not always in agreement about their most pressing challenges, foundations use a number of different approaches to learn more about community needs, assets, and preferences. Some of these involve the community directly – convening focus groups, holding public hearings, and developing community advisory groups. These strategies can be challenging to imple- ment because they require identifying and bringing together community voices and representatives that may not necessarily work within an existing infrastructure. Many foundations and community advocates assert that while additional infrastructure may be needed to include these voices, foundations cannot effectively serve the needs of the community without their input. Other ways of collecting information on community needs exist as well. Consulting with individuals who are also formally working on community health issues, includ- ing public health officials and local academics, can provide insight into community needs, for example. As these individuals are easily identifiable, this type of information gathering presents less of a challenge for foun- dations. Community Involvement Strategies. Overall, we found that the majority of foundations surveyed – 81 funders – employed at least one community involvement strategy (Exhibit 12). Of this number, 93 per- cent (75 foundations) used at least two strategies. Three-fourths of funders that involved communities used at least three strategies, two-thirds employed four or more, and 53 percent – 43 foundations – used at least five strategies to involve the community in their work. The two strategies used most often by foundations to bring in community voices and learn about community priorities were consultations with local public health officials followed by focus groups. The third most fre- quently used strategy was to consult with academics – 52 funders used this technique to learn more about community needs to further the foundation’s work. Community advisory committees, which are likely to be Exhibit 12. New Health Foundation Strategies for Community Involvement, by Reason for Use, 2001 DEVELOPMENT DEVELOPMENT ONGOING DEVELOPMENT DEVELOPMENT OF PROGRAM OF POLICIES AND HIRING OF WORK OF OF BOARD OF MISSION FOCUS PROCEDURES STAFF FOUNDATION Community advisory groups. . . . . . . . . . . 13. . . . . . . . . . . . . . . . . . . 15. . . . . . . . . . . . . . . . . . . 27. . . . . . . . . . . . . . . . . . . . . 12 . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . 30 Focus groups . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . . . . . . . . . . . . . . . . 18. . . . . . . . . . . . . . . . . . . 50. . . . . . . . . . . . . . . . . . . . . . 6 . . . . . . . . . . . . . . . . . . . 0 . . . . . . . . . . . . . . . . 32 Public hearings . . . . . . . . . . . . . . . . . . . . . . . 1. . . . . . . . . . . . . . . . . . . 12. . . . . . . . . . . . . . . . . . . 13. . . . . . . . . . . . . . . . . . . . . . 0 . . . . . . . . . . . . . . . . . . . 0 . . . . . . . . . . . . . . . . 10 Consultation with local public health officials . . . . . . . . . . . . . . . . . . 5. . . . . . . . . . . . . . . . . . . 20. . . . . . . . . . . . . . . . . . . 50. . . . . . . . . . . . . . . . . . . . . . 7 . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . 43 Consultation with local academics . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. . . . . . . . . . . . . . . . . . . 14. . . . . . . . . . . . . . . . . . . 38. . . . . . . . . . . . . . . . . . . . . . 8 . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . 39 N = 81 Notes: 58 foundations that did not indicate any community involvement are not included in this exhibit. Foundations may have responded with more than one strategy of community involvement, or more than one reason for use of each strategy. Source: Grantmakers In Health, Survey of New Health Foundations, 2001. G R A N T M A K E R S I N H E A L T H 15 more long term and require more commitment, were used by 40 foundations. Of these, only 18 percent – seven foundations – were required through their conversion arrangement to convene and utilize community advisory groups. Levels of community involvement vary by type of foundation work. Board development, for example, involved only limited community engagement from foundations responding to the survey. For those founda- tions in which communities were actively engaged in board selection, recruitment, and development, this occurred most often through community advisory committees. In fact, of those that indicated that they used an identified strategy for board recruitment (focus groups, hearings, consultations, or community advisory committees), more than half indicated that they convened community advisory committees. Only a handful of foundations consulted with academics and public health officials in their communities as board members were identified, recruited, and trained. Various community involvement strategies are also used to help develop the missions of foundations. The mission of a foundation is the basic guiding framework for its grantmaking. Consulting with local public health officials is the most preferred strategy for learning about community needs in the development of foun- dation missions, followed by consulting with academics and convening focus groups. Sometimes, however, foundation missions are determined during the conversion process itself. In these cases, negotiators in the conversion process – attorneys general, insurance commissioners, and representatives from the organizations involved in the conversion – may seek community input. Foundations rely on community involvement and engagement frequently in determining the program areas on which the organization should focus. These program areas represent the foundation’s priorities, outlining what steps the foundation will take in addressing the needs it has identified and what particular health issues or populations it will serve. Unlike mission statements, foundation program areas change over time, incorpo- rating lessons learned by foundations in their work and reflecting changing community needs. Fifty founda- tions indicated that they conducted focus groups to help identify program areas, and fifty foundations (not necessarily the same group) consulted with local public health officials in deciding what program areas to fund. Consultations with local academics was another often utilized strategy in determining program focus, as was relying on community advisory committees. By and large, though, it is in their ongoing work that many foundations include community opinions and voices. Many foundations (28) have ongoing community advisory committees to assist them; these commit- tees can serve as sounding boards for new ideas, barometers to measure growing community concerns and needs, or simply as experienced advisors. Other foundations (43) consult regularly with public health officials, and 39 have an ongoing dialogue with local academics. Grantmaking While foundations created from conversions differ a great deal from one to another, they do have some simi- larities in their approach to grantmaking. By and large, they fund within limited geographic areas. And although their priorities and program areas reflect diverse interests, almost all of these foundations make grants to address the health needs of their communities. 16 2 0 0 1 S U R V E Y Geographic Grantmaking Restrictions. Most foundations created from conversions have geo- graphic grantmaking restrictions that help to identify and define their communities. Some fund in several states, while others fund solely in their own state. Many others fund only in a limited number of counties or cities. In the 2001 survey, 121 of the 130 foundations that responded to inquiries on geographic grantmaking restrictions indicated that they did indeed have limited geographic areas within which they funded. Health Grantmaking. Most foundations created from health care conversions focus their grantmaking in the health arena. Many (64 percent) fund exclusively in health; others spend the bulk of their grantmaking dollars in health but also fund other activities. Definitions of health vary a great deal from one foundation to another. Commonly funded areas of health and health care include delivery of services, child and adolescent health, and health education and prevention (Exhibit 13). Some foundations focus on specific populations – the elderly, minorities, or high-risk teens – while others concentrate on broader issues, including environmen- tal health and access to care. Some areas of health are beginning to attract more funders. A larger number of funders are supporting access to care and mental health and substance abuse in their communities. Other areas of health are being identi- fied for the first time as priority areas for health foundations. Oral health and family violence are both emerg- ing as areas in which foundations are becoming involved. Racial and ethnic disparities in health, the weakened public health system, and the uninsured are also among the timely issues that new health foundations have taken a leadership role in addressing. Exhibit 13. Selected Health Grantmaking Areas, 2001 (number of foundations) Health promotion/disease prevention/ health education 41 Child and adolescent health 40 Delivery of care 40 Access to care 35 Healthy families/healthy communities 31 Substance abuse/mental health 29 Diseases and disabilities (includes research) 23 Aging 22 Health professions education 21 Improving systems of care 18 Oral health 15 Violence prevention 7 0 10 20 30 40 50 N=136 Notes: Foundations may have reported more than one health grantmaking area, and some grantmaking areas are included in more than one category. Data are unreported for three foundations. Source: Grantmakers In Health, Survey of New Health Foundations, 2001. G R A N T M A K E R S I N H E A L T H 17 Exhibit 14. New Health Foundation Funding in Health by Level of Funding, 2001 (percentage of foundations) Less than 50 percent in health 18% At least 50 percent in health 82% N=132 Note: Data do not include seven foundations that did not indicate percentages for grantmaking areas. Source: Grantmakers In Health, Survey of New Health Foundations, 2001. Among foundations that fund outside health, the share of funding spent in these areas vary. As the chart indi- cates, only 18 percent of foundations indicate that they fund less than 50 percent in health, and only two foundations responded that they did not fund health at all (Exhibit 14). Even these numbers, though, are likely to underrepresent the actual amount of health funding provided by new health foundations. Areas out- side the scope of health include family support, children and youth, arts, education, and Jewish identity. Funders working in these areas assert that due to the complex determinants of health, effective funding in some of these non-health related areas can influence the general health and well-being of communities. Summary and Conclusions New health foundations are at once maintaining a high profile and merging into the philanthropic main- stream. While this report focuses solely on a discrete group of foundations created from health care transac- tions, it is important to keep in mind that, in many cases, the source of their endowments may be the only factor these organizations have in common. In many ways, these foundations are like any other funder – they operate under the same federal and state guidelines for private foundations and public charities, they structure their organizations in the same manner, and they often seek similar ways to improve their work. As a result, they also reflect the diversity of the larger field of philanthropy, and have characteristics that make them each as unique as foundations in the larger philanthropic sector. Over time, some foundations created from conversions have emerged as leaders in the field of health philan- thropy. The lessons these foundations have learned – about start-up, grantmaking, and improving their work – have benefits both for their traditionally established peers and for brand new health foundations. This cohort of foundations has learned the importance of community involvement; brand new foundations can apply these lessons and seek community input earlier, and in more aspects of their work. They have also 18 2 0 0 1 S U R V E Y developed expertise in evaluation, communications, and setting objectives and outcomes for their work, lessons from which even more established foundations can benefit. Overall, this growing cohort of well- respected foundations created from conversions is raising the bar for all of their grantmaking colleagues. The origins of these new health foundations result in significant pressure from regulators and their communi- ties to set high standards of effectiveness and be accountable for their actions. As new conversions continue to occur, there is greater attention paid to structuring the resulting foundation to address the most pressing needs of the community. Recognizing that important structural factors such as tax status and staffing affect the behavior of the foundation, many initial boards are spending more time thinking through these issues with an eye toward the ultimate goal of meeting community needs. Another result of the increased prominence of these organizations is the growing response to new health foun- dations within the philanthropic sector. Organizations that serve foundations have changed and expanded their work to track, document, and address the needs of these new foundations. The Foundation Center, long a compiler of information about foundation funding, now includes discrete categories of funding con- ducted by foundations created from conversions. The Council on Foundations’ annual salary and manage- ment reports specifically address the hiring and management practices of new health foundations. In addition to conducting surveys to track this emerging group of foundations, GIH’s Support Center for Health Foundations provides technical assistance to these new funders on issues related to operations and governance. Organizations that rely on foundation funding have taken notice of new health foundations as well; grantees and community groups trying to raise funds look eagerly to the new health foundations in their neighbor- hoods. The landscape of health and health grantmaking has been significantly changed by these new health funders. Because of both their origins and their geographic grantmaking restrictions, these foundations are often poised to play important roles in both raising an awareness of community health needs and responding to them. While the overall asset base of some of these foundations is small, in many communities, these relatively small foundations are among the largest funders. This makes each of them a potentially influential player in the community, depending on how they choose to structure their programming and define their community role. Many foundations have taken advantage of this role by focusing on pressing public health issues, simultane- ously injecting needed resources while raising awareness of these concerns. Working alone or in concert with local organizations, other grantmakers, or government, these foundations bring newfound assets to the task of improving the nation’s health. G R A N T M A K E R S I N H E A L T H 19 APPENDIX 1 A Profile of New Health Foundations IRS TYPE OF NAME, LOCATION, YEAR OF CURRENT TAX-EXEMPT ENTITY AND WEB ADDRESS CONVERSION ASSETS STATUS CONVERTED GRANTMAKING AREAS Alleghany Foundation 1995 $51,094,345 Private Hospital Nurses in schools, arts/humanities, education, Covington, VA Foundation economic development, historic preservation, social and community services Alliance Healthcare 1994 $100,000,000 Private Health Plan Restricted access to care, substance abuse Foundation Foundation prevention and treatment, communicable disease San Diego, CA control, violence prevention, mental health, www.alliancehf.org environmental and community health problems Andalusia Health 1981 $2,315,653 Private Hospital Medical scholarships Services, Inc Foundation Andalusia, AL Anthem Foundation of 1999 $45,000,000 Public Charity3 Health Plan Compliance, community empowerment, options Connecticut to expand health care coverage to small West Hartford, CT employers The Anthem Foundation of 1995 $28,300,000 Public Charity3 Health Plan Preventive oral health and prevention of family Ohio violence Cincinnati, OH www.greatercincinnatifdn.org Archstone Foundation 1985 $143,001,109 Private Health Plan Aging issues Long Beach, CA Foundation www.archstone.org Asbury Foundation of 1997 $102,236,316 Private Health System General health Hattiesburg, Inc. Foundation Hattiesburg, MS The Assisi Foundation of 1994 $201,000,000 Private Hospital Health, education, literacy, religion, community Memphis, Inc. Foundation enhancement, other related activities Memphis, TN www.assisifoundation.org Austin-Bailey Health & 1996 $10,000,000 Private Hospital A broad range with no specific focus other than Wellness Foundation Foundation health and wellness Canton, OH www.foundationcenter.org/ grantmaker/austinbailey Baptist Community 1995 $235,000,000 Private Hospital Children ages 0–5 years, behaviors, parenting, Ministries Foundation immunization New Orleans, LA www.bcm.org Barberton Community 1996 $101,054,651 Public Charity3 Hospital Health, education, human services, economic Foundation and community development Barberton, OH Bedford Community Health 1984 $4,390,712 Public Charity1 Hospital Emergency medical services, senior care, Foundation, Inc. nursing scholarships, charity care Bedford, VA www.bchf.org 20 2 0 0 1 S U R V E Y IRS TYPE OF NAME, LOCATION, YEAR OF CURRENT TAX-EXEMPT ENTITY AND WEB ADDRESS CONVERSION ASSETS STATUS CONVERTED GRANTMAKING AREAS Bernardine Franciscan Sisters 1996 $12,809,674 Public Charity3 Hospital Care of the poor, Salvation Army, free clinics, Foundation drug and alcohol abusers Newport News, VA www.bfranfound.org Berwick Health & Wellness 1999 $27,000,000 Public Charity1 Hospital Dental health, mental health, women’s Foundation health (related to domestic abuse), community Berwick, PA health www.berwickfoundation.org BHHS Legacy Foundation 2000 $104,000,000 Public Charity3 Health System Children, families, and seniors Phoenix, AZ Birmingham Foundation 1996 $21,564,546 Private Hospital Senior wellness, children’s wellness, health Pittsburgh, PA Foundation access, capacity building, mental health, www.birminghamfoundation.org substance abuse, violence prevention Mary Black Foundation, Inc. 1996 $76,687,853 Public Charity1 Hospital and Children, youth, and families; cardiovascular Spartanburg, SC Health System disease prevention; nutrition improvement; www.maryblackfoundation.org prevention of adolescent pregnancy; literacy The Blowitz-Ridgeway 1984* $26,692,592 Private Hospital Health care, social services, medical research, Foundation Foundation early childhood development, education Northfield, IL The Brentwood Foundation 1994 $20,473,439 Private Hospital Medical education, research, community health Medina, OH Foundation Drs. Bruce and Lee 1995 $141,890,000 Private Hospital Health, human services, youth education; Foundation Foundation cultural, historical, environmental preservation Florence, SC Byerly Foundation 1995 $26,000,000 Public Charity2 Hospital Education, economic development, quality of Hartsville, SC life www.byerlyfoundation.org Calhoun County 1997 $18,885,499 Public Charity1 Hospital Substance abuse, child abuse/neglect Community Foundation intervention and prevention, mental health, elder Anniston, AL health, environmental health, and indigent www.cccfoundation.org health care The California Endowment 1996 $3,500,000,000 Private Health Plan Workforce diversity, access, cultural competency, Woodland Hills, CA Foundation disparities in health www.calendow.org California HealthCare 1996 $779,000,000 Social Welfare Health Plan Access to health care, California's uninsured, Foundation Organization health policy, quality of care, e-health, health Oakland, CA care delivery systems www.chcf.org The California Wellness 1992 $951,800,000 Private Health Plan Women’s health, environmental health, mental Foundation Foundation health, work and health, healthy aging, violence Woodland Hills, CA prevention, diversity in health professions, teen www.tcwf.org pregnancy prevention Cape Fear Memorial 1996 $65,000,000 Private Hospital Health sciences Foundation Foundation Wilmington, NC Caring for Colorado 1999 $140,000,000 Social Welfare Health Plan Infrastructure, community-specific projects, Foundation Organization informed health decisions Denver, CO www.caringforcolorado.org G R A N T M A K E R S I N H E A L T H 21 IRS TYPE OF NAME, LOCATION, YEAR OF CURRENT TAX-EXEMPT ENTITY AND WEB ADDRESS CONVERSION ASSETS STATUS CONVERTED GRANTMAKING AREAS Central Florida Healthcare 1997 $37,260,967 Public Charity3 Hospital and Access to care, education, direct service Development Foundation Health System Leesburg, FL www.cfhcdf.org Christy-Houston Foundation 1986 $93,915,877 Private Hospital Health care, education, charitable activities, Murfreesboro, TN Foundation nursing homes, nursing education Colorado Springs 1984 $13,000,000 Public Charity1 Hospital Operation of a family practice training program Osteopathic Foundation and clinic for the underserved Colorado Springs, CO www.csof.org The Colorado Trust 1985 $376,980,495 Private Hospital Advancing delivery of quality health care Denver, CO Foundation www.coltrust.org Columbus Medical 1992 $79,330,893 Public Charity1 Health Plan Access to health care, health promotion, health Association Foundation education Columbus, OH www.cmaf-ohio.org/cmaf CommunityCare 1998 $134,500,000 Public Charity3 Health System Health, human services, education Foundation, Inc. Springdale, AR www.ccfound.org Community Health 1997 $25,000,000 Public Charity1 Hospital Underinsured families, uninsured, dental health Corporation Riverside, CA www.rchf.org Community Health 1997 $43,500,000 Other** Hospital Provision of prescription medications to those in Endowment of Lincoln need, case management for mental health and Lincoln, NE substance abuse, improving health status for www.chelincoln.org those at highest risk for poorest outcomes, prevention of family violence, health technology Community Health 1999 $6,700,000 Private Hospital and Health and wellness in all areas including Foundation Foundation Health System emotional, physical, and mental Massillon, OH www.chfoundation.org Community Memorial 1995 $90,000,000 Private Hospital Youth, older adults, families, access to health Foundation Foundation and building organizational effectiveness Hinsdale, IL www.cmfdn.org Moses Cone – Wesley Long 1997 $101,000,000 Public Charity3 Hospital Access, wellness Community Health Foundation Greensboro, NC www.mosescone.com Connecticut Health 2001 $120,000,000 Social Welfare Health Plan Oral health, children's mental health, reduction Foundation Organization of racial and ethnic health disparities Farmington, CT www.cthealth.org Consumer Health 1994 $33,961,668 Private Health Plan Improving access to health care (particularly for Foundation Foundation the most vulnerable members of a community), Washington, DC consumer education and empowerment, health www.consumerhealthfdn.org systems reform, capacity building 22 2 0 0 1 S U R V E Y IRS TYPE OF NAME, LOCATION, YEAR OF CURRENT TAX-EXEMPT ENTITY AND WEB ADDRESS CONVERSION ASSETS STATUS CONVERTED GRANTMAKING AREAS Dakota Medical Foundation 1998 $102,000,000 Public Charity1 Hospital Children’s health, dental health, diabetes, drug/ Fargo, ND alcohol abuse, helath information/education, www.dakmedfn.org indigent care, mental health Daughters of Charity 1996* $235,000,000 Public Charity3 Hospital Health and wellness, primary and preventive Foundation health care St. Louis, MO www.daughtersofcharityfdn.org Daughters of Charity 1995 $1,800,000 Public Charity3 Hospital Health and wellness, primary and preventive Healthcare Foundation of health care, healthy community initiatives St. Louis St. Louis, MO www.daughtersofcharityfdn.org Deaconess Community 1994 $38,000,000 Public Charity3 Hospital Intercity health projects, human services, Foundation education, seniors Cleveland, OH www.fdncenter.org/ grantmaker/deaconess Deaconess Foundation 1997 $70,000,000 Public Charity3 Health System Children in urban core St. Louis, MO www.deaconess.org Desert HealthCare 1997 $6,400,000 Public Charity1 Hospital Enhancement of community health and wellness Foundation by providing innovative programs and services Palm Springs, CA www.dhfonline.org Eden Township HealthCare 1998 $32,663,000 Other** Hospital Health care access, cardiovascular disease, District delivery of care to high-risk/special needs Castro Valley, CA populations, substance abuse, collaboration with www.ethd.org school districts to improve health Endowment for Health, Inc. 1999 $87,000,000 Private Health Plan Oral health, access to health care Concord, NH Foundation www.endowmentforhealth.org FISA Foundation 1996 $35,500,000 Private Rehabilitation Health and human service needs of women and Pittsburgh, PA Foundation Hospital girls, quality of life issues for adults and www.fisafoundation.org children with disabilities Foundation for Seacoast 1984 $65,678,333 Private Hospital Access to mental and dental health care for low- Health Foundation income and uninsured people, dissemination of Portsmouth, NH health promotion information, expansion of www.fsh.org access to quality child care for low-income families Four County Community 1987 $6,500,000 Public Charity1 Hospital Healthy seniors, healthy youth, public safety, Foundation arts and culture Almont, MI www.4ccf.org Franklin Benevolent 1998 $38,387,000 Public Charity1 Hospital Health education and research Corporation San Francisco, CA www.frankben.org Friends of Public Health 1997 $1,750,000 Public Charity1 Health Plan Public health, graduate scholarships, public Portland, OR health workforce development, urgent needs in public health system G R A N T M A K E R S I N H E A L T H 23 IRS TYPE OF NAME, LOCATION, YEAR OF CURRENT TAX-EXEMPT ENTITY AND WEB ADDRESS CONVERSION ASSETS STATUS CONVERTED GRANTMAKING AREAS Georgia Health Foundation 1985 $10,500,000 Private Health Plan All areas of health – education, research, Atlanta, GA Foundation facilities www.gahealthfdn.org Georgia Osteopathic 1986 $6,000,000 Public Charity1 Hospital Statewide training program for third- and Institute fourth-year medical students working in Tucker, GA underserved areas www.goi.org Good Samaritan 1995 $24,142,360 Public Charity1 Hospital Access for low-income and underinsured Foundation, Inc. populations, health education in underserved Lexington, KY areas, training of health care professionals www.gsfky.org Greater St. Louis Health 1985 $5,400,000 Private Health Plan Health care providers, health promotion and Foundation Foundation illness prevention, seed money for new projects St. Louis, MO Grotta Foundation 1993 $8,852,880 Private Nursing Home Alzheimer's disease South Orange, NJ Foundation Gulf Coast Medical 1983 $18,500,000 Private Hospital Medically related services, local emergency Foundation Foundation medical services, and primary care Wharton, TX The Health Foundation of 1995 $53,300,000 Social Welfare Health Plan Oral health and mental health Central Massachusetts, Inc. Organization Worcester, MA www.hfcm.org The Health Foundation of 1997 $260,000,000 Social Welfare Health Plan Strengthening primary care providers to the Greater Cincinnati Organization poor, school-based child health interventions, Cincinnati, OH substance abuse, severe mental illness www.healthfoundation.org The Health Foundation of 1984 $35,500,000 Private Health Plan Adolescents, elders, AIDS Greater Indianapolis, Inc. Foundation Indianapolis, IN www.thfgi.org Health Foundation of South 1993 $72,700,000 Public Charity1 Hospital Indigent care, research, social services, nursing Florida scholarships, homeless health care, and school- Miami, FL based health clinics www.hfsf.org Health Future Foundation 1984 $70,000,000 Public Charity1 Hospital Indigent care, research, health-related projects at Omaha, NE Creighton University The Health Trust 1996 $107,000,000 Public Charity2 Health System Access to health services San Jose, CA www.healthtrust.org The HealthCare Foundation 1996 $17,500,000 Private Hospital Education, prevention, and treatment for low- for Orange County Foundation income families Santa Ana, CA www.hfoc.org The Healthcare Foundation 1996 $151,000,000 Private Hospital Health care needs of the vulnerable population of New Jersey Foundation of Newark, New Jersey; medical education; Roseland, NJ clinical medical research; school-based health www.hfnj.org care; humanism in medicine; the vulnerable members of the Jewish community of northern New Jersey 24 2 0 0 1 S U R V E Y IRS TYPE OF NAME, LOCATION, YEAR OF CURRENT TAX-EXEMPT ENTITY AND WEB ADDRESS CONVERSION ASSETS STATUS CONVERTED GRANTMAKING AREAS Healthcare Georgia, Inc. 1999 $80,000,000 Private Health Plan Guidelines not available Atlanta, GA Foundation HealthONE Alliance 1995 $178,482,000 Public Charity1 Health System Community health and professional education Denver, CO www.health1.org/philanthropy Healthy New Hampshire 1997 $12,737,909 Private Health Plan Acquiring health insurance coverage, health Foundation Foundation promotion Concord, NH Hill Crest Foundation, Inc. 1984 $28,000,000 Private Hospital Mental health, arts, education Bessemer, AL Foundation Hilton Head Island 1994 $24,900,000 Public Charity1 Hospital Arts and culture, community development, Foundation, Inc. education, environment, health, human services Hilton Head, SC www.hhif.org The Horizon Foundation 1998 $74,000,000 Public Charity1 Hospital Community health and wellness, substance Columbia, MD abuse, elder health www.thehorizonfoundation.org Incarnate Word Foundation 1997 $32,000,000 Public Charity3 Hospital Community health and wellness, women, St. Louis, MO children, economically poor www.incarnatewordfund.com Institute for Healthcare 1995 $35,000,000 Private Health System Community service activities Advancement Foundation Whittier, CA www.iha4health.org Irvine Health Foundation 1986 $27,000,000 Private Hospital Prevention, services, research, policy Irvine, CA Foundation www.ihf.org The Jackson Foundation, Inc. 1995 $80,000,000 Private Hospital Education, arts, technology training Dickson, TN Foundation www.jacksonfoundation.org Jenkins Foundation 1995 $41,690,000 Public Charity3 Hospital Access to care for the medically underserved, Richmond, VA substance abuse prevention, violence prevention, www.tcfrichmond.org teen pregnancy prevention The Jewish Foundation of 1996 $96,283,000 Private Hospital Capital improvement projects Cincinnati Foundation Cincinnati, OH Jewish Healthcare 1990 $132,000,000 Public Charity1 Hospital Advancing health, financing and delivering Foundation health, integrating health Pittsburgh, PA www.jhf.org Kansas Health Foundation 1985 $412,000,000 Private Hospital Public health, children’s health, leadership Wichita, KS Foundation www.kansashealth.org Lancaster Osteopathic Health 1999 $11,800,000 Public Charity1 Hospital Osteopathic profession and health of the Foundation children of Lancaster county Lancaster, PA Lower Pearl River Valley 1998 $14,012,000 Private Hospital General health Foundation Foundation Picayune, MS G R A N T M A K E R S I N H E A L T H 25 IRS TYPE OF NAME, LOCATION, YEAR OF CURRENT TAX-EXEMPT ENTITY AND WEB ADDRESS CONVERSION ASSETS STATUS CONVERTED GRANTMAKING AREAS Lutheran Charities 1987 $97,232,317 Public Charity3 Hospital Physical and developmental disability, children, Foundation of St. Louis elderly, substance abuse, parish nursing, church St. Louis, MO service in community Dr. John T. Macdonald 1992 $33,543,612 Private Hospital School health clinics, genetic research Foundation, Inc. Foundation Coral Gables, FL www.jtmacdonaldfdn.org MacNeal Health Foundation 2000 $86,000,000 Private Hospital Health education, health care for elderly and Berwyn, IL Foundation families, health research, literacy www.macnealhf.org The Memorial 1994 $144,000,000 Public Charity1 Hospital Youth and children, education, elder health, Foundation, Inc. human services Goodlettsville, TN Methodist Healthcare 1995 $216,000,000 Public Charity3 Hospital Primary health care and dental services Ministries of South Texas, Inc. San Antonio, TX www.mhm.org MetroWest Community 1996 $44,000,000 Private Health System Children and youth, elderly, community health Health Care Foundation Foundation data collection, nursing and medical Framingham, MA scholarships www.mchcf.org Mid-Iowa Health 1984 $16,702,248 Private Hospital Adolescent health, parent and early childhood Foundation Foundation health, access to health services, preventive health Des Moines, IA services The Mt. Sinai Health Care 1996 $142,000,000 Public Charity3 Health System Birth to 3 child development, aging, health Foundation policy, capacity building, medical science Cleveland, OH www.mtsinaifoundation.org Mount Zion Health Fund 1990 $48,800,000 Public Charity1 Hospital Vulnerable populations, filling funding gaps San Francisco, CA North Dade Medical 1997 $34,800,000 Public Charity2 Hospital Health, abuse, awareness, education, general Foundation, Inc. welfare, rehabilitation, remedial learning North Miami, FL Northwest Health 1997 $74,000,000 Social Welfare Health Plan Rural, access, mental health, children, youth, Foundation Organization disease related Portland, OR www.nwhf.org Northwest Osteopathic 1984 $9,500,000 Public Charity1 Hospital Families and children, scholarships to Medical Foundation osteopathic medical students, training clinics for Portland, OR osteopathic residency programs Osteopathic Founders 1996 $18,908,900 Public Charity1 Hospital Osteopathic medical education, community Foundation health Tulsa, OK Osteopathic Heritage 1998 $230,000,000 Public Charity3 Hospital Community health initiatives, osteopathic Foundations medical education and research Columbus, OH www.osteopathicheritage.org 26 2 0 0 1 S U R V E Y IRS TYPE OF NAME, LOCATION, YEAR OF CURRENT TAX-EXEMPT ENTITY AND WEB ADDRESS CONVERSION ASSETS STATUS CONVERTED GRANTMAKING AREAS Pajaro Valley Community 1998 $9,900,000 Public Charity1 Hospital Diabetes, oral health, farmworkers and their Health Trust families, youth Watsonville, CA www.pvhealthtrust.org Paso del Norte Health 1995 $211,000,000 Private Hospital Health education and disease prevention Foundation Foundation El Paso, TX www.pdnhf.org Annie Penn Community 2001 $28,500,000 Private Hospital Improve health and quality of life Trust Foundation Reidsville, NC Phoenixville Community 1997 $30,000,000 Public Charity3 Hospital Access to health care; public safety; health Health Foundation education; disease prevention; civil, social, and Phoenixville, PA economic health of Phoenixville www.dvm.org Portsmouth General 1988 $18,708,407 Private Hospital Pregnancy prevention, health and the family, Hospital Foundation Foundation indigent care, substance abuse prevention, Portsmouth, VA health education, preventive health programs www.pghfoundation.org Prime Health Foundation 1989 $9,000,000 Private Health Plan Managed care, health care education, disease Kansas City, MO Foundation management www.primehealthfoundation.org Quad City Osteopathic 1984 $5,360,505 Private Hospital Scholarships and grants for medical education Foundation Foundation Bettendorf, IA Quantum Foundation, Inc. 1995 $169,515,631 Private Hospital School health, school-based wellness centers, West Palm Beach, FL Foundation behavioral health, elder health, health access www.quantumfoundation.com QueensCare 1998 $373,873,000 Private Hospital Health care access, primary care, prevention, Los Angeles, CA Foundation wellness, education and outreach www.queenscare.org John Randolph Foundation 1995 $34,465,000 Public Charity1 Hospital Primary care, access to care, needs of children Hopewell, VA and the elderly The Rapides Foundation 1994 $208,000,000 Public Charity1 Hospital Access, behavioral risk reduction, maintenance of Alexandria, LA health for older adults, early identification of www.rapidesfoundation.org developmental delay Michael Reese Health Trust 1991 $96,300,000 Private Hospital and Health care; health education; some limited Chicago, IL Foundation Health Plan health research, primarily for public policy and www.fdncenter.org/ advocacy grantmaker/health John Rex Endowment 2000 $72,000,000 Public Charity1 Hospital Improving children's access to health services Raleigh, NC and to a pediatric home Roanoke-Chowan 1997 $16,000,000 Private Hospital Wellness Foundation, Inc. Foundation Ahoskie, NC Rose Community 1995 $284,000,000 Public Charity3 Hospital Primary prevention; access to care for low- Foundation income children, youth, and families; health Denver, CO policy and public health leadership; aging; www.rcfdenver.org education; child and family development; Jewish life G R A N T M A K E R S I N H E A L T H 27 IRS TYPE OF NAME, LOCATION, YEAR OF CURRENT TAX-EXEMPT ENTITY AND WEB ADDRESS CONVERSION ASSETS STATUS CONVERTED GRANTMAKING AREAS Saint Ann Foundation 1973 $30,700,000 Public Charity3 Hospital Human services Cleveland, OH www.socstannfdn.org St. David’s Foundation 1996 $95,731,000 Public Charity1 Hospital Access and prevention programs, behavioral Austin, TX health, parenting, life skills, violence prevention, www.sdsys.org teen pregnancy prevention, medical education, research The St. Joseph Community 2000 $26,656,540 Public Charity3 Hospital Access to care, disease prevention and health Health Foundation promotion, donor-restricted health interests Fort Wayne, IN St. Joseph’s Community 1998 $2,063,539 Public Charity1 Hospital Mental, physical, and spiritual well-being Health Foundation Minot, ND St. Luke’s Foundation 1983 $10,500,000 Public Charity2 Hospital Health care Bellingham, WA www.stlukesfoundation.org Saint Luke’s Foundation of 1987 $75,000,000 Public Charity3 Hospital General health and wellness, health and medical Cleveland, Ohio education, medical research, behavioral health, Cleveland, OH health care delivery, human services, education www.stlukesfoundcleveland.org St. Luke’s Health Initiatives 1995 $100,000,000 Public Charity3 Health System Access to care, mental health, health policy, Phoenix, AZ emerging issues www.slhi.org San Angelo Health 1995 $66,694,980 Private Hospital Community health and well-being Foundation Foundation San Angelo, TX www.sahfoundation.org San Luis Obispo Community 1998 $2,400,000 Private Blood Bank Issues surrounding community blood supply: Health Foundation Foundation amount, safety, education and awareness of San Luis Obispo, CA blood-transmitted diseases SHARE Foundation 1996 $65,400,000 Public Charity1 Hospital Health education, humanities, disease El Dorado, AR prevention, hospice, medical clinic, drug prevention, chaplaincy, scholarships Sierra Health Foundation 1984 $168,643,990 Private Health Plan Children’s health and other health-related Sacramento, CA Foundation projects www.sierrahealth.org J. Marion Sims Foundation 1994 $81,000,000 Private Hospital Health, human services, economic and Lancaster, SC Foundation community development Sisters of Charity 1995 $73,619,077 Public Charity3 Hospital Alcohol and drug abuse, prescription assistance, Foundation of Canton oral health, mental health Canton, OH www.csahealthsystem.org/phil.asp Sisters of Charity 1995 $42,000,000 Public Charity3 Hospital and Improving access to affordable, quality health Foundation of Cleveland Health System care; education Cleveland, OH www.socstannfdn.org Sisters of Charity Foundation 1995 $95,000,000 Public Charity3 Hospital Health care access, root causes of poverty of South Carolina Columbia, SC www.sistersofcharitysc.com 28 2 0 0 1 S U R V E Y IRS TYPE OF NAME, LOCATION, YEAR OF CURRENT TAX-EXEMPT ENTITY AND WEB ADDRESS CONVERSION ASSETS STATUS CONVERTED GRANTMAKING AREAS Sisters of Mercy of North 1995 $239,106,484 Public Charity3 Health System Social services, education, health care Carolina Foundation, Inc. Charlotte, NC www.somncfdn.org The Sisters of St. Joseph 1996 $22,400,000 Public Charity3 Hospital Healthy senior citizens, healthy communities, Charitable Fund healthy families Parkersburg, WV www.ssjcharitablefund.org South Lake County 1995 $13,665,000 Public Charity1 Hospital Youth and family services, health and wellness, Foundation arts and culture, education, community Clermont, FL economic development Spalding Health Care Trust 1984 $28,271,546 Public Charity3 Hospital Free health clinics, emergency equipment for Griffin, GA fire departments, capital projects, education, social and human services Taylor Community 1997 $10,000,000 Public Charity1 Hospital Scholarships, community support, Taylor Foundation Hospital support Ridley Park, PA Truman Heartland 1994 $18,305,386 Public Charity3 Hospital Nutrition, public health programs, dental Community Foundation health, economic and community development, Independence, MO education, arts and humanities Tucson Osteopathic Medical 1986 $13,634,104 Private Hospital Scholarships for osteopathic students, substance Foundation Foundation abuse, health care programs Tucson, AZ www.tomf.org Tuscora Park Health and 1996 $5,118,123 Private Hospital Primary care for the underinsured and Wellness Foundation Foundation underserved, health education, safety Barberton, OH UniHealth Foundation 1998 $394,415,000 Private Health System Health education, disease prevention, direct Woodland Hills, CA Foundation services www.unihealthfoundation.org Union Labor Health 1997 $6,000,000 Public Charity3 Hospital Enhancing the physical, mental, and moral Foundation well-being of people within Humboldt County Eureka, CA United Methodist Health 1984 $58,000,000 Public Charity3 Hospital Primary care access, oral health, health ethics, Ministry Fund congregational health and wellness, child care Hutchinson, KS www.healthfund.org Valley Care Association 1999 $6,965,480 Public Charity1 Nursing Home Aging, intergenerational programs Sewickley, PA The Valley Foundation 1984 $60,855,846 Private Hospital Research, education and social service agencies Los Gatos, CA Foundation dealing with health issues www.valley.org The Venice Foundation 1995 $159,329,573 Public Charity1 Health System Developmental disabilities, frail and elderly, Venice, FL family services, youth activities, affordable www.tvf.org housing Washington Square Health 1985 $31,533,710 Private Hospital Primary care, medical and nursing education, Foundation, Inc. Foundation medical research Chicago, IL www.wshf.org G R A N T M A K E R S I N H E A L T H 29 IRS TYPE OF NAME, LOCATION, YEAR OF CURRENT TAX-EXEMPT ENTITY AND WEB ADDRESS CONVERSION ASSETS STATUS CONVERTED GRANTMAKING AREAS Welborn Foundation 1999 $90,985,000 Private Hospital School-based health and social service centers, Evansville, IN Foundation healthy adolescent development, promotion of www.welbornfdn.org healthy lifestyles, improvements in community health status, education, social services Westlake Health Foundation 1998 $89,000,000 Private Hospital General health Oakbrook Terrace, IL Foundation westlakehf.com Williamsburg Community 1996 $69,300,000 Public Charity3 Hospital Primary care, prevention, senior health and Health Foundation wellness, community health initiatives Williamsburg, VA Winter Park Health Foundation 1994 $125,000,000 Private Hospital Youth, older adults, access to primary care for Winter Park, FL Foundation the uninsured www.wphf.org Woodruff Foundation 1986 $13,193,338 Private Hospital Mental health and addiction services Cleveland, OH Foundation Wyandotte Health Foundation 1977 $47,039,000 Public Charity1 Hospital Primary care, disease prevention, health Kansas City, KS education *Year that foundation received assets; not necessarily year of conversion. **Endowment created as a result of the conversion of a municipal hospital to nonprofit status. This endowment makes grants for health and human services but is not a foundation in the traditional sense, as its assets are controlled by the city government. 1Foundation is classified under the Internal Revenue Code as a public charity with the designation 509(a)(1) traditional. 2Foundation is classified under the Internal Revenue Code as a public charity with the designation 509(a)(2) gross receipts. 3Foundation is classified under the Internal Revenue Code as a public charity with the designation 509(a)(3) supporting organization. 30 2 0 0 1 S U R V E Y APPENDIX 2 Tax Status of New Health Foundations Foundations that receive assets from the conversion of a nonprofit health • 509(a)(3) supporting organization: A nonprofit corporation with an care organization can operate under several different tax status categories. established relationship to an existing public charity, often a communi- Which type of tax status they choose will affect their operations, both direct- ty foundation or a religious order. Supporting organizations do not ly and indirectly. Choice of tax status is revocable, and foundations do find have to meet a public support test, and they generally receive grant- reasons for changing their tax status after they have gained some experience making, investment, and administrative assistance from the nonprofit in philanthropy. Below are definitions of the types of tax status new health with which they are affiliated. foundations may obtain from the Internal Revenue Service (IRS). Community Foundation. These foundations are public charities but, because of their importance in many communities, are described sepa- 501(c)(3) rately here. They develop, receive, and administer endowment funds from The section of the Internal Revenue Code (IRC) that entitles entities orga- private sources and manage them under community control for charitable nized exclusively for charitable, educational, or scientific purposes to be purposes. Their grants are normally limited to charitable organizations with- exempt from most federal taxes. Many states honor the 501(c)(3) designation in a specifically identified region or community. A board of directors repre- and confer similar exemptions for state and local taxes. Several different types senting the diversity of community interests oversees their charitable giving. of foundations fall under the 501(c)(3) tax category. They are classified under the IRC with the designation 509(a)(1), a subset of 501(c)(3). Private Foundation. A grantmaking foundation with an endowment from a single source such as an individual, family, or corporation. Private foundations generally do not engage in direct charitable activities but instead make grants to other nonprofit organizations. They do not raise funds from 501(c)(4) the public and must make grants each year equaling about 5 percent of their A tax-exempt organization, known as a social welfare organization, that is endowments. The funds available for the grants and administrative expenses allowed to lobby. These organizations include political or lobbying groups generally come from their endowment income. Private foundations also pay such as Common Cause or the American Association of Retired Persons. a 1 percent or 2 percent excise tax to the federal government as determined They are not obliged to spend any portion of their income or endowment on by an IRS formula. Subsets of private foundations include independent charitable activities and are not required to report the same detailed informa- foundations, in which the board is selected independently of the donor(s); tion as private foundations. A few new health foundations have obtained this family foundations, in which the donor or the donor’s family controls the status if they resulted from the sale of a 501(c)(4) medical association or board; and corporate foundations, in which the donor corporation has select- other type of organization that had the 501(c)(4) status. ed the board. About half of the foundations responding to the Grantmakers In Health Public Charity. A tax-exempt religious, educational, or social service 2001 survey of new health foundations – mostly those formed in the 1990s organization that receives regular contributions from several sources such as – have the classification of public charity. Most of the rest are private foun- individuals, corporations, private foundations, government, and sometimes dations. It is likely that many of the public charities will eventually become fees for services. These organizations may operate programs and make grants. private foundations because their large endowments make it difficult for them to raise the funds required by the IRS. The IRS allows these new Public charities are classified as 501(c)(3) organizations. Within the organizations a few transition years before it determines their permanent 501(c)(3) category, there are subdivisions for further classifying different tax status. types of public charities including: About 20 percent of the public charities surveyed are supporting organiza- • 509(a)(1) traditional: A public charity that receives funds from pub- tions. They legally affiliate with an existing public charity, such as a commu- lic donations and/or government. It generally must meet an IRS public nity foundation, but operate largely like a private foundation. Most of the support test requiring that, over the most recent four-year period, its supporting organizations formed from health conversions are attached to support from public sources equaled or exceeded one-third of its total religious orders and have resulted from the sale of a religious hospital. While support. the parent organization technically governs the supporting organization, the • 509(a)(2) gross receipts: A public charity that must raise more than supporting organization operates independently. It usually has its own board one-third of its total support from any combination of gifts, grants, of directors and has the added benefit of not having to meet the public sup- contributions, or membership fees and gross receipts from admissions, port test or the payout requirement of a private foundation. merchandise sales, or services provided in relation to its tax-exempt function. 1100 connecticut avenue nw suite 1200 washington, dc 20036 tel 202.452.8331 fax 202.452.8340 www.gih.org