Health Legacy Foundations: A New Census

Abstract

Health care merger and acquisition activity has increased since enactment of the Affordable Care Act in 2010. Proceeds from transactions involving nonprofit hospitals, health systems, and health plans will endow philanthropic foundations, collectively known as health legacy foundations. Building on work by Grantmakers In Health, we undertook a systematic search for these foundations and generated a newly updated, comprehensive database. We found 306 organizations in forty-three states that have been endowed with proceeds from the sale, merger, lease, joint venture, or other restructuring of nonprofit health care assets. These health legacy foundations had $26.2 billion in assets in 2010. Concentrated in the southern United States, foundations originating from hospitals and specialty care facilities (86.6 percent) held mean assets of $64.7 million per funder and typically restricted grants to local communities. Foundations formed from health plans (13.4 percent) held higher mean assets ($222 million), usually served larger areas, and were more likely to engage in health care advocacy. Recent transactions involving smaller and stand-alone nonprofit hospitals will infuse many more communities with unprecedented charitable wealth.

The Dynamic Impact of Nonprofit Organizations: Are Health-Related Nonprofit Organizations Associated with Improvements in Obesity at the Community Level?

“…In the late 2000s, only 40 % of hospice providers were nonprofits and 53 % were for-profits (Gray and Schlesinger 2012). Additional community changes include an increasing number of health care nonprofits, particularly hospitals, converting to for-profit status, especially in rural communities (Niggel and Brandon 2014). Many communities are experiencing substantial changes in the number of health-oriented nonprofits operating in the community.…”

Becoming Strategic: Finding Leverage Over the Social and Economic Determinants of Health

“…These foundations are created when a nonprofit health organization (e.g., hospital system, physician practice, health insurance plan) is involved in a sale, acquisition, merger, conversion, or other transaction that generates proceeds that need to remain in the nonprofit sector (Standish, 1998;Frost, 2001;Grantmakers in Health, 2005, 2017Niggel & Brandon, 2014). The two most common scenarios are the conversion of a health plan (e.g., Blue Cross Blue Shield) from nonprofit to for-profit status and the sale of a nonprofit hospital or health system to a forprofit firm that is seeking to expand into a new market.…”

“…Grantmakers in Health (2017) and Niggel and Brandon (2014) conducted separate censuses of the sector and reported how conversion foundations distribute on various characteristics. Based on those studies, we can conclude that our sample has proportionately more foundations with (1) statewide and multicounty funding regions, (2) assets over $100 million, and (3) private-foundation legal status.…”

“…A more complicated approach to handling the transaction is for the nonprofit health entity to stay in business but change its mission from delivering health care to making grants (i.e., disbursing funds derived from the sale or conversion). 2 The Bridgespan Group produced a somewhat lower figure of 228 (Hussein & Collins, 2017), but Niggel and Brandon (2014) counted 306 conversion foundations as of 2010. The discrepancies reflect different search methods and differences in the criteria for counting a transaction.…”

Reconciling Community-Based Versus Evidence-Based Philanthropy: A Case Study of The Colorado Trust’s Early Initiatives

“…How should a foundation respond when it finds that it is pursuing different strategies that are based on competing philosophies? The natural inclination among those who advise on organizational strategy is to resolve the inconsistency Easterling and Main 2 Health conversion foundations (sometimes referred to as "health legacy foundations") are created with the proceeds that accrue when a for-profit firm acquires a nonprofit health organization (e.g., hospital system, physician practice, health insurance plan), or alternatively when a nonprofit health organization converts its status to forprofit (e.g., Standish, 1998;Frost, 2002;Niggel & Brandon, 2014). The Colorado Trust was formed during the initial wave of conversions in the 1980s, when 57 foundations were established.…”