Plans to take time for foundation from hospital sale
Transition from Sparks hospital to charitable entity a long process
Sunday, January 10, 2010
The Fort Smith Regional Healthcare Foundation - the state’s latest nonprofit - is the result of the recent sale of Sparks Regional Medical Center, a nonprofit hospital, to Health Management Associates headquartered in Naples, Fla.
Federal law requires when a nonprofit is sold to a forprofit operator any remaining proceeds of the transaction be donated or held and distributed for charitable purposes through a private foundation.
Since the fourth-quarter sale, Tom Webb, the nonprofit’s executive director, and his staff have been knee-deep in managing the elimination of pension plans and reconciliation of outstanding accounts and the retirement of debt - all of which is related to the estimated $138 million sale of Sparks Regional Medical Center. The deal was finalized in November.
But eventually, the Fort Smith Regional Healthcare Foundation, and its 12-person board of directors, will oversee more than just administrative loose ends.
The group is preparing to administer health care initiatives in the Arkansas River Valley, but at this early stage, foundation officials don’t have detailed plans. The proposed foundation’s “corpus,” or the amount of money from which investments will be made and supporting income earned has yet to be disclosed. Officials haven’t settled on the kind of foundation it will become once Internal Revenue Service status is obtained.
“At this point, it’s just forward-thinking,” said Webb of the proposed foundation in a telephone interview Wednesday. He estimates specifics will be known and publicly discussed in another two years.
However, John R. Taylor, a foundation board member and a certified public accountant, said the foundation will support health care and anything related to health care.
And he said there’s a chance the proposed foundation’s mission will be similar to Springdale’s Care Foundation, which is one of two “health conversion” foundations in the state.
Health conversion, or health legacy, foundations are a type of charity that result from the sale of a nonprofit hospital to a for-profit operator.
And their mission is typically closely aligned with the original nonprofit’s.
Heather Larkin, president and chief executive officer of the Arkansas Community Foundation in Little Rock, said health conversion foundations are relatively new and differ from a typical hospital foundation whose main responsibility is fundraising.
Foundations - including health conversion foundations - come in different shapes and sizes. And no one structure can be considered better than another, she said.
Larkin, whose group started in 1976 - the result of a $258,000 grant from the Winthrop Rockefeller Foundation, said transparency and accountability are characteristics any foundation board should strive to achieve.
There “should be public access to what’s going on since legacy foundations are not like a Walton Family Foundation Inc., where the board is investing the family’s money,” Larkin said. “This was money given to the hospital.”
And that invested money and resulting income, she said, needed to be put back into projects to benefit the community.
Foundations started with less than $25 million are considered small, compared with more sizable and typical investments that range between $250 to $500 million, said Larkin, mentioning possible community programs such as health clinics or cancer research projects.
“There’s potential for a huge impact if it’s [establishing a foundation] done correctly,” she said.
The transition from managing a health operation to philanthropy, however, is quite a leap, said Michael R. Howland, president and chief executive officer of the Southeastern Council of Foundations. The council is a trade group representing 360 grantmakers in 11Southeastern states, including Arkansas.
The switch from hospital foundation to free-standing foundation may be challenging for the staff, but explaining the change to the public is just as challenging, Howland said.
“The average person is probably not aware of the impact [that foundations have on a community],” he said.
Foundations provide support to charities and other nonprofits in the community that turn around and provide more direct services, Howland said.
Residents in Benton, Carroll, Madison and Washington counties have benefited over the last 10 years from more than $50 million worth of projects originated by the Care Foundation and its community foundation affiliate, the Northwest Arkansas Community Foundation.
An average $4 million is granted annually from the Care Foundation alone.
The Care Foundation, whose mission has extended beyond health-care projects, was established in 1998 after for-profit operator Quorum Health Group Inc. of Brentwood, Tenn., bought the nonprofit Northwest Health System.
And it took the Springdalebased group a year and a half to decide on its organizational structure, said Pearl McElfish, a Care Foundation spokesman.
“We still had a benefit plan from the hospital [to terminate] and land holdings to address. Basically, we had to close out a corporation,” said McElfish, who thinks the Fort Smith foundation’s projected timeline sounded reasonable. “There was more to determine than how to grant out the money.” To contact this reporter:
Business, Pages 47 on 01/10/2010
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