What is a "new health" foundation?
Federal law requires that proceeds from the sale of assets of tax-exempt entities go to charity. There are a number of ways this requirement can be met. One is the establishment of a foundation to benefit the community previously served by the nonprofit. Since 1973, when the first "new health foundation" (also referred to as health-conversion foundations) appeared, more than 170 foundations have been created as a result of nonprofit hospitals and HMOs converting to for-profit status. More than half the foundations surveyed (53 percent) were the result of conversions that occurred between 5 and 10 years ago, while just over one-fifth (22 percent) had conversion dates no more than 5 years ago and one-fourth (25 percent) resulted from conversions at least 10 years ago. The busiest period for conversions was from 1994 to 1999, peaking with 26 conversions in 1995. Another period of increased conversion activity was from 1984 to 1986, when 27 conversions occurred. A March 2005 report published by Grantmakers in Health estimates the assets of these new health foundations at more than $18.3 billion.
While most new health foundations are dedicated to healthcare, they typically have adopted a broad definition of health and sometimes support much wider community purposes. New health foundations are rapidly becoming major financial forces in their local communities and beyond.
There is no one source for information about new health foundations. Those established as private foundations file Form 990-PF with the IRS. They will continue to be included in the Foundation Center's database and directories as information on them becomes available. The most comprehensive current listing of new health foundations appears in:
Other articles on new health foundations available at Center libraries include the following:
- Bader, Barry S. "The Conversion Foundations: A Pot of Gold or Pandora's Box for Communities?" Health System Leader, Volume 3, Number 8, October 1996 p. 4-18. (Includes examples of foundations formed through conversion.)
- Building and Maintaining Strong Foundations: Creating Community Responsive Philanthropy in Nonprofit Conversions. San Francisco, CA: Consumers Union of U.S., Inc., 2004. This book is a primer offering guidance for the establishment of health conversion foundations when nonprofit hospitals change status to for-profit.
- Conover, Christopher J., Mark A. Hall, and Jan Ostermann. "The Impact of Blue Cross Conversions on Health Spending and the Uninsured." Health Affairs 24 (March-April 2005) p. 473-82. The researchers sought to determine if there were significant increases in health care costs and coverage after a conversion of a nonprofit to a for-profit agency. Their methodology and study results are presented.
- DeLucia, Michael. "Creating New Health Care Foundations" Nonprofit and Voluntary Sector Quarterly 30 (March 2001) p. 130-136.
- Ferris, James M., and Elizabeth A. Graddy. "Structural Changes in the Hospital Industry, Charity Care, and the Nonprofit Role in Health Care." Nonprofit and Voluntary Sector Quarterly 28 (March 1999): p. 18-31.
- Fox, Charles D., IV and Charlene Kelly. "Sales of Not-for Profit Hospitals to For-Profit Corporations." Trusts & Estates 137 (October 1998) p. 38, 40, 42, 44, 46.
- Goddeeris, John H. and Burton A. Weisbrod. Conversion from Nonprofit to For-Profit Legal Status: Why Does It Happen, and Should We Care? Evanston, IL: Northwestern University. Institute for Policy Research, 1997.
- Hyatt, Thomas K. and Bruce R. Hopkins. The Law of Tax-Exempt Healthcare Organizations. 2nd ed. New York, NY: John Wiley & Sons, 2001.
- New Foundations in Health: Six Stories. New York, NY: Milbank Memorial Fund, 1999.
- Owen, John R.,III. "Sale of non-profit hospitals creates new benefits and new risks." Fund Raising Management 28 (February 1998) p. 18, 37. (Provides a list of questions asked by state attorneys general and the IRS when considering selling nonprofit hospital assets.)
- Robinson, James C. "The Curious Conversion of Empire Blue Cross." Health Affairs 22 (July-August 2003) p. 100-18. The conversion of Empire Blue Cross from a nonprofit to a for-profit involved a unique use of the funds that were realized. Unlike similar conversions, wherein the proceeds were earmarked to endow charitable foundations, the proceeds from this conversion went to political interests and subsidies to health care institutions, according to the author.
- Robinson, James C. "For-Profit Non-Conversion and Regulatory Firestorm at CareFirst BlueCross BlueShield." Health Affairs 23 (July-August 2004) p. 68-83. CareFirst is a nonprofit health insurer that was recently denied conversion to for-profit status by regulators in Maryland. The article explores this tumultuous period in the history of CareFirst, and explains how and why the state of Maryland broke with recent tradition related to conversions in other states.
- Schwartz, James R. and H. Chester Horn, Jr. Health Care Alliances and Conversions: A Handbook for Nonprofit Directors and Trustees. SanFrancisco, CA: Jossey-Bass Publishers, 1999.
- Sisson, Mary. "For-Profit Faceoff." Crain's New York Business 20 (16-22 February 2004) p. 1, 45. The conversion of nonprofit health agencies to for-profit status may proceed in New York State according to a proposal by governor George Pataki, but the proceeds of the change will not be used to create health conversion foundations as in other states, but will be used as revenue for the state's budget.
- Volunteer Trustees Foundation for Research and Education. The Sale and Conversion of Not-for-Profit Hospitals: A State-by-State Analysis of New Legislation. Washington, DC: Volunteer Trustees Foundation for Research and Education, 1998.
For more books and articles on new health foundations, try searching Catalog of Nonprofit Literature (CNL), the Center's bibliographic database. You could start by searching on the subject "Health conversion foundations".
Many of the books and articles found through CNL can be located in Center Libraries and some Cooperating Collections. It is best to call ahead to verify a specific library's holdings.
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