Guest post by Marvene M. Eastham, Witt/Kieffer Senior Vice President
As nonprofit hospitals and health systems struggle to maintain access to capital to reinvest in their organizations, they may turn to acquisition by for-profit healthcare organizations. In theory it is a win-win: the for-profit expands its reach and gains access to a larger market share, which is attractive to shareholders, while the former nonprofit pays debts and has ready access to capital in order to, for example, maintain its physical plants and infrastructure, retain key staff and leaders and, most importantly, continue to serve its community and patients.
To protect the interest of patients and communities in such situations, the law requires that proceeds from the sale be directed toward charitable purposes in those communities – often resulting in the establishment of what is known as a health conversion foundation (also called “healthcare” or “hospital” conversion foundations). These foundations vary in size and mission, operate independently from the for-profit corporation, and become a key source of healthcare support for the community. Witt/Kieffer has worked with many of these foundations to identify and recruit CEO, board chairs, and other leadership candidates.
Health conversion foundations provide unique challenges to manage because of the legal regulations they are subject to and the oversight of the states in which they exist. State attorneys general and community leaders are watching health conversion foundations more closely to ensure they adhere to their missions and are run efficiently.
Another challenge facing the foundations is the need to distance themselves from the for-profit parent corporation while also working with the corporation to ensure that overarching community needs are collectively being met. Walking this fine line can be incredibly complicated, politically, to pull off.
As health conversion foundations rise in popularity and become more commonplace, healthcare experts will need to grapple with other key issues:
- What are the best ways to structure healthcare conversation foundations to ensure that their resources are used responsibly and profitably for the community?
- How strictly must health conversion foundations be regulated, and how can they best comply with requirements from state attorneys general and other regulators?
- Are the conversion foundations truly allowing the U.S. healthcare system to appropriately serve all communities, especially those that are sparsely populated or low-income, and how can their success be measured?
These issues are being worked out right now, but perhaps the most critical question facing health conversion foundations is who will lead them. Having worked with several of these foundations to find executives, I can vouch for the fact that “ideal” leaders for them are hard to come by. Such leaders must have the following leadership competencies:
- Experience and credibility in both the corporate and nonprofit worlds
- Diplomacy and tactfulness to interact with diverse stakeholders
- A community- and mission-driven orientation and ability to connect with the main constituents of the foundation
- An in-depth understanding of the political and legal landscape surrounding the foundations
Ultimately, these leaders must also appreciate that they are playing a vital role in the transformation of how healthcare is delivered in the U.S., and embrace the opportunity to exert their influence and lead change locally and nationally.