Hospital buyouts can create foundations that aid the community

Virginia Business
November 2005

When a nonprofit hospital sells its assets to a for-profit corporation, it frequently triggers the creation of a conversion foundation, a community foundation that funds health-related programs. In some cases, even nonprofit buyers, such as Sentara Healthcare and Carilion have contributed large sums of money to a new or existing community foundation as part of its purchase package.

These foundations can be valuable assets to the communities. For example, the Alleghany Foundation has distributed more than $18 million in its 10 years. It was created with a $35 million endowment when HCA purchased Alleghany Memorial Hospital in 1995 and now has assets of more than $50 million. Among its dozens of grants: a school dental program that provides care and corrective procedures to students from low-income families, the Alleghany Highlands Free Clinic where uninsured patients can receive free medical care, and obesity and diabetes education programs.

Karen Knuckles, executive director of the Alleghany Highlands Chamber of Commerce, says the impact has been tremendous. “It’s been a lifesaver for a lot of the agencies in the area. Those grants are a means to expand on projects and services that, without the foundation, we would have been unable to do.” She adds that grants such as the $1.1 million toward a new YMCA, also help the chamber “in our efforts for economic development. A new YMCA will help bring families into the area,” she says.

In Williamsburg, Sentara contributed about $100 million to the existing Williamsburg Health Foundation, which funded a palliative care program at the hospital. The newly created Stonewall Jackson Community Foundation actually holds 20 percent of the ownership of the hospital, per its agreement with Carilion.

In its acquisition of Danville and Wythe County hospitals, LifePoint contributed to foundations in each of those communities. The Danville Regional Foundation was established in July with $200 million. These health foundations typically distribute about 5 percent of their funds each year.