No Health, No Wealth | The Nation


No Health, No Wealth

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Research support provided by the Investigative Fund of the Nation Institute.

Charity, Texas Style

About the Author

Rosemary Metzler Lavan
Rosemary Metzler Lavan, a CPA, was a business writer for the New York Daily News who covered New York's health...
Annette Fuentes
Annette Fuentes is a New York journalist who writes on education and healthcare.

Also by the Author

The Community Education Partners (CEP) serves students the public schools don't want--and it makes millions.

The San Angelo Health Foundation now controls more than $67 million in charitable assets, derived from the sale of the 165-bed San Angelo community hospital to Columbia-HCA in 1995. But in a town that needs healthcare, the foundation is giving away millions with no health purpose--and no one can stop them.

Lisa McGiffert, senior analyst for Consumers Union's Austin office, notes that more than half the $4 million the foundation donated in 1997 was unrelated to health: $300,000 to the San Angelo Museum of Fine Arts, $1 million for subsidized assisted living for retirees and $19,000 for a heating/cooling system for the Girl Scouts headquarters. Grants in 1998 and 1999 were in a similar vein: $200,000 for an alumni visitors' center at Angelo State University, $252,000 to renovate the Junior League office in the town's historic district and $200,000 for a new animal shelter.

Foundation president Tom Early defends its use of funds, arguing that "in a small town with so much poverty, everything is interwoven. Health, education, culture, housing, all go hand in hand." Early says the hospital's original bylaws called for assets to be used for science and education, in addition to health, should the hospital ever dissolve. And he says most of the foundation's recent donations have been health related. But a review of recent donations reveals contributions for housing, libraries, the Junior League, historical landmarks, museums, a university lectureship in the humanities and more.

McGiffert says local people may be afraid to bite the hand that feeds them. "This foundation is everyone's best friend because they are holding the purse strings, and most people would not dream of upsetting them by complaining," she says. "But this community needs to exert public pressure on the foundation to meet their needs. It is, after all, the community's money."

California's Gold Rush

In 1996 nonprofit health insurer Blue Cross of California morphed into for-profit Wellpoint Health Network. Consumer advocates and the attorney general fought hard to make sure the public would not be shortchanged. Their efforts paid off when two conversion foundations were born--the California Endowment and the California HealthCare Foundation--with combined assets of $3 billion.

Advocates hold up the California example as a model conversion: community involvement in forming boards of trustees, an aggressive attorney general and foundations dedicated only to healthcare. But the truth is more complex.

The California Endowment, whose mission is to expand access to healthcare for underserved Californians, was situated inaccessibly in a corporate park in Woodland Hills, an hour from downtown Los Angeles. The offices were lavishly renovated, with state-of-the-art teleconferencing, sleek leather conference-room chairs and a $43,000 custom-made conference table of imported granite. "People have called them the Beverly Hillbillies because they got rich overnight," says one former employee referring to the CE trustees.

The state mandated that the endowment make grants totaling $150 million in its first three years, but trustees failed to meet this target. They did, however, vote to establish a yearly $200,000 discretionary grant fund that could be used for their pet causes. Trustees also compensated themselves amply. In 1997 twenty trustees collected a total of $568,250 for spending from one to fifteen hours a week on board work. In 1998, the total was $672,750. The payment was based on a basic stipend and bonuses for committee work.

The foundation's first CEO, Stephen Uranga McKane, a former program officer from the Kellogg Foundation, was ousted in October 1998 by trustees dissatisfied with his lack of leadership. His replacement was Dr. Robert Ross, a trustee since 1997. Ross acknowledges that the endowment has been struggling to "get up and running," but he considers that typical of any new nonprofit. The endowment headquarters is moving to Los Angeles's El Pueblo section to get closer to the people it aims to serve, Ross says, and he is working on a fifteen-year plan that emphasizes multicultural healthcare.

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