Healthy foundations: communities lose control of their hospitals, but gain charities to address social needs.

AuthorBlake, Kathy
PositionStatewide: BUSINESS NEWS FROM ACROSS NORTH CAROLINA

Looking for an upside to the declining number of North Carolina's independent community hospitals may be a fool's errand, given how the institutions have long provided an economic bulwark for cities and towns across the state. Rutherfordton, like many others, suffered an emotional loss when Duke LifePoint Healthcare bought an 80% stake in Rutherford Regional Health System in June 2014. But the sale made sense financially because it wiped out the hospital's $22 million in debt, while Duke LifePoint--jointly owned by Duke University Health System Inc. and Brentwood, Tenn.-based LifePoint Health Inc.--pledged $60 million in improvements over the next decade. Just as important, the nonprofit that previously owned Rutherford Regional hung on to a 20% stake, and assets of $30 million, up from $1 million. Now the affiliated RHI Legacy Foundation, led by Executive Director Jill Miracle, is prepping to address some critical problems in a county of 66,600, where half of the households report income of less than $36,000 and 21% live in poverty.

Rutherfordton is among a dozen or so North Carolina cities in which foundations have formed with proceeds from the sales of local hospitals, creating a honey pot available to nonprofits that often provide critical services for people in need. Health legacy foundations, sometimes called conversion foundations, are intended to provide long-term benefits to communities. They don't start out of the kindness of hospital officials' hearts: State law requires that assets from a dissolution or sale must be used to pay off debts and obligations, with the remaining money to be transferred either to the state, a charity or representatives of tax-exempt nonprofits.

The foundations, which span the state from the coast to the far west, "represent a valuable source of funding, expertise and connection for the people and places they serve," says Ret Boney, executive director of the North Carolina Network of Grantmakers, a Raleigh based nonprofit. At least seven foundations have formed during the last four years, she says. North Carolina now has fewer than 20 stand-alone hospitals, compared with 115 in the late 1980s, with the bulk owned by Carolinas Healthcare System, Novant Health Inc. and other large companies with multiple operations. (Duke LifePoint has acquired seven hospitals in North Carolina.) About 13 health legacy foundations in North Carolina now offer a helping hand. At least three have more than $50 million in...

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